<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 2000
SECURITIES ACT FILE NO. 33-21534
INVESTMENT COMPANY ACT FILE NO. 811-05543
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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. 21 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 22
(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)
(800) 432-4320
Registrant's telephone number, including area code
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
405 LEXINGTON AVENUE
11TH FLOOR
NEW YORK, NY 10174
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 May 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 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.
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<PAGE> 2
ENTERPRISE ACCUMULATION TRUST
PROSPECTUS
DATED MAY 1, 2000
EQUITY PORTFOLIOS
Growth Portfolio
Growth and Income Portfolio
Equity Portfolio
Equity Income Portfolio
Capital Appreciation Portfolio
Multi-Cap Growth Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
International Growth Portfolio
Global Socially Responsive Portfolio
SECTOR PORTFOLIOS
Global Financial Services Portfolio
Internet Portfolio
INCOME PORTFOLIO
High-Yield Bond Portfolio
DOMESTIC HYBRID PORTFOLIOS
Balanced 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................................. 4
Equity Portfolio............................................ 6
Equity Income Portfolio..................................... 8
Capital Appreciation Portfolio.............................. 10
Multi-Cap Growth Portfolio.................................. 12
Small Company Growth Portfolio.............................. 13
Small Company Value Portfolio............................... 15
International Growth Portfolio.............................. 17
Global Socially Responsive Portfolio........................ 19
Global Financial Services Portfolio......................... 20
Internet Portfolio.......................................... 21
High-Yield Bond Portfolio................................... 22
Balanced Portfolio.......................................... 24
Managed Portfolio........................................... 25
Additional Information about the Portfolios' Investments and
Risks..................................................... 27
Higher Risk Securities and Investment Practices............. 28
Risk Terminology.......................................... 30
Account Information......................................... 31
Transaction and Account Policies............................ 32
Portfolio Management........................................ 33
The Investment Advisor.................................... 33
The Portfolio Managers.................................... 34
Financial Highlights........................................ 38
</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. Shares
of the Portfolios are sold only to the insurance companies that write the
variable annuity and variable life policies. The contractholders do not become
shareholders of the Portfolios.
Enterprise Capital Management, Inc. (the "Advisor") is the investment
advisor to each Portfolio. The Advisor selects a Portfolio Manager for each
Portfolio on the basis of a number of criteria, including the Portfolio
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, industry sectors or countries. These
price movements, sometimes called volatility, will vary depending on the types
of securities a Portfolio owns and the markets in which these securities trade.
In addition, the investments made by a Fund may underperform the market
generally or other mutual funds with a similar investment objective of that
Fund. As with 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. A Portfolio may not
achieve its objective. A Portfolio's objective may not be changed without
shareholder approval.
1
<PAGE> 5
(PICTURE)
[Picture Description: Columns of various heights: located to the left of the
section titled: 'Growth Portfolio; Portfolio Profile']
GROWTH PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Capital appreciation
Principal Investments U.S. common stocks of large
capitalization companies
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
Reasonable 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 generally lower
risk than a typical growth stock approach. Valuation is the
key selection criterion which makes the investment style
risk averse. 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.
PERFORMANCE INFORMATION
The bar chart below and the performance table on the next page 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. It does not include separate account charges imposed by the
insurance companies that write the annuity contracts and variable life policies;
if these charges were included they would have reduced performance.
[Chart Description: Illustrates volatility of an investment and shows changes in
Growth Portfolio performance for 1999](CHART)
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
17.77% -4.79%
(DECEMBER 31, 1999) (SEPTEMBER 30, 1999)
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(AS OF THE CALENDAR YEAR ENDED PAST ONE SINCE
DECEMBER 31, 1999) YEAR INCEPTION
-------------------------------------------------------------------------------------
<S> <C> <C>
Enterprise Growth Portfolio(1).............................. 24.48% 28.52%
S&P 500(2).................................................. 21.03% 25.55%
</TABLE>
---------------
(1) Inception date is December 1, 1998.
(2) This unmanaged broad-based index includes 500 companies which tend to be
leaders in important industries within the U.S. 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. One cannot invest directly in an index.
Portfolio Manager Montag & Caldwell, Inc.
3
<PAGE> 7
(PICTURE)
[Picture Description: Columns of various heights: located to the left of the
section titled: 'Growth and Income Portfolio; Portfolio Profile']
GROWTH AND INCOME PORTFOLIO
PORTFOLIO 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
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 Portfolio Manager employs a "value-oriented" strategy. This means
that the Portfolio Manager attempts to identify stocks of companies that have
greater value than is recognized by the market generally. The Portfolio 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 sells its
products and services, the company's stock market price, earnings level and
projected earnings growth rate. The Portfolio Manager also considers current and
projected dividend yields. The Portfolio 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.
PERFORMANCE INFORMATION
The bar chart below and the performance table on the next page 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.
4
<PAGE> 8
This bar chart shows changes in the performance of the Portfolio's shares from
year to year. It does not include separate account charges imposed by the
insurance companies that write the annuity contracts and variable life policies;
if these charges were included they would have reduced performance.
