<PAGE> 1
As filed with the Securities and Exchange Commission on February 25, 1999
Securities Act File No. 33-21534
Investment Company Act File No. 811-05543
=====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 16 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 17
(Check appropriate box or boxes)
ENTERPRISE ACCUMULATION TRUST
(Exact Name of Registrant as Specified in Charter)
Atlanta Financial Center
3343 Peachtree Road
Suite 450
Atlanta, GA 30326
(Address of Principal Executive Office)(Zip Code)
Registrant's telephone number, including area code: (800) 432-4320
Catherine R. McClellan
Atlanta Financial Center
3343 Peachtree Road
Suite 450
Atlanta, GA 30326
(Name and Address for Agent for Service)
Copy to:
Margery K. Neale, Esq
Swidler Berlin Shereff & Friedman, LLP
919 Third Avenue
New York, NY 10022
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] on May 3, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE> 2
ENTERPRISE ACCUMULATION TRUST
PROSPECTUS
DATED MAY 3, 1999
Equity Portfolios
Growth Portfolio
Growth and Income Portfolio
Equity Portfolio
Equity Income Portfolio
Capital Appreciation Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
International Growth Portfolio
Global Financial Services Portfolio
Income Portfolio
High-Yield Bond Portfolio
Flexible Portfolio
Managed Portfolio
This prospectus contains information you should know before investing, including
information about risks. Please read it before you invest and keep it for future
reference. As with all mutual funds, the Securities and Exchange Commission does
not guarantee that the information in this prospectus is accurate or complete,
nor has it approved or disapproved these securities. It is a criminal offense to
state otherwise.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Introduction......................................................................................................1
Growth Portfolio..................................................................................................2
Growth and Income Portfolio.......................................................................................3
Equity Portfolio..................................................................................................4
Equity Income Portfolio...........................................................................................6
Capital Appreciation Portfolio....................................................................................7
Small Company Growth Portfolio....................................................................................8
Small Company Value Portfolio.....................................................................................9
International Growth Portfolio...................................................................................11
Global Financial Services Portfolio..............................................................................13
High-Yield Bond Portfolio........................................................................................15
Managed Portfolio................................................................................................18
Additional Information about the Portfolios' Investments and Risks...............................................20
Equity and Flexible Portfolios' Investments.............................................................20
Investment Restrictions and Practices...................................................................22
Risk Terminology........................................................................................24
Account Information..............................................................................................25
Transaction and Account Policies.................................................................................25
Valuation of Shares.....................................................................................25
Dividends, Distributions and Taxes......................................................................26
Portfolio Management.............................................................................................26
The Investment Advisor..................................................................................26
The Fund Managers.......................................................................................28
Year 2000 ..............................................................................................32
Financial Highlights.............................................................................................32
</TABLE>
-i-
<PAGE> 4
INTRODUCTION
Enterprise Accumulation Trust offers separate investment Portfolios
that serve as the underlying funding vehicles for variable annuity contracts and
variable life insurance policies. The Portfolios have individual objectives and
strategies to offer investors a broad range of investment alternatives.
Enterprise Capital Management, Inc. (the "Advisor") is the investment
advisor to each Portfolio. The Advisor selects a Fund Manager for each Portfolio
on the basis of a number of criteria, including the Fund Manager's reputation,
resources and performance results.
Before investing in the Portfolios, you should consider the general
risks involved. The value of your investment in a Portfolio is based on the
market prices of the securities the Portfolio holds. These prices change due to
economic and other events that affect securities markets generally, as well as
those that affect particular companies or governments. These price movements,
sometimes called volatility, will vary depending on the types of securities a
Portfolio owns and the markets where these securities trade. Like other
investments, you could lose money on your investment in a Portfolio. Your
investment in a Portfolio is not a bank deposit. It is not insured or guaranteed
by the FDIC or any government agency. We cannot guarantee that a Portfolio will
achieve its objective. A Portfolio's objective may not be changed without
shareholder approval.
1
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GROWTH PORTFOLIO
FUND PROFILE
Investment Objective Capital appreciation
Principal Investments U.S. common stocks of large capitalization
companies
Fund Manager Montag & Caldwell, Inc.
Investor Profile Investors who want the value of their
investment to grow but do not need to
receive income on their investment.
Investment Strategies The Growth Portfolio invests primarily in
U.S. common stocks. The "Growth at a
Price," strategy employed by the Portfolio
combines growth and value style investing.
This means that the Portfolio invests in
the stocks of companies with long-term
earnings potential but which are currently
selling at a discount to their estimated
long term value. The Portfolio's equity
selection process is a lower risk, growth
stock approach. Valuation is the key
selection criterion which makes the
investment style risk adverse. Also
emphasized are growth characteristics to
identify companies whose shares are
attractively priced and may
experience strong earnings growth relative
to other companies.
Principal Risks As a result of investing primarily in
U.S. common stocks, the Portfolio is
subject to the risk that stock prices will
fall over short or extended periods of
time. Stock markets tend to move in cycles,
with periods of rising prices and periods
of falling prices. This price volatility is
the principal risk of investing in the
Portfolio.
2
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GROWTH AND INCOME PORTFOLIO
FUND PROFILE
Investment Objective Total return through capital appreciation
with income as a secondary consideration
Principal Investments Broadly diversified group of U.S. common
stocks of large capitalization companies
Fund Manager Retirement System Investors Inc.
Investor Profile Investors who want the value of their
investment to grow, with the potential of
receiving dividend income.
Investment Strategies The Growth and Income Portfolio invests
primarily in U.S. common stocks of large
capitalization companies. The Portfolio
principally selects stocks that will
appreciate in value, seeking to take
advantage of temporary stock price
inefficiencies which may be caused by
market participants focusing heavily on
short-term developments. In selecting
stocks for the Portfolio, the Fund Manager
employs a "value-oriented" strategy. This
means that the Fund Manager attempts to
identify stocks of companies that have
greater value than is recognized by the
market generally. The Fund Manager
considers a number of factors, such as
sales, growth and profitability prospects
for the economic sector and markets in
which the company operates and for the
company's products and services, the
company's stock market price, earnings
level and projected earnings growth rate.
The Fund Manager compares this information
to that of other companies in determining
relative value.
Principal Risks The Portfolio invests primarily in U.S.
common stocks. As a result, the Portfolio
is subject to the risk that stock prices
will fall over short or extended periods of
time. Stock markets tend to move in cycles,
with periods of rising prices and periods
of falling prices. This price volatility is
the principal risk of investing in the
Portfolio.
3
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EQUITY PORTFOLIO
FUND PROFILE
Investment Objective Long-term capital appreciation
Principal Investments U.S. equity securities
Fund Manager OpCap Advisors
Investor Profile Investors who want the value of their
investment to grow but do not need to
receive income on their investment.
Investment Strategies The Equity Portfolio invests primarily in
equity securities of companies that meet
the Fund Manager's criteria of high return
on investment capital, strong positions
within their industries, sound financial
fundamentals and management committed to
shareholder interests. The Fund Manager
selects companies with one or more of the
following characteristics: substantial and
growing discretionary cash flow, strong
shareholder value-oriented management,
valuable consumer or commercial franchises,
high return on capital, favorable price to
intrinsic value, and undervalued assets.
The Fund Manager also imposes a strict sell
discipline to sell the stock once it rises
near to the target price.
Principal Risks The Portfolio invests primarily in U.S.
common stocks. As a result, the Portfolio
is subject to the risk that stock prices
will fall over short or extended periods of
time. Stock markets tend to move in cycles,
with periods of rising prices and periods
of falling prices. This price volatility is
the principal risk of investing in the
Portfolio.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility
of an investment in the Portfolio and give some indication of the risk. Of
course, the Portfolio's past performance does not necessarily indicate how the
Portfolio will perform in the future.
This bar chart shows changes in the performance of the Portfolio's
shares from year to year.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
22.67% -2.22% 31.22% 17.90% 7.85% 3.87% 38.44% 25.22% 25.76% 9.90%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
4
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Best Quarter Worst Quarter
14.17% -13.44%
(March 31, 1991) (September 30, 1999)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Average Annual Total Returns
(as of the calendar year ended Past One Past Five Past Ten
December 31, 1998) Year Years Years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enterprise Equity Portfolio(1) 9.90% 20.00% 17.42%
- ------------------------------------------------------------------------------------------
S&P 500(2) 28.57% 24.06% 19.21%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date is August 1, 1988.
(2) This unmanaged broad-based index includes 500 companies which tend
to be leaders in important industries within the US economy. It
includes reinvested dividends. An index does not have an investment
advisor and does not pay commissions or expenses. If an index had
expenses, its performance would be lower.
5
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EQUITY INCOME PORTFOLIO
FUND PROFILE
Investment Objective A combination of growth and income to
achieve an above-average and consistent
total return
Principal Investments Dividend-paying U.S. common stocks
Fund Manager 1740 Advisers, Inc.
Investor Profile Investors who want the value of their
investment to grow, with the potential of
receiving dividend income.
Investment Strategies The Equity Income Portfolio invests
primarily in dividend-paying U.S. common
stocks with dividends that exceed the
average for the S&P 500. The Fund Manager's
criteria in stock selection is principally
based on two fundamentals a stock must have
-- low price-to-earnings ratio and low
price-to-book value. The Fund Manager uses
these criteria as a discipline to enhance
the Portfolio's price stability and reduce
its exposure to market risk. In addition,
stocks must be sold within two quarters
after the yield declines below that of the
S&P 500.
Principal Risks The Portfolio invests primarily in U.S.
common stocks. As a result, the Portfolio
is subject to the risk that stock prices
will fall over short or extended periods of
time. Stock markets tend to move in cycles,
with periods of rising prices and periods
of falling prices. This price volatility is
the principal risk of investing in the
Portfolio.
6
<PAGE> 10
CAPITAL APPRECIATION PORTFOLIO
FUND PROFILE
Investment Objective Maximum capital appreciation
Principal Investments U.S. common stocks of companies that
demonstrate accelerating earnings momentum
and consistently strong financial
characteristics
Fund Manager Provident Investment Counsel, Inc.
Investor Profile Investors who want the value of their
investment to grow but do not need to
receive income on their investment and are
willing to accept the increased risk
associated with more aggressive investment
strategies.
Investment Strategies The Capital Appreciation Portfolio invests
in U.S. common stocks of companies that
demonstrate accelerating earnings momentum
and consistently strong financial
characteristics. The Fund Manager's
criteria for stock selection include: (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 S&P 500 for
the same period. The Fund Manager selects
stocks of small, medium and large
capitalization companies in an attempt to
achieve an average capitalization of
portfolio companies 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.
Principal Risks The Portfolio invests to a large extent in
medium and small capitalization common
stocks. As a result, the Portfolio is
subject to the risk that stock prices will
fall over short or extended periods of
time. Stock markets tend to move in cycles,
with periods of rising prices and periods
of falling prices. This price volatility is
the principal risk of investing in the
Portfolio. In addition, small- to mid-sized
companies may be more vulnerable to adverse
business or economic events than larger,
more established companies. In particular,
these companies may have somewhat limited
product lines, markets and financial
resources, and may depend upon a relatively
small- to medium-sized management group.
7
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SMALL COMPANY GROWTH PORTFOLIO
FUND PROFILE
Investment Objective Capital appreciation
Principal Investments U.S. common stocks of small capitalization
companies
Fund Manager William D. Witter, Inc.
Investor Profile Investors who want an increase in the value
of their investment without regard to
income; are willing to accept the increased
risk of investing in small company stocks
for the possibility of higher returns; and
want to diversify their portfolio to
include small company stocks.
Investment Strategies The Small Company Growth Portfolio invests
primarily in common stocks of small
capitalization companies with above-average
growth characteristics that are reasonably
valued. The Fund Manager uses a disciplined
approach in evaluating growth companies. It
relates the expected growth rate in
earnings to the price-earnings ratio of the
stock. Generally, the Fund Manager will not
buy a stock if the price- earnings ratio
exceeds the growth rate. By using this
valuation parameter, the Fund Manager
believes it moderates some of the inherent
volatility in the small capitalization
sector of the market. Securities will be
sold when the Fund Manager believes the
stock price exceeds the valuation criteria,
or when the stock appreciates to a point
where it is substantially overweighted in
the portfolio, or when the company no
longer meets expectations. The Fund
Manager's goal is to hold a stock for a
minimum of one year but this may not always
be feasible and there may be times when
short-term gains or losses will be
realized.
Principal Risks The Portfolio invests primarily in small
capitalization common stocks. As a result,
the Portfolio is subject to the risk that
stock prices will fall over short or
extended periods of time. Stock markets
tend to move in cycles, with periods of
rising prices and periods of falling
prices. This price volatility is the
principal risk of investing in the
Portfolio. In addition, small-sized
companies may be more vulnerable to adverse
business or economic events than larger,
more established companies. In particular,
small-sized companies may have limited
product lines, markets and financial
resources, and may depend upon a relatively
small management group.
8
<PAGE> 12
SMALL COMPANY VALUE PORTFOLIO
FUND PROFILE
Investment Objective Maximum capital appreciation
Principal Investments U.S. common stocks of small capitalization
companies
Fund Manager GAMCO Investors, Inc.
Investor Profile Investors who want an increase in the value
of their investment without regard to
income; are willing to accept the increased
risk of investing in small company stocks
for the possibility of higher returns; and
want to diversify their portfolio to
include small company stocks.
Investment Strategies The Small Company Value Portfolio invests
primarily in common stocks of small
capitalization companies that the Fund
Manager believes are undervalued -- that
is, the stock's market price does not fully
reflect the company's value. The Fund
Manager uses a proprietary research
technique to determine which stocks have a
market price that is less than the "private
market value," a proprietary measurement
used by the Fund Manager. The Fund Manager
then determines whether there is an
emerging valuation catalyst that will focus
investor attention on the underlying assets
of the company and increase the market
price. Smaller companies may be subject to
a valuation catalyst such as increased
investor attention, takeover efforts or a
change in management.
Principal Risks The Portfolio invests primarily in small
capitalization common stocks. As a result,
the Portfolio is subject to the risk that
stock prices will fall over short or
extended periods of time. Stock markets
tend to move in cycles, with periods of
rising prices and periods of falling
prices. This price volatility is the
principal risk of investing in the
Portfolio. In addition, small-sized
companies may be more vulnerable to adverse
business or economic events than larger,
more established companies. In particular,
small-sized companies may have limited
product lines, markets and financial
resources, and may depend upon a relatively
small management group.
9
<PAGE> 13
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of
an investment in the Portfolio and give some indication of the risk. Of course,
the Portfolio's past performance does not necessarily indicate how the Portfolio
will perform in the future.
This bar chart shows changes in the performance of the Portfolio's shares
from year to year.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18.35% -9.76% 48.12% 21.49% 19.51% 0.02% 12.28% 11.21% 44.32% 9.61%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
</TABLE>
BEST QUARTER WORST QUARTER
19.20% -17.80%
(March 31, 1991) (September 30, 1998)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Average Annual Total Returns
(as of the calendar year ended Past One Past Five Past Ten
December 31, 1998) Year Years Years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enterprise Small Company Value
Portfolio(1) 9.61% 14.59% 16.33%
- -----------------------------------------------------------------------------------------
Russell 2000(2) -2.56% 11.86% 12.92%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Inception date is August 1, 1988.
(2) This unmanaged broad-based index measures the performance of 2,000
small capitalization companies. As of the latest reconstitution, the
average market capitalization was approximately $592.0 million and the
largest company in the index had an approximate market capitalization
of $1,402.7 million. An index does not have an investment advisor and
does not pay commissions or expenses. If an index had expenses, its
performance would be lower.
10
<PAGE> 14
INTERNATIONAL GROWTH PORTFOLIO
FUND PROFILE
Investment Objective Capital appreciation
Principal Investments Non-U.S. equity securities
Fund Manager Vontonbel USA Inc.
Investor Profile Investors who want an increase in the value
of their investment without regard to
income and are willing to accept the
increased risk of international investing
for the possibility of higher returns.
Investment Strategies The International Growth Portfolio invests
primarily in non-U.S. equity securities
that the Fund Manager believes are
undervalued. The Fund Manager uses an
approach that involves top-down country
allocation combined with bottom-up stock
selection. The Fund Manager looks for
companies that are good predictable
business selling at attractive prices
relative to an estimate of intrinsic value.
The Fund Manager diversifies investments
amongst European, Australian and Far East
("EAFE") markets.
11
<PAGE> 15
Principal Risks The Portfolio invests primarily in common
stocks of foreign companies. As a result,
the Portfolio is subject to the risk that
stock prices will fall over short or
extended periods of time. Stock markets
tend to move in cycles, with periods of
rising prices and periods of falling
prices. This price volatility is the
principal risk of investing in the
Portfolio. In addition, investments in
foreign markets may be more volatile than
investments in U.S. markets. Diplomatic,
political or economic developments may
cause foreign investments to lose money.
The value of the U.S. dollar may rise,
causing reduced returns for U.S. persons
investing abroad. A foreign country may not
have the same accounting and financial
reporting standards as the U.S. Foreign
stock markets, brokers and companies are
generally subject to less supervision and
regulation than their U.S. counterparts.
Emerging markets securities may be even
more susceptible to these risks.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of
an investment in the Portfolio and give some indication of the risk. Of course,
the Portfolio's past performance does not necessarily indicate how the Portfolio
will perform in the future.
This bar chart shows changes in the performance of the Portfolio's shares
from year to year.
<TABLE>
<S> <C> <C> <C>
14.64% 12.65% 5.26% 14.83%
1995 1996 1997 1998
</TABLE>
Best Quarter Worst Quarter
17.29% -13.69%
(December 31, 1998) (September 30, 1998)
<TABLE>
<CAPTION>
Average Annual Total Returns (as of the calendar year Past One Return Since
ended December 31, 1998) Year Inception(1)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Enterprise International Growth Portfolio 14.83% 11.62%
- ----------------------------------------------------------------------------------------
MSCI EAFE Index(2) 20.00% 9.51%
- ----------------------------------------------------------------------------------------
</TABLE>
(1) Inception date is November 18, 1994. Performance reflects annualized
return from November 30, 1994 to December 31, 1998.
(2) The Morgan Stanley Capital International Europe, Australia, and the Far
East (MSCI EAFE) Index is a market capitalization weighted, equity
index comprised of 1,032 companies that are representative of the
market structure of 20 countries, excluding the United States, Canada
and other regions such as Latin America. Constituent stocks are
selected on the basis of industry representation, liquidity, and
sufficient float.
12
<PAGE> 16
GLOBAL FINANCIAL SERVICES PORTFOLIO
FUND PROFILE
Investment Objective Capital appreciation
Principal Investments Common stocks of domestic and foreign
financial services companies
Fund Manager Sanford C. Bernstein & Co., Inc.
Investor Profile Investors who want an increase in the value
of their investment without regard to
income; want investment in the global
financial services sector; and are willing
to accept the increased risk of
international investing for the possibility
of higher returns.
Investment Strategies The Global Financial Services Portfolio
invests primarily in the domestic and
foreign financial services industry by
normally investing in companies domiciled
in the U.S. and at least three other
countries. The Portfolio considers a
financial services company to be 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, life
insurance companies and insurance holding
companies. The Fund Manager selects
securities by combining fundamental and
quantitative research to identify
securities of financial services companies
that are attractively priced relative to
their 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.
13
<PAGE> 17
Principal Risks The Portfolio invests primarily in common
stocks of foreign companies. As a result,
the Portfolio is subject to the risk that
stock prices will fall over short or
extended periods of time. Stock markets
tend to move in cycles, with periods of
rising prices and periods of falling
prices. This price volatility is a
principal risk of investing in the
Portfolio. In addition, investments in
foreign markets may be more volatile than
investments in U.S. markets. Diplomatic,
political or economic developments may
cause foreign investments to lose money.
The value of the U.S. dollar may rise,
causing reduced returns for U.S. persons
investing abroad. A foreign country may not
have the same accounting and financial
reporting standards as the U.S. Foreign
stock markets, brokers and companies are
generally subject to less supervision and
regulation than their U.S. counterparts.
Emerging markets securities may be even
more susceptible to these risks. Because
the Portfolio concentrates in a single
sector, its performance is largely
dependent on the sector's performance,
which may differ from that of the overall
stock market. Generally, the financial
services industry is extremely sensitive to
fluctuations in interest rates. Moreover,
while rising interest rates will cause a
decline in the value of any debt securities
the Portfolio holds, falling interest rates
or deteriorating economic conditions can
adversely affect the performance of
financial services companies' stock. Both
foreign and domestic financial services
companies are affected by government
regulation or market intervention, which
may limit their activities and affect their
profitability. Some financial services
companies, e.g., insurance companies, are
subject to severe market share competition
and price competition.
14
<PAGE> 18
HIGH-YIELD BOND PORTFOLIO
FUND PROFILE
Investment Objective Maximum current income
Principal Investments Debt securities rated below investment
grade, which are commonly known as "junk
bonds"
Fund Manager Caywood-Scholl Capital Management
Investor Profile Income-oriented investors who are willing
to accept increased risk for the
possibility of greater returns through
high-yield bond investing.
Investment Strategies The High-Yield Bond Portfolio invests
primarily in high-yielding,
income-producing corporate bonds rated B3
or better by Moody's Investors Service,
Inc. ("Moody's") or B- or better by
Standard & Poor's Corporation ("S&P"),
which are commonly known as "junk bonds."
The Portfolio's investments are selected by
the Fund Manager after careful examination
of the economic outlook to determine those
industries that appear favorable for
investment. Industries going through a
perceived decline generally are not
candidates for selection. After the
industries are selected, the Fund Manager
identifies bonds of issuers within those
industries 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 Fund
Manager have characteristics of such lower-
grade bonds. Should an investment be
subsequently downgraded to Ca or lower or
CC or lower, the Fund Manager has
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
Fund 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.
15
<PAGE> 19
\
Principal Risks The Portfolio invests primarily in below
investment-grade debt securities. As a
result, the Portfolio is subject to the
risk that the prices of the debt securities
will decline due to rising interest rates.
This risk is greater for long-term debt
securities than for short-term debt
securities. A junk bond's market price may
fluctuate more than higher- quality
securities and may decline significantly.
While the Fund Manager tries to diversify
the Portfolio's portfolio and to engage in
a credit analysis of each junk bond issuer
in which it invests, junk bonds also carry
a substantial risk of default or changes in
the issuer's creditworthiness. In addition,
it may be more difficult for the Portfolio
to dispose of junk bonds or to determine
their value. Junk bonds may contain
redemption or call provisions that, if
exercised during a period of declining
interest rates, may force the Portfolio to
replace the security with a lower yielding
security. If this occurs, it will result in
a decreased return for shareholders.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of
an investment in the Portfolio and give some indication of the risk. Of course,
the Portfolio's past performance does not necessarily indicate how the Portfolio
will perform in the future.
This bar chart shows changes in the performance of the Portfolio's shares
from year to year.
<TABLE>
<S> <C> <C> <C>
16.59% 12.95% 13.38% 3.60%
1995 1996 1997 1998
</TABLE>
Best Quarter Worst Quarter
5.47% -5.13%
(September 30, 1997) (September 30, 1998)
16
<PAGE> 20
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Average Annual Total Returns (as of the calendar Past One Return Since
year ended December 31, 1998) Year Inception(1)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Enterprise High-Yield Bond Portfolio 3.60% 11.56%
- ---------------------------------------------------------------------------------------------------
Lehman Brothers High Yield Bond Index(2) 5.13% 11.91%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date is November 18, 1994. Performance reflects annualized
return from November 30, 1994 to December 31, 1998.
(2) This is an unmanaged index that includes fixed rate, public
nonconvertible issues that are rated Bal or lower by Moody's Investor
Service. If a Moody's rating is not available, the bonds must be rated
BB+ or lower by S&P, or by Fitch if an S&P rating is not available. The
index does not have an investment advisor and does not pay commissions
or expenses. If an index had expenses, its performance would be lower.
17
<PAGE> 21
MANAGED PORTFOLIO
FUND PROFILE
Investment Objective Growth of capital over time
Principal Investments Common stocks, bonds and cash equivalents,
the percentages of which will vary based on
the Fund Manager's assessment of relative
investment values
Fund Manager OpCap Advisors
Investor Profile Investors who want the value of their
investment to grow but do not need to
receive income on their investment.
Investment Strategies The Managed Portfolio invests in a
diversified portfolio of common stocks,
bonds and cash equivalents. The allocation
of the Portfolio's assets among the
different types of permitted investments
will vary from time to time based upon the
Fund 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 specific
types of investments. However, the
Portfolio invests primarily in equity
securities at times when the Fund Manager
believes that the best investment values
are available in the equity markets. The
Portfolio may invest almost all of its
assets in high-quality short-term money
market and cash equivalent securities when
the Fund Manager deems it advisable to
preserve capital. 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. The bonds in which the
Portfolio may invest will normally be
investment grade intermediate to long-term
U.S. government and corporate debt.
18
<PAGE> 22
Principal Risks The Portfolio invests in both common stocks
and debt securities. As a result, the
Portfolio is subject to the risk that stock
prices will fall over short or extended
periods of time. Stock markets tend to move
in cycles, with periods of rising prices
and periods of falling prices. This price
volatility is a principal risk of investing
in the Portfolio. In addition, the
Portfolio is subject to the risk that the
prices of debt securities will decline due
to rising interest rates. The risk is
greater for long-term debt securities than
for short-term debt securities. Debt
securities may decline in credit quality
due to economic governmental events. In
addition, an issuer may be unable to make
timely payments of principal or interest to
the Portfolio. Some investment grade bonds
may have speculative characteristics.
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the volatility of
an investment in the Portfolio and give some indication of the risk. Of course,
the Portfolio's past performance does not necessarily indicate how the Portfolio
will perform in the future.
This bar chart shows changes in the performance of the Portfolio's shares
from year to year.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
32.55% -3.63% 45.98% 18.65% 10.39% 2.56% 46.89% 23.47% 24.50% 7.95%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Best Quarter Worst Quarter
20.79% -14.24%
(March 31, 1991) (September 30, 1998)
- -----------------------------------------------------------------------------------------
Average Annual Total Returns
(as of the calendar year ended Past One Past Five Past Ten
December 31, 1998) Year Years Years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enterprise Managed Portfolio(1) 7.95 % 20.11% 19.83%
S&P 500(2) 28.57% 24.06% 19.21%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Inception date is August 1, 1988.
(2) This unmanaged broad-based index includes 500 companies which tend to
be leaders in important industries within the US economy. It includes
reinvested dividends. An index does not have an investment advisor and
does not pay commissions or expenses. If an index had expenses, its
performance would be lower.
19
<PAGE> 23
ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS' INVESTMENTS AND RISKS
EQUITY AND FLEXIBLE PORTFOLIOS' INVESTMENTS
The table below shows the Equity and Flexible Portfolios' principal investments.
In other words, the table describes the type or types of investments that we
believe will most likely help each Portfolio achieve its investment goal.
<TABLE>
<CAPTION>
EQUITY PORTFOLIOS INCOME FLEXIBLE
PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
Growth Small Small Global
& Equity Capital Company Company International Financial High-Yield
Growth Income Equity Income Appreciation Growth Value Growth Services Bond Managed
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Stocks(1) o o o o o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign Stocks o o
- -----------------------------------------------------------------------------------------------------------------------------------
Bonds(2) o o
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Each Portfolio that invests in U.S. stocks may invest in large
capitalization companies, medium capitalization companies and small
capitalization companies. Large capitalization companies generally have
market capitalizations of over $5 billion. Medium-sized capitalization
companies generally have market capitalizations ranging from $1 billion
to $5 billion. Small capitalization companies generally have market
capitalizations of $1 billion or less. However, there may be some
overlap among capitalization categories. The Growth and Income
Portfolio intends to invest primarily in stocks of large capitalization
companies. The Small Company Growth Portfolio and the Small Company
Value Portfolio intend to invest primarily in the stocks of small
capitalization issuers.
2. The High-Yield Bond Portfolio invests primarily in junk bonds, which
are high-yielding, income producing corporate bonds, and investment
grade corporate debt. To the extent that the Managed Portfolio invests
in bonds, it will normally invest in investment grade intermediate to
long-term U.S. government and corporate debt. An investment grade debt
security is rated in one of the top four ratings categories by a debt
rating agency (or is considered of comparable quality by the Fund
Manager). The two best known debt rating agencies are Standard & Poor's
Rating Services, a Division of The McGraw-Hill Companies, Inc. and
Moody's Investors Service, Inc. "Investment grade" refers to any
security rated "BBB" or above by Standard & Poor's or "Baa" or above by
Moody's.
Each Portfolio also may invest in other securities, use other strategies and
engage in other investment practices, which are described in detail in our
Statement of Additional Information. Of course, we cannot guarantee that any
Portfolio will achieve its investment goal.
The investments listed above and the investments and strategies described
throughout this prospectus are those that a Portfolio may use under normal
conditions. During unusual economic or market conditions or for temporary
defensive or liquidity purposes, each Portfolio may invest up to 100% of
20
<PAGE> 24
its assets in cash, money market instruments, repurchase agreements and
short-term obligations. When a Portfolio is investing for temporary defensive
purposes, it is not pursuing its investment goal.
21
<PAGE> 25
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS AND PRACTICES
- --------------------------------------------------------------------------------
This table shows each Portfolio's investment limitations as a percentage of
portfolio assets. In each case the principal types of risk are listed
(see page ). Numbers in this table show allowable usage only; for actual
usage, consult the Portfolio's annual/semiannual reports.
5 Percent of total assets (italic type)
5 Percent of net assets (roman type)
* No policy limitation on usage; Portfolio may be using currently
0 Permitted, but not typically used
- - Not permitted
- --------------------------------------------------------------------------------
CONVENTIONAL SECURITIES
- --------------------------------------------------------------------------------
NON-INVESTMENT-GRADE SECURITIES. Securities rated below BBB/Baa are considered
junk bonds. Credit, market, interest rate, liquidity, valuation, information
risks.
- --------------------------------------------------------------------------------
FOREIGN EQUITIES.
o Stocks issued by foreign companies. Market, currency, information, natural
event, political risks.
o American or European depository receipts, which are dollar-denominated
securities typically issued by American or European banks and are based on
ownership of securities issued by foreign companies. Market, currency,
information, natural event, political risks.
- --------------------------------------------------------------------------------
RESTRICTED AND ILLIQUID SECURITIES. Securities not traded on the open market.
May include illiquid Rule 144A securities. Liquidity, valuation, market risks.
- --------------------------------------------------------------------------------
INVESTMENT PRACTICES
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The purchase of a security that must later be sold back
to the seller at the same price plus interest. Credit risk.
- --------------------------------------------------------------------------------
SECURITIES LENDING. The lending of securities to financial institutions, which
provide cash or government securities as collateral. Credit risk.
- --------------------------------------------------------------------------------
SHORT SALES. The selling of securities which have been borrowed on the
expectation that the market price will drop.
o Hedged. Hedged leverage, market, correlation, liquidity, opportunity risks.
o Speculative. Speculative leverage, market, liquidity risks.
- --------------------------------------------------------------------------------
SHORT-TERM TRADING. Selling a security soon after purchase. A Portfolio engaging
in short-term trading will have higher turnover, brokerage commissions and
transaction expenses. Short-term trading may also have tax consequences,
involving a possible increase the short-term capital gains or losses. Market
risk.
- --------------------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS. The purchase or sale of
securities for delivery at a future date; market value may change before
delivery. Market, opportunity, leverage risks.
- --------------------------------------------------------------------------------
LEVERAGED DERIVATIVE SECURITIES. The Portfolios will not invest in derivatives
for speculative purposes, but only as a hedge against changes in the values of
the Portfolios' securities resulting from market conditions.
- --------------------------------------------------------------------------------
FINANCIAL FUTURES AND OPTIONS; SECURITIES AND INDEX OPTIONS. Contracts involving
the right or obligation to deliver or receive assets or money depending on the
performance of one or more assets or an economic index.
o Futures and related options. Interest rate, currency, market, hedged or
speculative leverage, correlation, liquidity, opportunity risks.
o Options on securities and indices. Interest rate, currency, market, hedged
or speculative leverage, correlation, liquidity, credit, opportunity risks.
- --------------------------------------------------------------------------------
CURRENCY CONTRACTS. Contracts involving the right or obligation to buy or sell a
given amount of foreign currency at a specified price and future date.
o Hedged. Currency, hedged leverage, correlation, liquidity, opportunity
risks.
o Speculative. Currency, speculative leverage, liquidity risks.
- --------------------------------------------------------------------------------
OTHER DERIVATIVES, INCLUDING PUTS, CALLS AND INTEREST RATE SWAPS. Interest rate,
currency, market, leverage, correlation, liquidity, credit, opportunity risk.
- --------------------------------------------------------------------------------
22
<PAGE> 26
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
SMALL SMALL GLOBAL
GROWTH & EQUITY CAPITAL COMPANY COMPANY INTERNATIONAL FINANCIAL HIGH-YIELD
GROWTH INCOME EQUITY INCOME APPRECIATION GROWTH VALUE GROWTH SERVICES MANAGED BOND
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
o o o o -o o o o o -o *
5 5 5
- -------------------------------------------------------------------------------------------------------------------------
o- o- 15- o- - - - * * - -
20 20 20 20 20 20 20 * * 20 -
- -------------------------------------------------------------------------------------------------------------------------
10 10 10 10 10 10 10 10 10 10 10
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
5 5 5 5 5 5 5 5 5 5 5
- -------------------------------------------------------------------------------------------------------------------------
- - - - - - - - - - -
- -------------------------------------------------------------------------------------------------------------------------
- - - - - - - - - -
- - o - - - - -
-
- -------------------------------------------------------------------------------------------------------------------------
oo oo oo oo oo o o o o oo
- -------------------------------------------------------------------------------------------------------------------------
oo oo oo oo oo oo o o o oo
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
oo o o o o o o o o oo o
oo o o o o o o o o oo o
- -------------------------------------------------------------------------------------------------------------------------
o- o- o- -- o- - - o o 0- -
-- o- -- -- o- - - o o -- -
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 27
Risk Terminology
Correlation Risk: the risk that changes in the value of a hedging instrument
will not match those of the asset being hedged (hedging is the use of one
investment to offset the effects of another investment). Incomplete correlation
can result in unanticipated risks.
Credit Risk: the risk that the issuer of a security, or the counter party to a
contract, will default or otherwise become unable to honor a financial
obligation.
Currency Risk: the risk that fluctuations in the exchange rates between the U.S.
dollar and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by foreign
currency denominated investments and may widen any losses.
Information Risk: the risk that key information about a security or market is
inaccurate or unavailable.
Interest Rate Risk: the risk of market losses attributable to changes in
interest rates. With fixed-rate securities, a rise in interest rates typically
cause a fall in values, while a fall in rates typically causes a rise in values.
Leverage Risk: associated with securities or practices (such as borrowing) that
multiply small index or market movements into large changes in value.
- Hedged. When a derivative (a security whose value is based on
another security or index) is used as a hedge against an
opposite position that a Portfolio also holds, any loss
generated by the derivative should be substantially offset by
gains on the hedged investment, and vice versa. While hedging
can reduce or eliminate losses, it can also reduce or
eliminate gains.
- Speculative. To the extent that a derivative is not used as a
hedge, a Portfolio is directly exposed to the risks of that
derivative. Gains or losses from speculative positions in a
derivative may be substantially greater than the derivative's
original cost.
Liquidity Risk: the risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead or forego an investment
opportunity, any of which could have a negative effect on a Portfolio's
management or performance.
Market Risk: the risk that the market value of a security may move up or down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than the price originally paid for it, or less than it was worth
at an earlier time. Market risk may affect a single issuer, industry, sector of
the economy or the market as a whole. Common to all stocks and bonds and the
mutual funds that invest in them.
24
<PAGE> 28
NATURAL EVENT RISK: the risk of losses attributable to natural disasters, crop
failures and similar events.
OPPORTUNITY RISK: the risk of missing out on an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.
POLITICAL RISKS: the risk of losses attributable to government or political
actions, from changes in tax or trade statutes to governmental collapse and war.
VALUATION RISK: the risk that a Portfolio has valued certain of its securities
at a higher price than it can sell them for.
ACCOUNT INFORMATION
Shares of each Portfolio are not offered directly to the public.
Instead, shares are currently issued and redeemed only in connection with
investments in and payments under variable annuity contracts and variable life
insurance policies (the "Contracts") of MONY Life Insurance Company of New York
("MONY") and its affiliates. All shares of the Portfolios are currently owned by
"Separate Accounts" of MONY and its affiliates. The Separate Accounts invest in
shares of the Portfolios in accordance with the allocation instructions received
from holders of the Contracts. You should be aware that the Contracts involve
fees and expenses that are not described in this Prospectus, and that the
Contracts also may involve certain restrictions and limitations. Certain
Portfolios may not be available in connection with a particular Contract. MONY
is under common control with, and therefore affiliated with Enterprise Capital
Management, Inc., the investment advisor of the Portfolios. In the future,
shares of the Portfolios may be sold to Separate Accounts and other eligible
investors that are not affiliated entities of MONY. It is possible, although not
presently anticipated, that a material conflict could arise between and among
the various investors in the Portfolios. If such a conflict were to occur, one
or more investors might withdraw their investments in the Portfolios. This might
force one or more of the Portfolios to sell portfolio securities at
disadvantageous prices. You will find information about purchasing a Contract in
the Prospectus that offers such Contracts, which accompanies this Prospectus.
TRANSACTION AND ACCOUNT POLICIES
VALUATION OF SHARES
The purchase or redemption price of a Portfolio share is its next
determined net asset value per share, without the imposition of any sales
charge. The net asset value per share is calculated separately for each
Portfolio. Each Portfolio calculates a share's net asset value by dividing net
assets of the Portfolio by the total number of outstanding shares of such
Portfolio.
The Portfolios calculate net asset value at the close of regular
trading (generally 4:00 p.m. Eastern time) on each day the New York Stock
Exchange is open. Investments for which market
25
<PAGE> 29
quotations are readily available are valued at market. All other securities and
assets are valued at fair value following procedures approved by the Trustees.
The Portfolios may invest in securities that are primarily listed on foreign
exchanges that trade on weekends or other days when the Portfolios do not price
their shares. As a result, the value of the Portfolios' shares may change on
days when you will not be able to purchase or redeem your shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio will distribute substantially all of its net investment
income and realized net capital gains, if any.
Each Portfolio declares and pays distributions of capital gains, if
any, at least once per calendar year. Each Portfolio declares and pays dividends
of investment income according to the following schedule:
Declared and Paid Annually Declared and Paid Monthly
- ----------------------------------------------------------------------------
Growth Portfolio High-Yield Bond Portfolio
- ----------------------------------------------------------------------------
Growth and Income Portfolio Equity Income -Semi Annually
- ----------------------------------------------------------------------------
Equity Portfolio
- ----------------------------------------------------------------------------
Capital Appreciation Portfolio
- ----------------------------------------------------------------------------
Small Company Growth
- ----------------------------------------------------------------------------
Small Company Value Portfolio
- ----------------------------------------------------------------------------
International Growth Portfolio
- ----------------------------------------------------------------------------
Global Financial Services
- ----------------------------------------------------------------------------
Managed Portfolio
- ----------------------------------------------------------------------------
Your dividends and capital gains distributions, if any, will be
automatically reinvested in shares of the same Portfolio on which they were paid
at net asset value. Such reinvestments automatically occur on the payment date
of such dividends and capital gains distributions.
Each Portfolio intends to qualify as a regulated investment company
under the Internal Revenue Code of 1986, as amended. As long as each Portfolio
is qualified as a regulated investment company, it will not be subject to
federal income tax on the earnings that it distributes. For information
concerning the federal income tax consequences to holders of the Contract, see
the accompanying Prospectus for the Contracts.
26
<PAGE> 30
PORTFOLIO MANAGEMENT
THE INVESTMENT ADVISOR
Enterprise Capital Management, Inc. serves as the investment advisor to
each of the Portfolios. The Advisor selects Fund Managers for the Portfolios,
subject to the approval of the Board of Trustees of the Portfolios, and reviews
their continued performance. Evaluation Associates, Inc., which has had 26 years
of experience in evaluating investment advisors for individuals and
institutional investors, assists the Advisor in selecting Fund Managers. The
Advisor also provides various administrative services.
The Securities and Exchange Commission has issued an exemptive order
that permits the Advisor to enter into or amend Agreements with Fund Managers
without obtaining shareholder approval each time. The exemptive order permits
the Advisor, with Board approval, to employ new Fund Managers for the
Portfolios, change the terms of the Agreements with Fund Managers or enter into
a new Agreement with a Fund Manager. Shareholders of a Portfolio have the right
to terminate an agreement with a Fund Manager at any time by a vote of the
majority of the outstanding voting securities of such Portfolio. The Portfolio
will notify shareholders of any Fund Manager changes or other material
amendments to the Agreements with Fund Managers that occur under these
arrangements.
The Advisor, which was incorporated in 1986, also serves as investment
advisor to The Enterprise Group of Funds, Inc. which had assets of $[ ] billion
as of _______. Performance of similar Funds of The Enterprise Group of Funds,
Inc. may differ from those of the Portfolios due to a number of factors
including the size of the Funds, investment cash flows and redemptions. The
Advisor's address is Atlanta Financial Center, 3343 Peachtree Road, N.E., Suite
450, Atlanta, Georgia 30326.
The following table sets forth the fee paid to the Advisor for the
fiscal year ended December 31, 1998 by each Portfolio. The Advisor in turn
compensated each Fund Manager at no additional cost to the Portfolio.
Name of Portfolio Fee (as a percentage of average net assets)
Growth Portfolio 0.75%
Growth and Income Portfolio 0.75%
Equity Portfolio 0.80% of average daily net assets up to
$400 million; 0.75% of average daily net
assets from $400 million to $800 million;
and 0.70% of average daily net assets in
excess of $800 million
27
<PAGE> 31
Equity Income Portfolio 0.75%
Capital Appreciation Portfolio 0.75%
Small Company Growth Portfolio 1.00%
Small Company Value Portfolio 0.80% of average daily net assets up to
$400 million; 0.75% of average daily net
assets from $400 million to $800 million;
and 0.70% of average daily net assets in
excess of $800 million
International Growth Portfolio 0.85%
Global Financial Services Portfolio 0.85%
High-Yield Bond Portfolio 0.60%
Managed Portfolio 0.80% of average daily net assets up to
$400 million; 0.75% of average daily net
assets from $400 million to $800 million;
and 0.70% of average daily net assets in
excess of $800 million
THE FUND MANAGERS
The following chart sets forth certain information about each of the
Fund Managers. The Fund Managers are responsible for the day to day management
of the Portfolios. The Fund Managers typically manage assets for institutional
investors and high net worth individuals. Collectively, the Fund Managers manage
assets in excess of $350 billion for all clients, including Enterprise
Accumulation Trust.
28
<PAGE> 32
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Name of Portfolio and Name The Fund Manager's Portfolio Managers
and Address of Fund Experience
Manager
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Growth Portfolio Montag & Caldwell and its Ronald E. Canakaris,
predecessors have been President and Chief
Montag & Caldwell, Inc. engaged in the business of Investment Officer of Montag
("Montag & Caldwell") providing investment counseling & Caldwell, is responsible
1100 Atlanta Financial Center to individuals and institutions for the day-to-day investment
3343 Peachtree Road, N.E. since 1945. Total assets under management of the Growth
Atlanta, Georgia 30326 management for all clients Portfolio and has more than
approximated $25.8 billion as of 30 years' experience in the
December 31, 1998 investment industry. He has
Usual investment minimum: $40 million. been President of Montag &
Caldwell for more than 15 years
and has served as Fund Manager
since its inception.
- -----------------------------------------------------------------------------------------------------------------
Growth and Income Portfolio RSI has been providing investment James P. Coughlin, President
advisory services since 1989. and Chief Investment Officer
Retirement System Investors Inc. Total assets under management of RSI, is responsible for the
("RSI") for RSI were $597 million as of day-to-day management of
317 Madison Avenue December 31, 1998. the Portfolio and has more
New York, New York 10017 than 30 years' experience in
the investment industry. He
has served as President and
Chief Investment Officer of
RSI since 1989.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 33
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Name of Portfolio and Name The Fund Manager's Portfolio Managers
and Address of Fund Experience
Manager
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equity Portfolio OpCap has provided investment Eileen Rominger, Managing
advisory services since 1984. Director of Oppenheimer
OpCap Advisors ("OpCap") OpCap had approximately Capital, is responsible for the
One World Financial Center $62 billion under management day-to-day management of
New York, New York 10281 as of December 31, 1998. the Fund. Ms. Rominger has
Usual investment minimum more than 20 years' experience
is $20 million. in the investment industry and
has been Managing Director of
Oppenheimer Capital since 1994.
She previously served as Senior
Vice President from 1986 to 1994.
- -----------------------------------------------------------------------------------------------------------------
Equity Income Portfolio 1740 Advisers had provided investment John V. Rock, President and
advisory services since 1971. Director of 1740 Advisers, is
1740 Advisers, Inc. ("1740 Total assets under management responsible for the day-to-
Advisers") for 1740 Advisers as of day investment management
1740 Broadway December 31, 1998, were of the Portfolio and has more
New York, New York 10019 approximately $1.9 billion. than 35 years' experience in
Usual investment minimum is $20 the investment industry. He
million. has served as President of
1740 Advisers since 1974.
- -----------------------------------------------------------------------------------------------------------------
Capital Appreciation Portfolio PIC traces its origins to an Jeffrey J. Miller is a Managing
investment partnership formed Director of PIC and is
Provident Investment Counsel, in 1951. As of December 31, 1998, responsible for the day-to-
Inc. ("PIC") total assets under management day management of the
300 North Lake Avenue for all clients were $20.4 billion. Portfolio. He has more than
Pasadena, California 91101 Usual investment minimum: $5 25 years' experience in the
million. investment industry. He has
been Managing Director of
PIC since 1972.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 34
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NAME OF PORTFOLIO AND NAME THE FUND MANAGER'S PORTFOLIO MANAGERS
AND ADDRESS OF FUND EXPERIENCE
MANAGER
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SMALL COMPANY GROWTH Witter has provided investment William D. Witter, President
PORTFOLIO advisory services since 1977. of Witter, and Paul B.
As of December 31, 1998 total assets Phillips, Managing Director,
William D. Witter, Inc. ("Witter") under management for all clients are responsible for the day-
One Citicorp Center were $905 million. Usual to-day management of the
153 East 53rd Street investment minimum is $1 Portfolio. They have more
New York, New York 10022 million. than 80 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 Bankers
Trust Company from 1986 to
1995.
- -----------------------------------------------------------------------------------------------------------------
SMALL COMPANY VALUE GAMCO's predecessor, Gabelli Mario J. Gabelli has served
PORTFOLIO & Company, Inc., was founded as chief investment officer of
in 1977. As of December 31, Gabelli since inception in
GAMCO Investors, Inc. 1998 total assets under management 1977 and is responsible for
("GAMCO") for all clients were $7.2 billion. the day-to-day management
One Corporate Center Usual investment minimum is of the Portfolio. He has more
Rye, New York 10580 $500,000. than 28 years' experience in
the investment industry.
- -----------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH Vontobel has provided Fabrizio Pierallini, Senior
PORTFOLIO investment counseling Vice President and Managing
since 1984. Vontobel's Director of International
Vontobel USA Inc. assets under management Investments is responsible
("Vontobel") for all clients were $841 million for the day-to-day management
450 Park Avenue as of December 31, 1998. of the Fund. Mr. Pierallini
New York, New York 10022 Usual investment minimum has been employed by Vontobel
is $200,000. since 1994. He previously
served as a portfolio manager
for the Swiss Bank.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 35
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NAME OF PORTFOLIO AND NAME THE FUND MANAGER'S PORTFOLIO MANAGERS
AND ADDRESS OF FUND EXPERIENCE
MANAGER
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GLOBAL FINANCIAL SERVICES Sanford Bernstein was The day-to-day management
PORTFOLIO established in 1967 and as of of this Portfolio is performed
December 31, 1998 had $78.6 by Sanford Bernstein's Policy
Sanford C. Bernstein & Co., billion in assets under Group, which is chaired by
Inc. ("Sanford Bernstein") management. Usual Andrew S. Adelson, who has
767 Fifth Avenue investment minimum more than 20 years'
New York, New York is $5 million. experience in the investment
10153-0185 industry.
- -----------------------------------------------------------------------------------------------------------------
HIGH-YIELD BOND PORTFOLIO Caywood-Scholl has provided James Caywood, Managing
investment advice with respect Director and Chief Investment
Caywood-Scholl Capital to high-yield, low grade fixed Officer of Caywood-Scholl,
Management ("Caywood- income instruments since 1986. is responsible for the day-to-
Scholl") As of December 31, 1998 assets day management of the
4350 Executive Drive, Suite under management for all clients Portfolio. He has more than
125 approximated $973 million. 30 years' investment industry
San Diego, California 92121 Usual investment minimum is $1 experience. He joined
million. Caywood-Scholl in 1986 as
Managing Director and Chief
Investment Officer and has
held those positions since
1986.
- -----------------------------------------------------------------------------------------------------------------
MANAGED PORTFOLIO OpCap Advisors has been Richard J. Glasebrook II,
providing investment advisory Managing Director of
OpCap Advisors services since 1987. Oppenheimer Capital is
One World Financial Center As of December 31, 1998, responsible for the day-to-
New York, New York 10281 Oppenheimer Capital and its day management of the
affiliates have over $62 billion Portfolio. He has more than
under management. Its usual 25 years' investment industry
investment minimum is $20 experience. Mr. Glasebrook
million. has served as Managing
Director of Oppenheimer
Capital since 1994 and
immediately preceding served
as Senior Vice President.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE> 36
YEAR 2000
Many computer and computer-based systems cannot distinguish the year
2000 from the year 1900 because of the way they encode and calculate dates
(commonly known as the "Year 2000 Issue"). The Year 2000 Issue could potentially
have an adverse impact on the handling of security trades, the payment of
interest and dividends, pricing and account services. As part of its operational
responsibilities, the Advisor has reviewed each of its internal systems and has
obtained assessments from each service provider, including Fund Managers, of
Year 2000 issues which could potentially impact services to the Portfolios. The
Advisor is unaware of any Year 2000 issues which remain unresolved or have been
identified as unresolvable. In addition, the Advisor has established a timetable
to periodically re-evaluate systems to ensure new issues or those which may not
previously have been identified are addressed and resolved in an expeditious
manner. The Advisor does not anticipate any material expenditures for monitoring
Year 2000 issues. If the problem has not been fully addressed, however, the
Portfolios could be negatively affected. The Year 2000 Issue could also have a
negative impact on the companies or governmental agencies in which the
Portfolios invest, which could hurt the Portfolios' investment returns, but at
this time, the Advisor cannot predict the degree of impact on the Portfolios.
FINANCIAL HIGHLIGHTS
The Financial Highlights tables for each Portfolio is intended to help
you understand the Portfolio's financial performance for the past 5 years, or,
if shorter, the period of the Portfolio's operations. Certain information
reflects financial results for a single Portfolio share. The total returns in
each table represent the rate that an investor would have earned (or lost) on an
investment in a Portfolio (assuming reinvestment of all dividends and
distributions).
33
<PAGE> 37
ENTERPRISE ACCUMULATION TRUST
EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992
------------- ----------- ---------- ----------- ---------- ---------- -----------
<S> <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
----------- ---------- ----------- --------- --------- ---------
Net investment income (loss) 0.30 0.37 0.33 0.28 0.18 0.17
Net realized and unrealized
gains (losses) on
investments................... 7.13 5.52 6.38 0.41 1.13 2.49
----------- ----------- ----------- --------- --------- ---------
Total from investment
operations................ 7.43 5.89 6.71 0.69 1.31 2.66
----------- ----------- ----------- --------- --------- ---------
Dividends from net investment
income........................ 0.32 0.09 0.49 0.18 0.17 0.24
Distributions from net
realized capital gains........ 0.88 0.29 1.01 0.32 0.42 0.43
----------- ----------- ----------- --------- --------- ---------
Total distributions....... 1.20 0.38 1.50 0.50 0.59 0.67
----------- ----------- ----------- --------- --------- ---------
Net asset value, end of
period........................ $ $ 35.09 $ 28.86 $ 23.35 $ 18.14 $ 17.95 $ 17.23
=========== =========== =========== ========= ========= =========
Total return.................... 25.76% 25.22% 38.44% 3.87% 7.85% 17.90%
----------- ----------- ----------- --------- --------- ---------
Net assets end of period (in
thousands).................... $ $ 517,803 $ 314,907 $ 167,963 $ 88,583 $ 66,172 $ 33,581
----------- ----------- ----------- --------- --------- ---------
Ratio of expenses to average
net assets.................... 0.84% 0.81% 0.69% 0.67% 0.72% 0.79%
----------- ----------- ----------- --------- --------- ---------
Ratio of expenses to average
net assets (excluding
waivers)...................... 0.84% 0.81% 0.72% 0.69% 0.72% 0.79%
----------- ----------- ----------- --------- --------- ---------
Ratio of net investment
income (loss) to average
net assets.................... 1.42% 1.94% 1.94% 1.81% 1.47% 1.48%
----------- ----------- ----------- --------- --------- ---------
Ratio of net investment
income (loss) to average
net assets (excluding
waivers)...................... 1.42% 1.94% 1.91% 1.79% 1.47% 1.48%
----------- ----------- ----------- --------- --------- ---------
Portfolio turnover.............. 17% 30% 29% 38% 15% 27%
----------- ----------- ----------- --------- --------- ---------
Average commission per
share(C)...................... $ 0.0577 $ 0.0567
----------- -----------
<CAPTION>
YEAR
ENDED
DECEMBER 31, PERIOD OF
---------------------------------------------- AUGUST 1, 1988
1991 1990 1989 DECEMBER 31, 1988
---------- ---------- ----------- -----------------
<C> <C> <C> <C>
Net asset value, beginning
of period..................... $ 11.92 $ 12.50 $ 10.19 $ 10.00
--------- --------- -------- --------
Net investment income (loss) 0.24 0.30 0.26 0.00
Net realized and unrealized
gains (losses) on
investments................... 3.42 (0.58) 2.05 0.19
--------- --------- ------- --------
Total from investment
operations................ 3.66 (0.28) 2.31 0.19
--------- --------- ------- --------
Dividends from net investment
income........................ 0.34 0.21 0.00 0.00
Distributions from net
realized capital gains........ 0.00 0.09 0.00 0.00
--------- --------- ------- --------
Total distributions....... 0.34 0.30 0.00 0.00
--------- --------- ------- --------
Net asset value, end of
period........................ $ 15.24 $ 11.92 $ 12.50 $ 10.19
========= ========= ======= ========
Total return.................... 31.20% (2.20)% 22.70% 1.90%(B)
--------- --------- ------- --------
Net assets end of period (in
thousands).................... $ 17,221 $ 10,248 $ 5,997 $ 1,059
--------- --------- ------- --------
Ratio of expenses to average
net assets.................... 0.86% 0.92% 0.85% 0.85%(A)
--------- --------- ------- --------
Ratio of expenses to average
net assets (excluding
waivers)...................... 0.86% 0.99% 1.54% 6.79%(A)
--------- --------- ------- --------
Ratio of net investment
income (loss) to average
net assets.................... 2.09% 3.45% 3.93% 0.10%(A)
--------- --------- ------- --------
Ratio of net investment
income (loss) to average
net assets (excluding
waivers)...................... 2.09% 3.38% 3.24% (5.84)%(A)
--------- --------- ------- --------
Portfolio turnover.............. 41% 49% 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> 38
ENTERPRISE ACCUMULATION TRUST
SMALL COMPANY VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992
------- -------- -------- -------- -------- -------- --------
<S> <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
Net investment income (loss) 0.05 0.25 0.32 0.19 0.10 0.09
Net realized and unrealized
gains (losses) on
investments................... 8.91 1.82 1.75 (0.16) 2.98 3.05
-------- -------- ------- -------- ---------- -------
Total from investment
operations................. 8.96 2.07 2.07 0.03 3.08 3.14
-------- -------- ------- -------- ---------- -------
Dividends from net investment
income........................ 0.15 0.12 0.40 0.10 0.10 0.10
Distributions from net
realized capital gains........ 2.33 0.21 0.75 0.99 1.08 1.43
------- -------- ------- -------- ---------- -------
Total distributions......... 2.48 0.33 1.15 1.09 1.18 1.53
-------- -------- ------- -------- ---------- -------
Net asset value, end of
period........................ $ 26.70 $ 20.22 $ 18.48 $ 17.56 $ 18.62 $ 16.72
======== ======== ======= ======== ========== =======
Total return.................... 44.32% 11.21% 12.28% 0.02% 19.51% 21.50%
-------- -------- ------- -------- ---------- -------
Net assets end of period (in
thousands).................... $365,266 $2,704 $66,061 $ 4,880 $ 105,635 $31,211
-------- ------ ------- ------- ---------- -------
Ratio of expenses to average
net assets.................... 0.86% 0.84% 0.69% 0.66% 0.74% 0.86%
-------- -------- ------- -------- ---------- -------
Ratio of expenses to average
net assets (excluding
waivers)...................... 0.86% 0.84% 0.72% 0.67% 0.74% 0.86%
-------- -------- ------- -------- ---------- -------
Ratio of net investment
income (loss) to average
net assets.................... 0.21% 1.35% 1.86% 1.30% 1.06% 1.05%
-------- -------- ------- -------- ---------- -------
Ratio of net investment
income (loss) to average
net assets (excluding
waivers)....................... 0.21% 1.35% 1.83% 1.29% 1.06% 1.05%
-------- -------- ------- -------- ---------- -------
Portfolio turnover.............. 58% 137% 70% 58% 70% 105%
-------- -------- ------- -------- ---------- -------
Average commission per
share(C)...................... $ 0.0456 $ 0.0480
-------- --------
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD OF
------------------------------------------------- AUGUST 1, 1988 -
1991 1990 1989 DECEMBER 31, 1988
------------ ------------ -------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................ $ 10.46 $ 12.06 $ 10.19 $ 10.00
Net investment income (loss) 0.09 0.31 0.17 0.00
Net realized and unrealized
gains (losses) on
investments................... 4.86 (1.47) 1.70 0.19
------- -------- ------- --------
Total from investment
operations................. 4.95 (1.16) 1.87 0.19
------- -------- ------- --------
Dividends from net investment
income........................ 0.30 0.15 0.00 0.00
Distributions from net
realized capital gains........ 0.00 0.29 0.00 0.00
------- ------- ------- --------
Total distributions......... 0.30 0.44 0.00 0.00
------- ------- ------- --------
Net asset value, end of
period........................ $ 15.11 $ 10.46 $ 12.06 $ 10.19
======= ======== ======== ========
Total return.................... 48.10% (9.80)% 18.40% 1.90%(B)
------- -------- -------- --------
Net assets end of period (in
thousands).................... $ 9,777 $ 2,744 $ 2,302 $ 571
------- -------- -------- --------
Ratio of expenses to average
net assets.................... 1.00% 1.02% 0.95% 0.95%(A)
------- -------- -------- --------
Ratio of expenses to average
net assets (excluding
waivers)...................... 1.19% 1.62% 2.38% 9.22%(A)
------- -------- -------- --------
Ratio of net investment
income (loss) to average
net assets.................... 1.41% 3.32% 2.48% 0.23%(A)
------- -------- -------- --------
Ratio of net investment
income (loss) to average
net assets (excluding
waivers)....................... 1.22% 2.38% 1.05% (8.04)%(A)
------- -------- -------- --------
Portfolio turnover.............. 120% 44% 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> 39
ENTERPRISE ACCUMULATION TRUST
MANAGED PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993
------------- -------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 34.31 $ 28.06 $ 20.82 $ 21.35 $ 20.11
------------ ------------ ------------ ---------- ----------
Net investment income (loss). 0.35 0.59 0.40 0.40 0.46
Net realized and unrealized
gains (losses) 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
------------ ------------ ------------ ---------- ----------
Dividends from net
investment income.......... 0.55 0.06 0.75 0.46 0.24
Distributions from net
realized capital gains..... 1.39 0.27 1.38 0.62 0.53
------------ ------------ ------------ ---------- ----------
Total distributions.... 1.94 0.33 2.13 1.08 0.77
------------ ------------ ------------ ---------- ----------
Net asset value, end of
period..................... $ 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 period
(in thousands)............. $ 2,672,932 $ 1,935,343 $ 1,264,718 $ 689,252 $ 525,163
------------ ------------ ------------ ---------- ----------
Ratio of expenses to
average net assets......... 0.76% 0.74% 0.67% 0.64% 0.66%
------------ ------------ ------------ ---------- ----------
Ratio of expenses to average
net assets (excluding
waivers)................... 0.76% 0.74% 0.67% 0.64% 0.66%
------------ ------------ ------------ ---------- ----------
Ratio of net investment
income (loss) to average
net assets................. 1.14% 2.16% 1.80% 2.23% 3.21%
------------ ------------ ------------ ---------- ----------
Ratio of net investment income
(loss) to average net assets
(excluding waivers)........ 1.14% 2.16% 1.80% 2.23% 3.21%
------------ ------------ ------------ ---------- ----------
Portfolio turnover........... 32% 29% 31% 33% 21%
------------ ------------ ------------ ---------- ----------
Average commission per
share(C)................... $ 0.0574 $ 0.0531
------------ ------------
<CAPTION>
YEAR PERIOD OF
ENDED AUGUST 1, 1998 -
------------------------------------------ DECEMBER 31, DECEMBER 31,
1992 1991 1990 1989 1988
------------- ------------ ------------ ----------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $ 17.56 $ 12.43 $ 13.80 $ 10.44 $ 10.00
---------- ------------ ----------- --------- ---------
Net investment income (loss). 0.25 0.29 0.31 0.34 0.05
Net realized and unrealized
gains (losses) on
investments................ 2.95 5.31 (0.81) 3.06 0.39
--------- ----------- ----------- --------- ---------
Total from investment
operations............ 3.20 5.60 (0.50) 3.40 0.44
--------- ----------- ----------- --------- ---------
Dividends from net
investment income.......... 0.27 0.39 0.28 0.03 0.00
Distributions from net
realized capital gains..... 0.38 0.08 0.59 0.01 0.00
---------- ------------ ------------ --------- ---------
Total distributions.... 0.65 0.47 0.87 0.04 0.00
---------- ------------ ------------ --------- ---------
Net asset value, end of
period..................... $ 20.11 $ 17.56 $ 12.43 $ 13.80 $ 10.44
========== ============ ============ ========= =========
Total return................. 18.60% 46.00% (3.60)% 32.60% 4.40%(B)
---------- ------------ ----------- --------- ---------
Net assets end of period
(in thousands)............. $ 236,175 $ 98,468 $ 45,955 $ 22,459 $ 3,238
---------- ------------ ----------- --------- ---------
Ratio of expenses to
average net assets......... 0.69% 0.73% 0.80% 0.85% 0.85%(A)
---------- ------------ ----------- --------- ---------
Ratio of expenses to average
net assets (excluding
waivers)................... 0.69% 0.73% 0.80% 1.05% 3.37%(A)
---------- ------------ ----------- --------- ---------
Ratio of net investment
income (loss) to average
net assets................. 2.06% 2.42% 3.79% 5.10% 3.88%(A)
---------- ------------ ----------- --------- ---------
Ratio of net investment income
(loss) to average net assets
(excluding waivers)........ 2.06% 2.42% 3.79% 4.09% 1.36%(A)
---------- ------------ ----------- --------- ---------
Portfolio turnover........... 23% 57% 112% 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> 40
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-
1998 1997 1996 1995 DECEMBER 31, 1994
------------- ------------------------------------------------- --------------------
<S> <C> <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> 41
ENTERPRISE ACCUMULATION TRUST
HIGH-YIELD BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, PERIOD OF
----------------------------------------------------- NOVEMBER 18, 1994-
1998 1997 1996 1995 DECEMBER 31, 1994
--------- -------- -------- -------- -----------------
<S> <C> <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 ......................................... -- 0.01 0.02 --
-------- -------- -------- -------
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> 42
ENTERPRISE ACCUMULATION TRUST
Investment Advisor
Enterprise Capital Management, Inc.
Atlanta Financial Center
3343 Peachtree Road, N.E.
Suite 450
Atlanta, GA 30326-1022
Custodian
State Street Bank and Trust Company
Boston, MA
Independent Accountants
PricewaterhouseCoopers LLP
Atlanta, GA
Member - Investment Company Institute
<PAGE> 43
(OUTSIDE BACK COVER)
FOR MORE INFORMATION
The following documents contain more information about the Portfolios
and are available free of charge upon request:
Annual/Semi-annual Reports. Contain financial
statements, performance data and information on
portfolio holdings. The annual report also contains a
written analysis of market conditions and investment
strategies that significantly affected a Portfolio's
performance during the last fiscal year.
Statement of Additional Information (SAI). Contains
additional information about the Portfolios'
policies, investment restrictions and business
structure. This prospectus incorporates the SAI by
reference.
You may obtain copies of these documents or ask questions about the
Portfolios by contacting:
MONY Life Insurance Company of New York
Mail Drop 9-34
1740 Broadway
New York, New York 10019
1-800-487-6669
Inquiries concerning management and investment policies of the
Portfolios should be directed to:
Enterprise Capital Management, Inc.
3343 Peachtree Road, Suite 450
Atlanta, GA 30326
1-800-432-4320
Information about the Portfolios (including the SAI) can be reviewed
and copied at the Public Reference Room of the Securities and Exchange
Commission, Washington, D.C. Call (800) SEC-0330 for information on the
operation of the Public Reference Room. Information about the Portfolios is also
available on the Securities and Exchange Commission's web-site at
http://www.sec.gov and copies may be obtained upon payment of a duplicating fee
by writing the Public Reference Section of the Securities and Exchange
Commission, Washington, D.C. 20549-6009.
You should rely only on the information contained in this prospectus.
No one is authorized to provide you with any different information.
INVESTMENT COMPANY ACT
File No.
<PAGE> 44
ENTERPRISE ACCUMULATION TRUST
Atlanta Financial Center
3343 Peachtree Road, Suite 450
Atlanta, Georgia 30326-1022
1-800-432-4320
STATEMENT OF ADDITIONAL INFORMATION
EQUITY PORTFOLIOS:
Growth Portfolio
Growth and Income Portfolio
Equity Portfolio
Equity Income Portfolio
Capital Appreciation Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
International Growth Portfolio
Global Financial Services Portfolio
INCOME PORTFOLIO:
High-Yield Bond Portfolio
FLEXIBLE PORTFOLIO:
Managed Portfolio
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of Enterprise Accumulation Trust (the
"Trust") dated May 3, 1999, which has been filed with the Securities and
Exchange Commission. The Trust sells shares to variable accounts of MONY Life
Insurance Company of New York ("MONY") and MONY Life Insurance Company of
America ("MONY America") ("Variable Accounts") that were established to fund
certain Flexible Payment Variable Annuity and Life Insurance contracts (the
"Contracts). Holders of the Contracts ("Contractholders") can obtain copies of
the Trust's Prospectus by writing to MONY, Mail Drop 9-34, 1740 Broadway, New
York, NY 10019 or by calling MONY at 1-800-487-6669.
The Prospectus is incorporated by reference into this Statement of
Additional Information, and this Statement of Additional Information is
incorporated by reference into the Prospectus.
The date of this Statement of Additional Information is May 3, 1999.
<PAGE> 45
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
General Information and History................................................................1
Investment Objectives and Policies.............................................................1
Equity Portfolios.....................................................................1
Income Portfolio......................................................................7
Flexible Portfolio....................................................................8
Certain Investment Securities, Techniques and Associated Risks.................................8
Short Term Investments................................................................9
Obligations Issued or Guaranteed by U.S. Government Agencies or Instrumentalities.....9
Information on Time Deposits and Variable Rate Notes..................................9
Insured Bank Obligations.............................................................10
High-Yield Securities................................................................10
REITs ............................................................................12
Hedging Transactions.................................................................12
Certain Securities...................................................................12
Foreign Currency Values and Transactions.............................................15
Certain Other Securities.............................................................16
Forward Commitments..................................................................18
Temporary Defensive Tactics..........................................................18
Investment Restrictions.......................................................................18
Portfolio Turnover............................................................................21
Management of the Trust.......................................................................21
Investment Advisory and Other Services........................................................25
Investment Advisory Agreement........................................................25
Fund Manager Arrangements............................................................27
Purchase, Redemption and Pricing of Securities Being Offered..................................30
Purchase of Shares...................................................................30
Redemption of Shares.................................................................30
Determination of Net Asset Value.....................................................32
Portfolio Transactions and Brokerage..........................................................32
Performance Comparisons.......................................................................35
Dividends, Distributions and Taxes............................................................38
</TABLE>
i
<PAGE> 46
<TABLE>
<S> <C>
Additional Information........................................................................39
Custodian, Transfer and Dividend Disbursing Agent.............................................41
Independent Accountants.......................................................................41
Financial Statements..........................................................................41
Appendix A....................................................................................42
Appendix B....................................................................................44
</TABLE>
ii
<PAGE> 47
GENERAL INFORMATION AND HISTORY
The Trust was organized as a Massachusetts business trust under the
name Quest for Value Accumulation Trust on March 2, 1988, and is registered with
the Securities and Exchange Commission (the "SEC") as an open-end diversified
management investment company. On September 16, 1994, it changed its name to
Enterprise Accumulation Trust. The Trust's common stock is divided into eleven
classes, each of which representing shares of separate portfolio (each a
"Portfolio," and collectively, the Portfolios).
INVESTMENT OBJECTIVES AND POLICIES
The following information is provided for those investors wishing to
have more comprehensive information than that contained in the Prospectus. The
investment objectives of each Portfolio are fundamental and may not be changed
without the approval of a majority of the outstanding voting securities of that
Portfolio. The investment policies of the Trust are not fundamental and may be
changed without shareholder approval.
EQUITY PORTFOLIOS
Under normal market conditions, at least 65% of the net asset value of
the nine Equity Portfolios will be invested in common equity securities. The
remainder of the Equity Portfolios' assets may be invested in repurchase
agreements, bankers acceptances, bank certificates of deposit, commercial paper
and similar money market instruments, convertible bonds, convertible preferred
stock, preferred stock, corporate bonds, U.S. Treasuries, notes and bonds,
American Depository Receipts ("ADRs"), European Depository Receipts ("EDRs"),
rights and warrants.
The Growth, Growth and Income, Equity, Equity Income, Capital
Appreciation, Global Financial Services, Small Company Growth and Small Company
Value Portfolios invest in securities that are traded on national securities
exchanges and in the over-the-counter market. Each of these Portfolios, except
the Global Financial Services Portfolio, may invest up to 20% of its assets in
foreign securities provided they are listed on a domestic or foreign securities
exchange or are represented by ADRs. The Global Financial Services Portfolio may
invest over 50% of its assets in foreign securities. No Portfolio may invest
more than 10% of its net assets in illiquid, including restricted, securities.
As noted below, the International Growth Portfolio invests principally in the
securities of foreign issuers listed on recognized foreign exchanges, but may
also invest in securities traded on the over-the-counter market.
GROWTH PORTFOLIO. The objective of the Growth Portfolio is appreciation
of capital primarily through investments 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.
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Growth and Income Portfolio. The objective of the Growth and Income
Portfolio is total return through capital appreciation with income as a
secondary consideration. 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 of 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. The securities held in the Growth and Income
Portfolio will generally reflect the price volatility of the broad equity market
(i.e., the S&P 500 Composite Stock Price 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 ("NYSE"). In addition, it may also purchase securities listed on
other domestic securities exchanges, securities traded in the domestic
over-the-counter market and foreign securities provided that they are listed on
a domestic or foreign securities exchange or represented by 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 income producing equity securities.
The Portfolio's principal criterion in stock selection is above-average
yield, and it uses this criterion 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.
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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.
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 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 to achieve its objective of capital appreciation by investing primarily in
common stocks of small companies with strong earnings growth and potential for
significant capital appreciation. Under normal market conditions, the Portfolio
will have at least 65% of its total assets in small capitalization stocks
(market capitalization of up to $1 billion) and generally that percentage will
be considerably higher. The Portfolio reserves the right to have some of its
assets in the equities of companies with over $1 billion in market
capitalization. These holdings may be equities that have appreciated since
original purchase or equities of companies with a market capitalization in
excess of $1 billion at the time of purchase. The Portfolio will normally be as
fully invested as practicable in common stocks, but also may invest up to 5% of
its assets in warrants and rights to purchase common stocks.
In pursuing its objective, the Fund Manager will seek out the stocks of
small companies that are expected to have above average growth in earnings and
are reasonably valued. The Fund Manager uses a disciplined approach in
evaluating growth companies. It relates the expected growth rate in earnings to
the price-earnings ratio of the stock. Generally, the Fund Manager will not buy
a stock if the price-earnings ratio exceeds the growth rate. By using this
valuation parameter, the Fund Manager believes it moderates some of the inherent
volatility in the small-capitalization sector of the market. Securities will be
sold when the Fund Manager believes the stock price exceeds the valuation
criteria, or when the stock appreciates to a point where it is substantially
overweighted in the portfolio, or when the company no longer meets expectations.
The Fund Manager's goal is to hold a stock for a minimum of one year but this
may not always be feasible and there may be times when short-term gains or
losses will be realized.
Small Company Value Portfolio. The investment objective of the Small
Company Value Portfolio is maximum capital appreciation, primarily through
investment of at least 65% of Portfolio assets in common equity securities of
companies (based on the total outstanding common shares at the time of
investment) which have market capitalizations of up to $1 billion.
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The Portfolio intends to invest the remaining 35% of its total assets
in the same manner but reserves the right to use some or all of the 35% to
invest in equity securities of companies (based on the total outstanding common
shares at the time of investment) which have a market capitalization of more
than $1 billion.
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 has surfaced. The Fund Manager uses a number
of proprietary research techniques in various sectors to seek out companies in
the public market that are selling at a discount to what the Fund Manager terms
the private market value (PMV) of the companies. The Fund Manager then
determines whether there is an emerging catalyst that will focus investor
attention on the underlying assets of the company. Smaller companies may be
subject to a valuation catalyst such as increased investor attention, takeover
efforts or a change in management.
International Growth Portfolio. The objective of the International
Growth Portfolio is capital appreciation, primarily through a diversified
Portfolio of non-U.S. equity securities.
It is a fundamental policy of the Portfolio that it will invest at
least 80% of the value of its assets (except when maintaining a temporary
defensive position) in equity securities of companies domiciled outside the
United States. That portion of the Portfolio not invested in equity securities
is, in normal circumstances, invested in U.S. and foreign government securities,
high-grade commercial paper, certificates of deposit, foreign currency, bankers
acceptances, cash and cash equivalents, time deposits, repurchase agreements and
similar money market instruments, both foreign and domestic. The Portfolio may
invest in convertible debt securities of foreign issuers which are convertible
into equity securities at such time as a market for equity securities is
established in the country involved.
The International Growth Fund will invest primarily in equity
securities, which may achieve capital appreciation by selecting companies with
superior potential based on a series of macro and micro analyses. The
International Growth Fund may select its investments from companies which are
listed on a securities exchange or from companies whose securities have an
established over-the-counter market, and may make limited investments in
"thinly traded" securities.
The International Growth Fund will have at least 65% of its assets
invested in European and Pacific Basin equity securities. The International
Growth Fund intends to broadly diversify investments among countries and
normally to have represented in the portfolio business activities of not less
than three different countries. The selection of the securities in which the
International Growth Fund will invest not be limited to companies of any
particular size, and will be based only upon the expected contribution such
security will make to its investment objective.
Using an approach that involves top-down country allocation combined
with bottom-up stock selection, the Fund Manager will seek to identify countries
where economic and political factors are likely to provide above-average
returns, and companies in such countries that are best positioned in their
respective industries and are attractively valued. In this regard the Fund
Manager will allocate the assets of the International Growth Fund principally
between the European and Pacific regions. The International Growth Fund will
invest most of its assets in equity securities of countries which are generally
considered to have developed markets, such as the United Kingdom, Germany,
France, the Netherlands, Switzerland, Norway, Spain, Japan, Hong Kong,
Australia, and Singapore.
The Fund Manager's approach is governed by its belief that the
principal factors affecting an equity market's return are, on a country
allocation basis, the proportion of liquidity in the economy, and, on a stock
selection basis, consistent profit growth, a strong balance sheet and high
returns on employed capital and, in addition, that the effect of currency
fluctuations on portfolio returns can be reduced through a systematic hedging
strategy.
For its country allocation, the Fund Manager analyzes approximately 35
international growth markets, which include the 20 markets currently comprised
in Morgan Stanley Capital International's Europe, Australia, and Far East Index
("EAFE"). The Fund Manager also gives consideration to such factors as market
liquidity, accessibility to foreign investors, regulatory protection of
shareholders, accounting and disclosure standards, and transferability of funds
and foreign exchange controls, if any.
Each factor is assigned a numerical value based on a scale determined
by the historic ranges. Based on the arithmetical sum of all such values, an
attractiveness ranking for each country in the Fund Manager's universe is
produced on a quarterly basis. The use of three different sets of variables in
combination results in a higher degree of predictability of the valuation
model's output. Generally, the factors are equally weighted. In a few instances
a double weight is assigned if the predictive power of a particular factor has
historically been very high, like yield curve analysis, which is relevant in all
markets.
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The valuation model's total return expectations provide a relative
ranking in descending order of attractiveness of all countries in the Fund
Manager's universe. It is not the Fund Manager's approach to make country "bets"
by, for example, significantly overweighting those countries showing the highest
expected return based on the output of the Fund Manager's valuation model.
Rather, the Fund Manager normalizes the distribution of country weights through
the use of a proprietary risk-variance matrix that establishes for each market a
minimum/maximum weight relative to the benchmark (EAFE). Since the Fund
Manager's country allocation valuation model cannot take into account exogenous
events impacting country stock market returns such as political events, social
unrest and currency turmoil, this matrix serves for risk control purposes.
Before a decision is made to increase or lower a country weight based
on the quantitative output of the valuation model, the Fund Manager reviews the
country's fundamental economic data that are not part of the country screening
process as well as its political situation. This systematic qualitative
analysis focuses on such macroeconomic data as GDP growth, external trade
balances, current account and balance of payments, external debt position and
debt service ratios, foreign reserve position, ability to finance deficits in
external accounts, fiscal and exchange rate policies, private and public
savings rates, as well as inflationary trends.
The Fund Manager believes this approach to be more useful than a rigid
discipline that ties the magnitude and timing of shifts in country weights
directly to changes in the expected returns for each country produced by the
Fund Manager's valuation model since the Fund Manager does not employ portfolio
optimization techniques.
The Fund Manager's stock selection process begins by screening a
universe of approximately 3000 stocks in a market capitalization range from
approximately $500 million to approximately $100 billion. The Fund Manager's
screens are designed to be representative of each market and generally cover a
broad cross-section of companies which together account for about 70% of total
market capitalization. The Fund Manager's approach is to look at companies whose
growth factors can be measured and compared. The Fund Manager's data series
focus on low price to sales ratios, consistent earnings growth, consistent
operating margins, high returns on equity relative to price to cash flow, and
healthy debt ratios. The Fund Manager defines cash flow as recurrent net profit
plus depreciation. Furthermore, the Fund Manager analyzes the share price in
relation to earnings before interest, taxes, depreciation and amortization, and
looks at the underlying trend of cash and retained earnings. The screens,
comprising multiple valuation ratios, are used to ensure rigor and consistency
in the Fund Manager's bottom-up research.
The Fund Manager supplements the above quantitative screening process
by an analysis of certain qualitative criteria, one of the most important of
which is to identify strong, stable and reliable management that maintains a
company's market position through consistent unit volume growth and gains in
market share rather than a reliance on price increases, exercises tight
financial control and fosters a culture of market responsiveness.
Based on the Fund Manager's ranking of approximately 3000 stocks in
about 35 different international equity markets, the Fund Manager usually
selects names which appear in the top third of the quantitative screens for
each country. Based on the screening factors, these stocks typically show low
historical deviations of annual earnings, high returns on equity and low debt
levels. Position size at purchase ranges from about 0.7% to 1% of total
portfolio assets.
Within this range position size varies in proportion to the market
capitalization of the company within a given country's stock market. The Fund
Manager normally allows positions to reach a maximum of approximately 5% of
total assets.
Shifts in country weight are the principal cause for selling stocks.
Stocks are sold if a country's maximum weight-basis on the risk-variance matrix
has been exceeded. The Fund Manager may trim or sell positions if a name drops
from the top third of its quantitative screens due to price appreciation or if
a company's fundamentals have deteriorated.
Within each country, no conscious sector allocation decision is made.
Sector allocation is the result of the stock selection within each country.
Global Financial Services Portfolio. The investment objective of the
Global Financial Services Portfolio is capital appreciation by investing
primarily in common stocks of domestic and foreign financial services companies.
The Portfolio will concentrate (invest 25% or more of its total assets) its
investments in the financial services industry. The Portfolio seeks to achieve
its objective through investment in the common stocks of domestic and foreign
financial services
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companies. Under normal circumstances, at least 65% of the Portfolio's total
assets will be invested in financial services companies that are domiciled in at
least four countries, including the U.S.
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 Fund Manager systematically applies a combination 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 Global Financial Services Portfolio employs a research-driven,
value-based investment philosophy that the Fund Manager utilized for more than
two decades. The Fund Manager's approach rests on the premise that the capital
markets all have some degree of inefficiency; value distortions are common in
all markets, with their dimensions ranging from minor to extreme. [CONFIRM]
In addition to targeting high return potential, process is also geared
to control volatility. To evaluate the potential risk/reward tradeoff, the Fund
Manager incorporates the use of a number of proprietary models including an
optimization model, a multi-factor risk model, a country valuation model, a
currency valuation model, an earnings revision model, and a relative return
trends model. The actual construction of the portfolio considers not only this
fundamental risk/reward profile of stocks, but also the appropriate timing for
the transactions.
The Global Financial Services Portfolio invests almost exclusively in
financial services stocks with average holdings of between 55 and 75 stocks. In
addition, the Portfolio primarily invests in U.S. financial services companies.
Other countries eligible for inclusion into this service will be limited to the
developed market as represented by the MSCI EAFE Index with Canada. The Fund
Manager will not make investments in emerging markets. The Portfolio is broadly
diversified geographically, typically with holdings in ten or more foreign
countries. The vast majority of the investments are made in common and preferred
stocks with a fully invested posture being the norm. Individual security
positions are controlled so that no single holding will dominate the portfolio.
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The Fund 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
Group's decisions, deviating only to conform to Portfolio objectives.
The Fund Manager 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, the Fund Manager's analysts are centrally
located so that the senior professionals can control the quality of their
findings.
Income Portfolio
Investors should refer to Appendix A to this Statement of Additional
Information for a description of the Moody's Investors Service, Inc. (Moody's)
and Standard & Poor's (S&P) ratings mentioned below.
High-Yield Bond Portfolio. The 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 net assets
(at least 65% of gross assets) in high-yielding, income-producing corporate
bonds that are rated below investment grade and rated B3 or better by Moody's or
B- or better by S&P. The corporate bonds in which the Portfolio invests are
high-yielding but normally carry a greater credit risk than bonds with higher
ratings. In addition, such bonds, commonly referred to as "junk bonds," may
involve greater volatility of price than higher-rated bonds. For a discussion of
high-yield securities and related risks, see "Certain Investment Techniques and
Associated Risks" in this Statement of Additional Information.
The Portfolio's investments are selected by the Fund 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 Fund 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 Fund Manager shall
have discretion to hold or liquidate the security.
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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 Fund 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 of put, calls, and
futures and their related risks, see "Certain Investment Techniques and
Associated Risks."
Flexible Portfolio
Managed Portfolio. The objective of the Managed Portfolio is 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 Fund
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 will be the same as those in which the Equity Portfolios
invest. Debt securities are expected to be predominantly investment grade
intermediate to long-term U.S. Government and corporate debt, although the
Portfolio will also invest in high quality short-term money market and cash
equivalent securities and may invest almost all of its assets in such securities
when the Fund Manager deems it advisable in order to preserve capital. In
addition, the Portfolio may also invest up to 20% of its assets in 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 Fund 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. However, it is a policy of the Portfolio that it will not
invest more than 5% of the value of its total assets in high-yield securities.
CERTAIN INVESTMENT SECURITIES, TECHNIQUES
AND ASSOCIATED RISKS
Following is a description of certain investment techniques employed by
the Portfolios, and certain types of securities invested in by the Portfolios
and associated risks. Unless otherwise indicated, all of the Portfolios may use
the indicated techniques and invest in the indicated securities.
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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 investments"). 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
Finances Services Portfolio may invest in all of the above, both foreign and
domestic, including foreign currency, foreign time deposits and foreign bank
acceptances.
Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities
Some obligations issued or guaranteed by U.S. government agencies or
instrumentalities, such as securities issued by the Federal Home Loan Bank, are
backed by the right of the agency or instrumentality to borrow from the
Treasury. Others, such as securities issued by the Federal National Mortgage
Association ("Fannie Mae"), are supported only by the credit of the
instrumentality and not by the Treasury. If the securities are not backed by the
full faith and credit of the United States, the owner of the securities must
look principally to the agency issuing the obligation for repayment and may not
be able to assert a claim against the United States in the event that the agency
of 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
10% limit on illiquid investments set forth below.
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., the "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 Fund
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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 this Statement of Additional Information, 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 determined that a readily
available market exists for such obligations, a Portfolio will treat such
obligations as subject to the 10% limit for illiquid investments for each
Portfolio unless such obligations are payable at principal amount plus accrued
interest on demand or within seven days after demand.]
High-Yield Securities
Notwithstanding the investment policies and restrictions applicable to
the High-Yield Bond and Managed Portfolios which were 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 affected by
various factors, as discussed below:
High-Yield Bond Market. The high-yield bond market is relatively new
and has grown in the context of a long economic expansion. Any downturn in the
economy may have a negative impact on the perceived ability of the issuer to
make principal and interest payments which may adversely affect the value of
outstanding high-yield securities and reduce market liquidity.
Sensitivity to Interest Rate and Economic Changes. In general, the
market prices of bonds bear an inverse relationship to interest rates; as
interest rates increase, the prices of bonds decrease. The same relationship may
hold for high-yield bonds, but in the past high-yield bonds have been somewhat
less sensitive to interest rate changes than treasury and investment grade
bonds. While the price of high-yield bonds may not decline as much, relatively,
as the prices of treasury or investment grade bonds decline in an environment of
rising interest rates, the market price, or value, of a high-yield bond will be
expected to decrease in periods of increasing interest
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rates, negatively affecting 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 impair 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 affect
higher-rated, investment-grade securities.
Payment Expectations. Many high-yield bonds contain redemption or call
provisions which might be expected to be exercised in periods of decreasing
interest rates. Should bonds in which the High-Yield Bond Portfolio has invested
be redeemed or called during such an interest rate environment, the Portfolio
would have to sell such securities without reference to their investment merit
and reinvest the proceeds received in lower yielding securities, resulting in a
decreased return for investors in the High-Yield Bond Portfolio. In addition,
such redemptions or calls may reduce the High-Yield Bond Portfolio's asset base
over which the Portfolio's investment expenses may be spread.
Liquidity and Valuation. Because of periods of relative illiquidity,
many high-yield bonds may be thinly traded. As a result, the 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 a 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. Because
such income is not represented by cash, the Portfolio may be required to sell
other securities in order to satisfy the distribution requirements applicable to
regulated investment companies under the Internal Revenue Code of 1986, as
amended ("IRC").
Portfolio Composition. As of December 31, 1998, the High-Yield Bond
Portfolio consisted of securities classified as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
RATINGS INVESTMENTS
------- -------------
<S> <C>
AAA......................................................... 2%
BBB......................................................... 6%
BB.......................................................... 30%
B........................................................... 57%
CCC......................................................... 2%
</TABLE>
11
<PAGE> 58
<TABLE>
<S> <C>
Non-rated*.................................................. 3%
</TABLE>
- ----------------
* Equivalent ratings for these securities would have been B.
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.
HEDGING TRANSACTIONS
Except as otherwise indicated, the Fund Managers may invest in
derivatives, which are discussed in detail below, 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. 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.
The Portfolios will not engage in hedging transactions for speculative
purposes but only as a 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
(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 5% of the Portfolio's total assets taken at current value.
CERTAIN SECURITIES
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 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 amount paid to the Portfolio by the purchaser of the option is the
"premium." 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
12
<PAGE> 59
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, a Portfolio intends to write listed covered calls when it
anticipates that the rate of return from so doing 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 up 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 may be
limited; 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.
Puts. The Portfolios may purchase put options ("Puts") which relate to
(i) securities (whether or not they hold such securities); (ii) Index Options
(described below whether or not they hold such Options); or (iii) broadly-based
stock indexes. The Portfolios may write covered Puts. The Portfolios 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. The High-Yield Bond Portfolio may invest up to 10% of the
value of the Portfolio in Puts.
Futures Contracts. To the extent permitted by Arizona and New York law,
all Portfolios may enter into contracts for the future acquisition or delivery
of securities ("Futures Contracts") including index contracts and foreign
currencies, and may also purchase and sell call options on Futures Contracts.
These Portfolios may use this investment technique to hedge against anticipated
future adverse price changes which otherwise might either adversely affect the
value of the Portfolio's securities or currencies held in the Portfolio, or to
hedge anticipated future price changes which adversely affect the prices of
stocks, long-term bonds or currencies which the Portfolio intends to purchase at
a later date. Alternatively, the Portfolios may enter into Futures Contracts in
order to hedge against a change in interest rates which will result in the
premature call at par value of certain securities which the Portfolio has
purchased at a premium.
13
<PAGE> 60
If stock, bond or currency prices or interest rates move in an unexpected
manner, the Portfolio would not achieve the anticipated benefits of Futures
Contracts.
The use of Futures Contracts involves special considerations or risks
not associated with the primary activities engaged in by any Portfolios. Risks
of entering into Futures Contracts include: (1) the risk that the price of the
Futures Contracts may not move in the same direction as the price of the
securities in the various markets; (2) the risk that there will be no liquid
secondary market when the Portfolio attempts to enter into a closing position;
(3) the risk that the Portfolio will lose an amount in excess of the initial
margin deposit; and (4) the risk that the Fund Manager may be incorrect in its
prediction of movements in stock, bond, currency prices and interest rates.
Index Options. All the Equity 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 S&P 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 Fund
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 a Portfolio's
investments from interest rate fluctuations, the Portfolio may engage in
interest rate swaps. Generally, the Portfolios use interest rate swaps as a
hedge and not as a speculative investment. Interest rate swaps involve the
exchange between a Portfolio and 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 swap 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 because of subsequent changes in interest
rates. This would protect the Portfolio from a decline in the value of the
underlying security due to rising rates, but would also limit its ability to
benefit from falling interest rates.
The Portfolio will enter into interest rate swaps only on a net basis
(i.e., the two payments streams will be netted out, with 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
14
<PAGE> 61
over its entitlements with respect to each interest rate swap will be accrued on
a daily basis, and an amount of cash or liquid high grade 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 a Fund 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.
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 Services 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 MSCI EAFE Index. 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 Fund Manager based upon its research.
To manage exposure to currency fluctuations, the Portfolio may alter
equity or money market exposures (in its normal asset allocation mix as
previously identified), enter into forward currency exchange contracts, buy or
sell options, futures or options on futures relating to foreign currencies and
may purchase securities indexed to currency baskets. The Portfolio will also use
these currency exchange techniques in the normal course of business to hedge
against adverse changes in exchange rates in connection with purchases and sales
of securities. Some of these strategies may require the Portfolio to set aside
liquid assets in a segregated custodial account to cover its obligations. These
techniques are further described below.
15
<PAGE> 62
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 a Fund 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 an amount equal to the amount the Portfolio
would be required to pay upon exercise of the put.
Certain Other Securities
Except as otherwise indicated, the Portfolios may purchase the
following securities, the purchase of which involves certain risks described
below. Unless otherwise indicated, a Portfolio will not purchase a category of
such securities if the value of such category, taken at current value, would
exceed 5% of the Portfolio's total assets.
Master Demand Notes. All Portfolios may purchase variable amount master
demand notes. Variable amount master demand notes are demand obligations that
permit the investment of fluctuating amounts at varying market rates of interest
pursuant to arrangements between the issuer and a commercial bank acting as
agent for the payees of such notes whereby both parties have the right to vary
the amount of the outstanding indebtedness on the notes. Since there is no
secondary market for these notes, the appropriate Fund Managers, subject to the
overall review
16
<PAGE> 63
of the Trust's Trustees and the Advisor, monitor the financial condition of the
issuers to evaluate their ability to repay the notes.
Repurchase Agreements. All Portfolios may enter into repurchase
agreements having maturities of one business day. When a Portfolio acquires
securities from a bank or broker-dealer, it may simultaneously enter into a
repurchase agreement with the same seller pursuant to which the seller agrees at
the time of sale to repurchase the security at a mutually agreed upon time and
price. In such instances, the Trust's Custodian has possession of the security
or collateral for the seller's obligation. If the seller should default on its
obligation to repurchase the securities, the Portfolio may experience delays,
difficulties or other costs when selling the securities held as collateral and
may incur a loss if the value of the collateral declines. The appropriate Fund
Managers, subject to the overall review by the Trust's Trustees and the Advisor,
monitor the value of the collateral as to repurchase agreements, and they
monitor the creditworthiness of the seller and mist find it satisfactory before
engaging in repurchase agreements. The Portfolios will enter into repurchase
agreements only with Federal Reserve member banks that have net worth of at
least $100,000,000 and outstanding commercial paper of the two highest rating
categories assigned by Moody's or S&P or with broker-dealers that are registered
with the Securities and Exchange Commission, are members of the National
Association of Securities Dealers, Inc. ("NASD") and have similarly rated
commercial paper outstanding. Any repurchase agreements entered into by the
Portfolios will be fully collateralized and marked to market daily.
Restricted or Illiquid Securities. Each Portfolio may invest up to 10%
of its net assets in restricted securities (privately placed equity or debt
securities) or other securities which are not readily marketable.
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, subject to the 20% limitation, invest in foreign
securities as well as both sponsored and unsponsored ADRs, and EDRs which are
securities of U.S. issuers backed by securities of foreign issuers. There may be
less information available about unsponsored ADRs and EDRs, and therefore, they
may carry higher credit risks. The Portfolios may also invest in securities of
foreign branches of domestic banks and domestic branches of foreign banks.
Investments in foreign equity and debt securities involve risks
different from those encountered when investing in securities of domestic
issuers. The appropriate Fund Managers and the Advisor, subject to the overall
review of the Portfolio's Trustees, evaluate the risks and opportunities when
investing in foreign securities. Such risks include trade balances and
imbalances and related economic policies; currency exchange rate fluctuations;
foreign exchange control policies; expropriation or confiscatory taxation;
limitations on the removal of funds or other assets; political or social
instability; the diverse structure and liquidity of securities markets
17
<PAGE> 64
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.
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. The 5% limitation does not apply to the
International Growth Portfolio, which has a 20% limitation.
Temporary Defensive Tactics
Any or all of the Portfolios may at times for defensive purposes, at
the determination of the Fund 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 Fund Manager
such investments are appropriate in light of economic or market conditions. For
temporary defensive purposes, the International Growth Portfolio may invest in
all of the above, both foreign and domestic, including foreign currency, foreign
time deposits, and foreign bank acceptances. When a Portfolio takes a defensive
position, it may not be following the fundamental investment policy of the
Portfolio.
INVESTMENT RESTRICTIONS
The following are fundamental policies and, together with the
restrictions and other fundamental policies described above 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 Trust, 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. Except as otherwise set forth, no Portfolio may:
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
18
<PAGE> 65
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
Trust'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 Portfolio is permitted to use by any of its other
fundamental policies.
6. Invest more than 10% of its net assets in illiquid securities
(securities for which market quotations are not 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
Trust, any officer or trustee of the Trust or any officer or director of the
Investment Advisor or the Fund 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.)
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<PAGE> 66
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
Trust may be deemed an underwriter under the Securities Act of 1933 in disposing
of a Trust 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 Trust 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 Trust 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.
If a percentage restriction is adhered to at the time of an investment,
a later increase or decrease in the investment's percentage of the value of a
Portfolio's total assets resulting from a change in portfolio value or assets
will not constitute a violation of the percentage restrictions.
PORTFOLIO TURNOVER
A portfolio turnover rate is, in summary, the percentage computed by
dividing the lesser of a Portfolio's purchases or sales of securities by the
average investments of that Portfolio. The Fund 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 Fund
Manager, an issuer's creditworthiness or perceived changes in a company's
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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.
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.
The portfolio turnover rate of the Small Company Value Portfolio in
1996, which was 137%, exceeded 100% principally due to the appointment of a new
Fund Manager and a resulting change in management style. In 1997, the portfolio
turnover rate of the Portfolio was 58%.
The portfolio turnover rate of the High-Yield Bond Portfolio in 1998,
which was 108%, exceeded 100% principally due to the investment strategy
utilized by the Fund Manager to potentially enhance performance by replacing
portfolio holdings with better revenue-producing issues.
MANAGEMENT OF THE TRUST
The Trust's Board of Trustees has overall responsibility for the
management of the Trust 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 Trust has undertaken to
monitor the Trust 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 Board of Directors of those companies have agreed to
be responsible for reporting any potential or existing conflicts to Trustees of
the Trust 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 Trustees and officers of the Trust, 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 Trust, the address of each is Atlanta Financial Center,
3343 Peachtree Road, N.E., Suite 450, Atlanta, GA 30326-1022.
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<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH PRINCIPAL OCCUPATION
THE TRUST PAST FIVE YEARS
- --------------------------- --------------------
<S> <C>
Arthur T. Dietz (75) President, ATD Advisory Corp. since 1996; President and
Trustee Chief Executive Officer, Strategic Fund Management, Inc.,
[Member of the Audit Committee] 1987-1995; Mills B. Lane Professor of Finance and Banking,
Emory University, 1954-1988; Chairman, First Atlanta Investments,
1998-present; Director, The Enterprise Group
of Funds, Inc.
*Samuel J. Foti (47) President and Chief Operating Officer, MONY since 1994;
Trustee 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, Atlanta, Georgia since
Trustee 1987; President, Summit Industries, Inc.(manufacturer)
[Chairman of Audit Committee] since 1954; Chairman, Crescent Banking Co., Inc. since 1985;
President, Jonesheirs, Inc. (licensing entity) since 1975;
Director, The Enterprise Group of Funds, Inc.
William A. Mitchell, Jr.(59) President/CEO, Carter & Associates (real estate
Trustee development), Atlanta, Georgia since 1994; Director, John
Wieland Homes (commercial residential builder) since 1992;
Director, The Enterprise Group of Funds, Inc.
Lonnie H. Pope (65) Chief Executive Officer, Longleaf Industries, Inc.,
Trustee (chemical manufacturing) (1996-present); formerly President
[Member of the Audit Committee] and Chief Executive Officer of AFF, Inc. (aromatics manufacturing)
from 1987 to 1998;] Director, The Enterprise Group of Funds, Inc.
</TABLE>
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<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH PRINCIPAL OCCUPATION
THE TRUST PAST FIVE YEARS
- --------------------------- --------------------
<S> <C>
*Michael I. Roth (53) Chairman and Chief Executive Officer, MONY since 1993;
Trustee 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 Trust (1987); Executive Vice
President, Primerica Trust [DESCRIPTION?] (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 Trust.
*Victor Ugolyn (51) Chairman, President and Chief Executive Officer, The
Trustee Enterprise Group of Funds, Inc. since 1991; Chairman,
President and 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 (43) Secretary, The Enterprise Group of Funds, Inc. since
Secretary 1991; Senior Vice President, Secretary and Chief
Counsel, Enterprise Capital Management, Inc. since
1991; Senior Vice President, Secretary and Chief
Counsel, Enterprise Fund Distributors, Inc. since
1991.
Herbert M. Williamson (48) [Assistant Secretary and] Treasurer, The Enterprise Group of
Assistant Secretary, Treasurer Funds, Inc., Enterprise Capital Management, Inc. and
Enterprise Fund Distributors, Inc. since 1989.
Phillip G. Goff (35) Vice President and Chief Financial Officer, The Enterprise
Vice President Group of Funds, Inc., Enterprise Capital Management, Inc. and
Enterprise Fund Distributors, Inc. 1995 - present; Audit
Manager, Coopers & Lybrand LLP, 1991 - 1995.
</TABLE>
* Messrs. Foti, Roth and Ugolyn are "interested persons" of the Trust, of the
Advisor, and of the Distributor, as that term is defined in the Investment
Act of 1940.
23
<PAGE> 70
Arthur T. Dietz, Arthur Howell and Lonnie H. Pope (the "non-interested
Trustees") also serve on the Audit Committee of the Board of Trustees.] [The
Audit Committee is charged with recommending to the full Board the engagement or
discharge of the Trust's independent accountants; directing investigations into
matters within the scope of the independent accountants' duties; reviewing with
the independent accountants the audit plan and results of the audit; approving
professional services provided by the independent accountants and other
accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; and preparing and submitting Committee minutes to the full
Board. Arthur T. Dietz and Victor Ugolyn also serve on the Valuation Committee
of the Board of Trustees.
All officers of the Trust are officers of Enterprise Capital
Management, Inc. and receive no salary or fee from the Trust. The Trustees,
other than Messrs. Foti, Roth and Ugolyn will be paid an annual fee of $12,500
plus $625 for each Trustee's meeting attended and $625 for each committee
meeting attended.
The following sets forth compensation paid to each of the Trustees
during 1998:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Pension or Total
Retirement Compensation
Benefits from the Trust
Aggregate Accrued as Part Estimated and Portfolio
Compensation of Portfolio Annual Benefits Complex Paid to
Name From the Trust Expenses Upon Retirement Trustees*
<S> <C> <C> <C> <C>
Arthur T. Dietz $11,100 None None $25,875
Arthur Howell $12,100 None None $26,875
William A.
Mitchell, Jr. $11,275 None None $24,625
Lonnie H. Pope $12,100 None None $26,875
</TABLE>
* Each Trustee received fees for services as a Director of The Enterprise Group
of Funds, Inc.
At April 3, 1999, the officers and Trustees of the Trust as a group
owned none of the Portfolios' outstanding shares.
As of the date of this Statement of Additional Information, MONY and
MONY America, its wholly-owned subsidiary, through their respective Variable
Accounts, own all of the Trust'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
vote independently of voting instructions received from
24
<PAGE> 71
Contractholders. The Trust might nonetheless be deemed to be controlled by MONY
and MONY America by virtue of the definitions contained in the 1940 Act although
the Trust disclaims such control.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
The Trust, on behalf of each Portfolio, has entered into an Investment
Advisory Agreement (the "Advisor's Agreement") with the Advisor which, in turn,
has entered into Fund Manager's Agreements with each of the Fund Managers. The
Advisor is a second-tier subsidiary of MONY Life Insurance Company ("MONY"), one
of the nation's largest insurance companies and a subsidiary of The MONY Group,
Inc. The Advisor was incorporated in 1986. The Advisor's address is 3343
Peachtree Road, Suite 450, Atlanta, Georgia 30326. Victor Ugolyn, who is
President of the Trust, is also Chairman of the Board and President of the
Advisor.
The Advisor's Agreement obligates the Advisor to provide investment
advisory services to the Portfolios, to furnish the Trust with certain
administrative, clerical, bookkeeping and statistical services, office space and
facilities, and to pay the compensation of the officers of the Trust. Each
Portfolio pays all other expenses incurred in its operation, including
redemption expenses, expenses of portfolio transactions, shareholder servicing
costs, mailing costs, expenses of registering the shares under federal and state
securities laws, accounting and pricing costs (including the daily calculation
of net asset value and daily dividends), interest, certain taxes, legal
services, auditing services, charges of the custodian and transfer agent, and
other expenses attributable to an individual account. Each Portfolio also pays a
portion of the Trust's general administrative expenses. These expenses are
allocated to the Portfolios either on the basis of their asset size, on the
basis of special needs of any Portfolio, or equally as is deemed appropriate.
These expenses include expenses such as: director fees; state franchise taxes;
custodial, transfer agent, brokerage, auditing and legal services; the printing
of prospectuses, proxies, registration statements and shareholder reports sent
to existing shareholders; expenses relating to bookkeeping, recording and
determining the net asset value of shares; the expenses of qualification of a
Portfolio's shares under the federal and state securities laws; and any other
expenses properly payable by the Trust that are allocable to the respective
Portfolios. Litigation costs, if any, may be directly allocable to the
Portfolios or allocated on the basis of the size of the respective Portfolios.
The Board of Trustees annually reviews allocation of expenses among the
Portfolios and has been determined that this is an appropriate method of
allocation of expenses.
The total expenses of each Portfolio for the most recent fiscal year,
expressed as a percentage of average net assets were as follows:
25
<PAGE> 72
<TABLE>
<CAPTION>
PORTFOLIO TOTAL EXPENSES
--------- --------------
<S> <C>
Growth
Growth and Income
Equity [0.84%]
Equity Income
Capital Appreciation
Small Company Growth
Small Company Value [0.86%]
Global Financial Services
International Growth [1.19%]
High-Yield Bond [0.77%]
Managed [0.76%]
</TABLE>
The Advisor has advised the Trust that it will reimburse such portion
of the fees due to it under the Advisor's Agreement as is necessary to assure,
for the period commencing January 1, 1999, and ending no earlier than December
31, 1999, that expenses incurred by the Portfolios will not exceed the following
percentages of average annual assets (annualized for periods of less than a
fiscal year): Growth ___ %; Growth and Income ____%; Equity ___%; Equity Income
_____%; Capital Appreciation ______%; Small Company Growth ______%; Small
Company Value ____%; International Growth _________%; Global Financial Services
_____%; High-Yield Bond ______%; and Managed _______%. The Fund Managers have
advised the Trust that they may assist in a portion of the above-referenced
reimbursement from time to time.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations thereunder, the Advisor or the Fund 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 Advisor to act as
investment advisor for any other person or firm.
The Advisor and the Trust have received an exemptive order from the
Securities and Exchange Commission which permits the Trust to enter into or
amend Fund Manager Agreements without obtaining Contractholder approval each
time. On April 28, 1997,
26
<PAGE> 73
Contractholders voted affirmatively to give the Trust this ongoing authority.
With Board approval, the Advisor is permitted to employ new Fund Managers for
the Portfolios, change the terms of the Fund Manager Agreements or enter into a
new Agreement with that Fund Manager. Contractholders of a Portfolio continue to
have the right to terminate the Fund Manager's Agreement for a Portfolio at any
time by a vote of the majority of the outstanding voting securities of the
Portfolio. Contractholders will be notified of any Fund Manager changes or other
material amendments to Fund Manager Agreements that occur under these
arrangements.
FUND MANAGER ARRANGEMENTS
Under the Fund Manager Agreements, the Fund Managers, subject to the
oversight of the Advisor, are required to: (i) regularly provide investment
advice and recommendations to the respective Portfolios of the Trust 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 Trust and the portion, if
any, of the assets of these Portfolios of the Trust to be held uninvested; and
(iii) arrange for the purchase of securities and other investments by the
respective Portfolios of the Trust and the sale of securities and other
investments held by each of these Portfolios of the Trust. The following table
sets forth certain information about the Fund Managers for each Portfolio.
<TABLE>
<CAPTION>
PORTFOLIO NAME AND CONTROL FEE PAID BY THE ADVISOR TO THE
PERSONS OF THE FUND FUND MANAGER AS A PERCENTAGE OF
MANAGER AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Growth Portfolio Montag & Caldwell, Inc. .30% for assets under management
("Montag & Caldwell"). up to $1 billion; .20% thereafter.
Montag & Caldwell is
controlled by Alleghany
Trust.
Growth and Income Portfolio Retirement System .30% for assets under management
Investors Inc. ("RSI") which up to $100 million; .25% on the next
is a subsidiary of Retirement $100 million; and .20% for assets
System Group Inc. greater than $200 million.
Equity Portfolio OpCap Advisors, which is a .40% for assets under management
subsidiary of Oppenheimer up to $1 billion and .30% thereafter.
Capital, a general
partnership.
</TABLE>
27
<PAGE> 74
<TABLE>
<CAPTION>
PORTFOLIO NAME AND CONTROL FEE PAID BY THE ADVISOR TO THE
PERSONS OF THE FUND FUND MANAGER AS A PERCENTAGE OF
MANAGER AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equity Income Portfolio 1740 Advisers, Inc. ("1740 .30% for assets under management
Advisers"). It is a subsidiary up to $100 million; .25% on the next
of MONY. $100 million; and .20% thereafter.
Capital Appreciation Portfolio Provident Investment .50% for assets under management
Counsel, Inc. ("PIC"). PIC up to $100 million; .45% for assets
is a wholly owned under management for the next $100
subsidiary of United Asset million; .35% for assets greater than
Management, Inc. $200 million up to $300 million and
.30% thereafter.
Small Company Growth William D. Witter, Inc. .65% for assets under management
Portfolio ("Witter"). Witter is owned up to $50 million; .55% for assets
by its employees. under management for the next $50
million; and .45% for assets
thereafter.
Small Company Value Portfolio GAMCO Investors, Inc. is a .40% for assets under management
wholly owned subsidiary of up to $1 billion and .30% thereafter.
Gabelli Asset Management Inc.
International Growth Portfolio Vontobel USA Inc. .40% for assets under management
("Vontobel"). Vontobel up to $100 million;.35% for assets
is a wholly-owned under management from $100 million
subsidiary of Bank J. to $200 million;.325% for assets
Vontobel of Zurich, from $200 million to $500
Switzerland. million and .25% for assets greater
than $500 million.
Global Financial Services Sanford C. Bernstein & .50% for assets up to $100 million;
Portfolio Co., Inc. ("Sanford .40% for assets from $100 million to
Bernstein") is owned by $300 million; .30% for assets over
its employees. $300 million.
</TABLE>
28
<PAGE> 75
<TABLE>
<CAPTION>
PORTFOLIO NAME AND CONTROL FEE PAID BY THE ADVISOR TO THE
PERSONS OF THE FUND FUND MANAGER AS A PERCENTAGE OF
MANAGER AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
High-Yield Bond Portfolio Caywood-Scholl Capital .30% for assets under management
Management ("Caywood- up to $100 million and .25%
Scholl"). Caywood-Scholl is thereafter.
owned by Dresdner RCM
Global Investors LLC, an
affiliate of Dresdner Bank
AG.
Managed Portfolio OpCap Advisors, a .40% for assets under management
majority-owned subsidiary up to $1 billion and .30% for assets
of Oppenheimer Capital, a from $1 billion to $2 billion and .25%
general partnership. thereafter.
</TABLE>
The tables below sets forth the 1998, 1997 and 1996 breakdown by
Portfolio of (1) the investment advisory fee paid to the Advisor, (2) the
percentage of the Management Fee to be paid by the Advisor to the Fund Manager,
(3) the fund management fee paid by the Advisor to the Fund Manager, (4) the net
advisory fee left to the Advisor after payment of the fund management fee, and
(5) the amount of the expense reimbursement paid by the Advisor to the Portfolio
to assure that expenses incurred by the Portfolio did not exceed 2.0% of
average annual net assets for the Equity Portfolios and 1.3% of average annual
net assets for the Income Portfolio.
<TABLE>
<CAPTION>
1998
Portfolio (1) (2) (3) (4) (5)
- --------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Growth
Equity
Growth and Income
Equity Income
Capital Appreciation
Small Company Growth
Small Company Value
International Growth
Global Financial
Services
High-Yield Bond
Managed
</TABLE>
29
<PAGE> 76
<TABLE>
<CAPTION>
1997
Portfolio (1) (2) (3) (4) (5)
- --------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Equity
Small Company Value
International Growth
High-Yield Bond
Managed
<CAPTION>
1996
Portfolio (1) (2) (3) (4) (5)
- --------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Equity
Small Company Value
International Growth
High-Yield Bond
Managed
</TABLE>
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
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 Trust should also read the prospectus of the Contract(s).
Shares of each Portfolio of the Trust are offered to the Variable
Accounts without sales charge at the respective net asset values of the
Portfolios next determined after receipt by the Trust of the purchase payment in
the manner set forth below under "Determination of Net Asset Value."
Certificates representing shares of the Trust or any of its Portfolios will not
be physically issued. Enterprise Trust Distributors, Inc. (the "Distributor")
acts without remuneration from the Trust as the exclusive distributor of the
Trust's shares. The principal executive office of the Distributor is located at
Atlanta Financial Center, 3343 Peachtree Road, N.E., Suite 450, Atlanta, Georgia
30326-1022.
REDEMPTION OF SHARES
Shares of any Portfolio of the Trust 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 Trust's transfer agent of redemption
instructions in proper form. The redemption privilege may be suspended or
payment may be postponed for more than seven days during any
30
<PAGE> 77
period when: (1) the NYSE 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 or delay.
31
<PAGE> 78
Determination of Net Asset Value
The Portfolios calculate a share's net asset value by dividing the net
assets of the Portfolio by the number of shares then outstanding of such
Portfolio. The net asset value of each Portfolio's shares is determined once
daily as of the close of the NYSE on each day on which the NYSE is open for
trading. 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 sale price on the
exchange on which the security is primarily traded. If there are no current day
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 60 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,
or under the supervision of, the Board of Trustees. The Portfolios may own
securities that are primarily listed on foreign exchanges which trade on
Saturday or other customary United States national business holidays. If the
Portfolios do not price their securities on these days, their net asset values
may be significantly affected on days when investors have no access to the
Portfolios. The net asset value per share is effective as of the time of
computation. In determining net asset value, the price carried by the composite
tape of all national exchanges is used.
Securities other than money market instruments maturing in 60 days or
less which are traded on a national exchange are valued at the last sale price
as of the close of business on the day the securities are being valued, or,
lacking any sales, at the last bid price. Securities other than money market
instruments maturing in 60 days or less traded in the over-the-counter market
are valued at the last bid price or at yield equivalent as obtained from one or
more dealers that make markets in the securities. Securities which are traded
both in the over-the-counter market and on a national exchange are valued
according to the broadest and most representative market, and it is expected
that for debt securities this ordinarily will be the over-the-counter market.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision of
the Board of Trustees. Debt securities and foreign securities are valued on the
basis of independent pricing services approved by the Board of Trustees, and
such pricing services generally follow the same procedures in valuing foreign
equity securities as are described above. Money market instruments with
maturities of 60 days or less are valued using the amortized cost method of
valuation.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Each Fund Manager selects the brokerage firms which complete portfolio
transactions for that Portfolio, subject to the overall direction and review of
the Advisor and the Board of Trustees of the Trust. 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
Trust seeks to obtain prompt execution of orders at the most favorable net
price.
The initial criterion which must be met by any Fund 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
32
<PAGE> 79
commission costs may be obtained. In seeking to achieve the best combination of
price and execution, the Fund 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.
Transactions may be directed to brokers or dealers in return for their
brokerage and research services, which are intangible and on which no dollar
value can be placed, furnished to the Trust, the Advisor, and the respective
Fund Managers, or those firms who agree to pay certain of the Trust'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 Trust. There is no formula for
such allocation. The research information may or may not be useful to the Trust
and/or other accounts of the Fund Managers; information received in connection
with directed orders of other accounts managed by the Fund Managers or its
affiliates may or may not be useful to the Trust. Such information may be in
written or oral form and includes information on particular companies and
industries as well as market, economic or institutional activity areas. It
serves to broaden the scope and supplement the research activities of the Fund
Managers, to make available additional views for consideration and comparison,
and to enable the Fund Managers to obtain market information for the valuation
of securities held by the Trust. Fund Managers may execute brokerage
transactions through affiliated broker/dealers, subject to compliance with
applicable requirements of the federal securities laws.
Sales of shares of the Trust, subject to applicable rules covering the
Distributor's activities in this area, will also be considered as a factor in
the direction of the Trust 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 Fund Managers to cause purchase or sale
transactions to be allocated among the Portfolios and others whose assets it
manages in such manner as it deems equitable. In making such allocations among
the Trust 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 each Portfolio 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 Fund 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 Portfolio 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.
33
<PAGE> 80
The following table sets forth the amounts of the brokerage commissions
paid to broker-dealers by each Portfolio for the fiscal year ended December 31,
1998.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Brokerage Brokerage Commissions
Aggregate Commissions Paid to Paid to Affiliated Broker-
Brokerage Affiliated Broker- Dealers as a Percentage of
Commission Paid Brokerage Dealers as a Percentage the Portfolio's Aggregate
on Transactions Commissions Paid of the Portfolio's Dollar Amount of
in the Portfolio's To Affiliated Aggregate Transactions Involving
Portfolio Securities Broker-Dealers Commissions Paid Brokerage Commissions
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth
- --------------------------------------------------------------------------------------------------------------------
Growth and Income
- --------------------------------------------------------------------------------------------------------------------
Equity
- --------------------------------------------------------------------------------------------------------------------
Equity Income
- --------------------------------------------------------------------------------------------------------------------
Capital Appreciation
- --------------------------------------------------------------------------------------------------------------------
Small Company
Growth
- --------------------------------------------------------------------------------------------------------------------
Small Company
Value
- --------------------------------------------------------------------------------------------------------------------
International Growth
- --------------------------------------------------------------------------------------------------------------------
Global Financial
Services
- --------------------------------------------------------------------------------------------------------------------
High-Yield Bond
- --------------------------------------------------------------------------------------------------------------------
Managed
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The following tables set forth the aggregate brokerage commissions paid
by each Portfolio on transactions in that Portfolio's securities for the fiscal
year ended December 31, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1997
- -------------------------------------------------------------------------------
Aggregate Brokerage Commissions Paid on
Portfolio Transactions in the Portfolio's Securities
- -------------------------------------------------------------------------------
<S> <C>
Equity $ 164,149
- -------------------------------------------------------------------------------
Small Company Value $ 534,558
- -------------------------------------------------------------------------------
International Growth $ 181,826
- -------------------------------------------------------------------------------
High-Yield Bond $ 562
- -------------------------------------------------------------------------------
Managed $1,382,062
- -------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 81
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1996
- -------------------------------------------------------------------------------
Aggregate Brokerage Commissions Paid on
Portfolio Transactions in the Portfolio's Securities
- -------------------------------------------------------------------------------
<S> <C>
Equity $ 204,255
- -------------------------------------------------------------------------------
Small Company Value $ 784,580
- -------------------------------------------------------------------------------
International Growth $ 102,770
- -------------------------------------------------------------------------------
High-Yield Bond $ 516
- -------------------------------------------------------------------------------
Managed $ 22,241
- -------------------------------------------------------------------------------
</TABLE>
PERFORMANCE COMPARISONS
The average annual total return for the year ended December 31, 1998,
for the five-year period ended December 31, 1998,and the period from inception
through December 31, 1998, is shown in the following table:
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
FOR THE YEAR FOR THE FIVE
ENDED YEARS ENDED FOR THE PERIOD
DECEMBER 31, DECEMBER 31, FROM INCEPTION
1998 1998 TO DECEMBER 31,
PORTFOLIO (ONE YEAR) (FIVE YEARS) 1998(1)(2)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity 23.14% 21.30% 18.02%
Small Company Value 34.19% 17.42% 17.21%
</TABLE>
35
<PAGE> 82
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
International Growth 5.76% -- 12.41%
High-Yield Bond 12.38% -- 13.33%
Managed 22.45% 21.85% 20.98%
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects waiver of advisory fees and assumption of other expenses by
the Fund 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.
(2) The date of inception of the Equity, Small Company Value and Managed
Portfolios is August 1, 1988. The date of inception of the High-Yield
Bond and International Growth Portfolios is November 18, 1994.
Average annual total return is calculated by finding the average annual
compounded rates of return over the one, five and since inception periods that
would equate the initial amount invested to the ending redemption value
according to the following formula:
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERA = ending redeemable value of hypothetical $1,000
payment made at the beginning of the one, five and
since inception periods at the end of the one, five
and since inception periods.
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. Net
investment income is the net of accrued interest earned on debt obligations held
by each Portfolio and expenses accrued for the period. Accrued interest 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
plus accrued interest); (ii)
36
<PAGE> 83
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 Trust. The table does not reflect charges and deductions which are, or
may be, imposed under the Contracts. Yield is calculated by dividing net
investment income of a Portfolio per share earned during a 30 day period by the
maximum offering price per share on the last day of the period, according to the
following formula:
Yield = 2[(a-b/cd+1)(6)-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period. that were entitled to receive dividends.
d = the maximum offer price per share on the last day of
the period.
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 Trust 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 S&P 500 Composite Stock Price Index,
the Russell 2000 and the Lehman
37
<PAGE> 84
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The dividend policies of the Portfolios are discussed in the
Prospectus. In computing interest income, the Portfolios will amortize any
discount or premium resulting from the purchase of debt securities except for
mortgage- or other receivables-backed obligations subject to monthly payment of
principal and interest. 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 IRC.
To remain qualified as a regulated investment company, a Portfolio must, among
other things, (a) derive at least 90% of its gross income from the sales or
other disposition of securities, dividends, interest, proceeds from loans of
stocks 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.
Each Portfolio will comply with asset diversification regulations
prescribed by the U.S. Treasury Department under the IRC. In general, these
regulations effectively provide that, as of the end of each calendar quarter or
within 30 days thereafter, no more that 55% of the total assets of the Portfolio
may be represented by any one investment, no more than 70% by any two
investments, no more than 80% by any three investments, and no more than 90% by
any four investments. For this purpose, all securities of the same issuer are
considered a single investment, but each U.S. agency or instrumentality is
treated as a separate issuer. There are also alternative diversification tests
that may be satisfied by the Portfolio under the regulation. Each Portfolio
intends to comply with the diversification regulations. If a Portfolio fails to
comply with these regulations, the contracts invested in that Portfolio will not
be treated as annuity, endowment or life insurance contracts under the IRC.
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. A
Portfolio's returns will be reduced by the amount of any such foreign taxes.
Contractholders are urged to consult their tax advisors regarding specific
questions as to Federal, state and local taxes.
ADDITIONAL INFORMATION
Description of the Trust. The Trust is organized as a Massachusetts
business trust. Under Massachusetts law shareholders could, in certain
circumstances, be held personally liable as partners for Trust obligations. The
Trust's Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and requires that notice of such
disclaimer be given in each instrument entered into or executed by the Trust.
The Declaration of Trust also provides for indemnification out of the Trust's
property for any shareholder held
38
<PAGE> 85
personally liable for any Trust obligation. Thus, the risk of loss to a
shareholder from being held personally liable for obligations of the Trust is
limited to the unlikely circumstance in which the Portfolio itself would be
unable to meet its obligations.
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 Trust, to remove a Trustee.
The Trustees will call a meeting of the 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 Trust'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 Trust's shareholder list or mail the applicants'
communication to all other shareholders at the applicants' expense.
Possible Additional Trust 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.
Organization of the Trust. When issued, shares are fully paid and have
no preemptive, conversion or other subscription rights. The shares of beneficial
interest of the Trust, $0.01 par value, are divided into eleven separate series.
The shares of each series are freely-transferrable and equal as to earnings,
assets and voting privileges with all other shares of that series. Upon
liquidation of the Trust 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 debt and expenses have been paid. The
shares do not have cumulative voting rights.
The Trust's Board of Trustees, whose responsibilities are comparable to
those of directors of a Massachusetts corporation, is empowered to issue
additional classes of shares, which classes may either be identical except as to
dividends or may have separate assets and liabilities; classes having separate
assets and liabilities are referred to as "series." The creation of additional
series and offering of their shares (the proceeds of which would be invested in
separate, independently
39
<PAGE> 86
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 Trust 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 Trust's books of account. The Trust's Board of Trustees has
agreed to monitor the Trust transactions and management of each of the
Portfolio's books of account. The Trust's Board of Trustees has agreed to
monitor the Trust 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.
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 Advisor Agreement or a Fund 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 Trust, or any Portfolio of the Trust, 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 Advisor or its parent, MONY, may own, will be voted in the same
proportion as shares for which instructions are received. The Trust 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 Trust has been organized.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company ("State Street") whose address is
P.O. Box 8505, Boston, Massachusetts, 02266-8505, has been retained to act as
custodian of the assets of the Trust. The custodian is responsible for
safeguarding and controlling the cash and securities of the Portfolios, handling
the receipt and delivery of securities and collecting interest and dividends on
the Portfolios' investments. State Street also acts as transfer agent and
Shareholder Servicing Agent for the Trust.
40
<PAGE> 87
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, whose address is 1100 Campanile Building,
1155 Peachtree Street, Atlanta, Georgia, 30309, has been retained to serve as
the Trust's independent accountants. The independent accountants are responsible
for auditing the annual financial statements of each Portfolio as well as other
related services. PricewaterhouseCoopers LLP also serves as independent
accountants for the Advisor and its affiliates.
FINANCIAL STATEMENTS
41
<PAGE> 88
APPENDIX A
RATINGS OF CORPORATE DEBT SECURITIES
MOODY'S INVESTORS SERVICE, INC. (1)
Aaa Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to
as "gilt edge."
Aa Bonds 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.
A Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations.
Baa Bonds rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba Bonds rated Ba are judged to have speculative elements: their future
cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterize bonds in this case.
B Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments of or
maintenance of other terms of the contract over any long period of time
may be small.
Caa Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or
interest.
Ca Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
short-comings.
- ---------------------
(1) Moody's applies numerical modifiers, 1, 2 and 3 in 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.
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<PAGE> 89
STANDARD & POOR'S CORPORATION (2)
AAA Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest-rated issues only in a small
degree.
A Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than bonds in higher-rated categories.
BBB Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds
in higher-rated categories.
BB, Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominately speculative with respect to the issuer's capacity to pay
B, interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and CC the
CCC, highest speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective
CC characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
- ----------------------
(2) Plus (+) or Minus (-): The ratings from AA to BB may be modified by the
addition of a plus or minus sign to show relative standing within the
major rating categories.
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<PAGE> 90
APPENDIX B
DESCRIPTION OF MUNICIPAL SECURITIES
Municipal Securities are notes and bonds issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, the interest
on which is exempt from federal income taxes and, in certain instances,
applicable state or local income taxes. These securities are traded primarily in
the over-the-counter market.
Municipal Securities are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, schools,
streets, water and sewer works and gas and electric utilities. Municipal
Securities may also be issued in connection with the refunding of outstanding
Municipal Securities obligations, obtaining funds to lend to other public
institutions and for general operating expenses. Industrial Development Bonds
("IDBs") are issued by or on behalf of public authorities to obtain funds to
provide privately operated facilities for business and manufacturing, housing,
sports, pollution control, and for airport, mass transit, port and parking
facilities and are considered tax-exempt bonds if the interest thereon is exempt
from federal income taxes.
The two principal classifications of tax-exempt bonds are "general obligation"
and "revenue." General obligation bonds are secured by the issuer's pledge of
its full faith and credit and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Although IDBs are
issued by municipal authorities, they are generally secured only by the revenues
derived from payment of the industrial user. The payment of principal and
interest on IDBs is dependent solely upon the ability of the user of the
facilities financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment.
Tax-exempt notes are of short maturity, generally less than three years. They
include such securities as Project Notes, Tax Anticipation Notes, Revenue
Anticipation Notes, Bond Anticipation Notes and Construction Loan Notes.
Tax-exempt commercial paper consists of short-term obligations generally having
a maturity of less than nine months.
New issues of Municipal Securities are normally offered on a when-issued basis,
which means that delivery and payment for these securities normally takes place
15 to 45 days after the date of commitment to purchase.
Yields of Municipal Securities depend upon a number of factors, including
economic, money and capital market conditions, the volume of Municipal
Securities available, conditions within
44
<PAGE> 91
the Municipal Securities market, and the maturity, rating and size of individual
offerings. Changes in market values of Municipal Securities may vary inversely
in relation to changes in interest rates. The magnitude of changes in market
values in response to changes in market rates of interest typically varies in
proportion to the quality and maturity of obligations. In general, among
Municipal Securities of comparable quality, the longer the maturity, the higher
the yield, and the greater potential for price fluctuations.
FLOATING RATE AND VARIABLE RATE SECURITIES
The Tax-Exempt Income Portfolio may invest in floating rate and variable rate
tax-exempt securities. These securities are normally IDBs or revenue bonds that
provide that the rate of interest is set as a specific percentage of a
designated base rate, such as rates of treasury bills or bonds or the prime rate
at a major commercial bank and provide that the holders of the securities can
demand payment of the obligation on short notice at par plus accrued interest,
which amount may be more or less than the amount initially paid for the bonds.
Floating rate securities have an interest rate which changes whenever there is a
change in the designated base interest rate, while variable rate securities
provide for a specific periodic adjustment in the interest rate. Frequently such
securities are secured by letters of credit or other credit support arrangements
provided by banks. The quality of the underlying credit or of the bank, as the
case may be, must be equivalent to the long-term bond or commercial paper rating
stated above.
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<PAGE> 92
PART C
OTHER INFORMATION
Item 23. Exhibits.
(a) Declaration of Trust, as amended. Incorporated herein by
reference to Registrant's Registration Statement on Form
N-1A (File No. 33-21534) filed on April 28, 1988.
(b) By-Laws of Registrant. Incorporated herein by reference to
Pre-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A (File No. 33-21534) filed on July
13, 1988.
(c) Inapplicable.
(d) (i) Investment Adviser's Agreement between Registrant
and Enterprise Capital Management, Inc. ("Enterprise
Capital").*
(ii) Portfolio Manager's Agreement between Enterprise
Capital and Montag & Caldwell, Inc.*
(iii) Portfolio Manager's Agreement between Enterprise
Capital and Retirement System Investors Inc. *
(iv) Portfolio Manager's Agreement between Enterprise
Capital and OpCap Advisors*
(v) Portfolio Manager's Agreement between Enterprise
Capital and 1740 Advisers, Inc.*
(vi) Portfolio Manager's Agreement between Enterprise
Capital and Provident Investment Counsel, Inc.*
(vii) Portfolio Manager's Agreement between Enterprise
Capital and William D. Witter, Inc.*
(viii) Portfolio Manager's Agreement between Enterprise
Capital and GAMCO Investors, Inc.*
(ix) Portfolio Manager's Agreement between Enterprise
Capital and Vontobel USA Inc.*
(x) Portfolio Manager's Agreement between Enterprise
Capital and Sanford C. Bernstein & Co., Inc.*
(xi) Portfolio Manager's Agreement between Enterprise
Capital and Caywood-Scholl Capital Management*
(e) Distribution Agreement. Incorporated herein by reference to
Pre-Effective Amendment No. 1 to Registrant's Registration
Statement on Form N-1A (File No. 33-21534) filed on July
13, 1988.
2
<PAGE> 93
(f) Not Applicable.
(g) Custody Agreement. Incorporated herein by reference to
Post-Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A (File No. 33-21534) filed on May 1,
1990.
(h) Inapplicable.
(i) Opinion of Counsel.*
(j) Consent of Independent Accountants.*
(k) Inapplicable.
(l) Agreement Related to Initial Capital. Incorporated herein
by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No.
33-21534) filed on July 13, 1988.
(m) Inapplicable.
(n) Financial Data Schedules.*
(o) (i) Inapplicable.
(ii) Powers of Attorney.*
- ---------------------------------
* To be filed by amendment.
Item 24. 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 MONY Life Insurance Company
("MONY") owns all the outstanding shares of the registrant as described
in the Registrant's Statement of Additional Information. Shares of the
Registrant will be voted as directed by persons having interests in the
respective Variable Accounts. Registrant might be deemed to be
controlled by such insurance company affiliates of MONY although
Registrant declaims such control.
The Subsidiaries of MONY are as follows: MONY Realty Partners, Inc.,
MONY Funding, Inc., MONY CS, Inc., MONY Brokerage, Inc., MONY Credit
Corporation, 1740 Advisers, Inc., MONY Securities Corporation, MONY
Life Insurance Company of America, Enterprise Capital Management, Inc.,
1740 Ventures, Inc., MONY International Holdings, Inc. Each subsidiary
is wholly-owned.
3
<PAGE> 94
Item 25. Indemnification.
See Registration Statement, Form N-1A, File No. 33-15489, July 1,
1987, Item No. 27, which is incorporated herein by reference.
Item 26. Business and Other Connections of the Investment Advisor.
See "Fund Management" in the Prospectus and "Investment Advisory and
Other Services" in the Statement of Additional Information for
information regarding the business and other connections of the
Investment Advisor.
For information as to the business, profession, vocation or employment
of a substantial nature of each of the officers and directors of
Enterprise Capital Management, Inc. reference is made to Part B of this
Post-Effective Amendment to the Registrant's Registration Statement and
to the recent Form ADV (File No. 801-27181) of Enterprise Capital
Management, Inc. filed under the Investment Advisers Act of 1940, which
is incorporated herein by reference.
Montag & Caldwell, Inc., Retirement System Investors Inc., OpCap
Advisors, 1740 Advisers, Inc., Provident Investment Counsel, Inc.,
William D. Witter, Inc., Gabelli Asset Management Company, Brinson
Partners, Inc., Sanford C. Bernstein & Co., Inc. and Caywood-Scholl
Capital Management; the Fund Managers of certain of the Funds of the
Registrant, are primarily engaged in the business of rendering
investment advisory services. Reference is made to the recent Form ADV
and schedules thereto on file with the Commission for a description of
the names and employment of the directors and officers of the following
Fund Managers, and other required information:
<TABLE>
<CAPTION>
File No.
--------
<S> <C>
Montag & Caldwell, Inc. 801-15398
Retirement System Investors Inc. 801-36893
OpCap Advisors 801-27180
1740 Advisers, Inc. 801-8176
Provident Investment Counsel, Inc. 801-30020
William D. Witter, Inc. 801-12695
Gabelli Asset Management Company 801-14132
Vontobel USA Inc.
Sanford C. Bernstein & Co., Inc. 801-10488
Caywood-Scholl Capital Management 801-26996
</TABLE>
Item 27. Principal Underwriter.
Not applicable.
Item 28. Location and Accounts and Records.
4
<PAGE> 95
<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
Enterprise Capital Group Investment Advisor Same as above.
Management, Inc.
Enterprise Fund Distributors, Distributor Same as above.
Inc.
State Street Bank and Trust Custodian One Heritage Drive
Company The Joseph Palmer Building
North Quincy, MA 02171
The records of the Fund Managers are kept at the following locations:
Growth Portfolio Montag & Caldwell, Inc.
1100 Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, GA 30326
Growth & Income Portfolio Retirement Systems Investors Inc.
317 Madison Avenue
New York, NY 10017
Equity Portfolio OpCap Advisors
One World Financial Center
New York, NY 10281
Equity Income Portfolio 1740 Advisers, Inc.
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 Value GAMCO Investors, Inc.
Portfolio One Corporate Center
Rye, NY 10580
</TABLE>
5
<PAGE> 96
<TABLE>
<S> <C>
International Growth Vontobel USA Inc.
Portfolio 450 Park Avenue
New York, New York 10022
Global Financial Services Sanford C. Bernstein & Co., Inc.
Portfolio 767 Fifth Avenue
New York, NY 10153-0185
High-Yield Bond Portfolio Caywood-Scholl Capital Management
4350 Executive Drive, Suite 125
San Diego, CA 92121
Managed Portfolio OpCap Advisors
One World financial Center
New York, NY 10281
</TABLE>
Item 29. Management Services.
Inapplicable.
Item 30. Undertakings.
Inapplicable.
6
<PAGE> 97
SIGNATURES
Pursuant to the requirements 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 the 25th day of February, 1999.
ENTERPRISE ACCUMULATION TRUST
By: /s/
-----------------------------------
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 date
indicated:
<TABLE>
<S> <C> <C>
/s/
- ------------------------- Chairman, President and Chief February 25, 1999
Victor Ugolyn Executive Officer
/s/
- ------------------------- Principal Financial and Accounting February 25, 1999
Phillip G. Goff Officer
*
- ------------------------- Director February 25, 1999
Arthur T. Dietz
*
- ------------------------- Director February 25, 1999
Samuel J. Foti
*
- ------------------------- Director February 25, 1999
Arthur Howell
*
- ------------------------- Director February 25, 1999
Lonnie H. Pope
*
- ------------------------- Director February 25, 1999
William A. Mitchell, Jr.
*
- ------------------------- Director February 25, 1999
Michael I. Roth
By:
---------------------- February 25, 1999
Catherine R. McClellan
(Attorney-in-Fact)
</TABLE>
7
<PAGE> 98
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
Number ------------
------
<S> <C>
(i) Opinion and Consent of Counsel
(j) Consent of Independent Accountants
(n) Financial Data Schedules
</TABLE>
8