[Chart Description: Illustrates volatility of an investment and shows changes in
Growth and Income Portfolio performance for 1999](CHART)
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
14.86% -6.14%
(JUNE 30, 1999) (SEPTEMBER 30, 1999)
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(AS OF THE CALENDAR YEAR ENDED PAST ONE SINCE
DECEMBER 31, 1999) YEAR INCEPTION
-------------------------------------------------------------------------------------
<S> <C> <C>
Enterprise Growth and Income Portfolio(1)................... 20.55% 21.26%
S&P 500(2).................................................. 21.03% 25.55%
</TABLE>
---------------
(1) Inception date is December 1, 1998.
(2) This unmanaged broad-based index includes 500 companies which tend to be
leaders in important industries within the U.S. 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. One cannot invest directly in an index.
Portfolio Manager Retirement System Investors Inc.
5
<PAGE> 9
(PICTURE)
[Picture Description: Columns of various heights: located to the left of the
section titled: 'Equity Portfolio; Portfolio Profile']
EQUITY PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Long-term capital appreciation
Principal Investments U.S. equity securities
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 U.S. common stock of companies that meet the
Portfolio Manager's criteria of high return on investment
capital, strong positions within their industries, sound
financial fundamentals and management committed to
shareholder interests. To that end, the Portfolio Manager
selects companies with one or more of the following
characteristics: Superior business practices that will
benefit from long-term trends, superior growth,
profitability and leading market share versus others in
their industry, strong enduring business models, valuable
customer or business franchises, high return on capital, favorable price to
intrinsic value and undervalued assets.
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 below and the performance table on the next page 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. It does not reflect separate account charges imposed by the
insurance companies that write the variable annuity contracts and variable life
policies; if these charges were included they would have reduced the
performance.
[Chart Description: Illustrates volatility of an investment and shows changes in
Equity Portfolio performance from 1990-1999](CHART)
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
19.79% -13.44%
(DECEMBER 31, 1999) (SEPTEMBER 30, 1998)
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(AS OF THE CALENDAR YEAR ENDED PAST ONE PAST FIVE PAST TEN
DECEMBER 31, 1999) YEAR YEARS YEARS
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enterprise Equity Portfolio(1).............................. 15.61% 22.60% 16.72%
S&P 500(2).................................................. 21.03% 28.55% 18.21%
</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 U.S. 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. One cannot invest directly in an index.
Portfolio Manager TCW Investment Management Company
7
<PAGE> 11
(PICTURE)
[Picture Description: Columns of various heights: located to the left of the
section titled: 'Equity Income Portfolio; Portfolio Profile']
EQUITY INCOME PORTFOLIO
PORTFOLIO 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
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. The goal
is capital appreciation combined with a high level of
current income. Dividend yield relative to the S&P 500
average is used as a discipline and measure of value in
selecting stocks for the Fund. To qualify for a purchase, a
stock's yield must be greater than the S&P 500's average
dividend yield. The stock must be sold within two quarters
after its dividend yield falls below that of the S&P
average. The effect of this discipline is that a stock will
be sold if increases in its annual dividends do not keep pace with increases in
its market 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 below and the performance table on the next page 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. It does not include separate account charges imposed by the
insurance companies that write the annuity contracts and variable life policies;
if these charges were included they would have reduced performance.
[Chart Description: Illustrates volatility of an investment and shows changes in
Equity Income Portfolio performance for 1999](CHART)
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
9.49% -8.14%
(JUNE 30, 1999) (SEPTEMBER 30, 1999)
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(AS OF THE CALENDAR YEAR ENDED PAST ONE SINCE
DECEMBER 31, 1999) YEAR INCEPTION
-------------------------------------------------------------------------------------
<S> <C> <C>
Enterprise Equity Income Portfolio(1)....................... 5.70% 7.01%
S&P 500/Barra Value Index(2)................................ 12.72% 15.28%
</TABLE>
---------------
(1) Inception date is December 1, 1998.
(2) The S&P 500/Barra Value Index is an unmanaged capitalization weighted index
comprised of stocks of the S&P 500 with low price-to-book ratios relative to
the S&P 500 as a whole. It assumes the reinvestment of dividends and capital
gains and does not include any management fees or expenses. The Lipper
Equity Income Fund Index is an unmanaged index of the 30 largest funds based
on total year-end net asset value, in the Lipper Equity Income Fund
category. It assumes the reinvestment of dividends and capital gains and
does not include any management fees or expenses. One cannot invest in an
index.
Portfolio Manager 1740 Advisers, Inc.
9
<PAGE> 13
(PICTURE)
[Picture Description: Ticker: Old fashioned ticker tape: located to the left of
the section titled: 'Capital Appreciation Portfolio; Portfolio Profile']
CAPITAL APPRECIATION PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Maximum capital appreciation
Principal Investments U.S. common stocks of companies that
demonstrate accelerating earnings momentum and consistently
strong financial characteristics
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's
investment strategy blends top-down economic and industry
analysis with bottom-up stock selection. The Fund Manager's
investment approach emphasizes large capitalization U.S.
companies that, in the Portfolio Manager's opinion, have
the ability to produce above-average earnings growth. The
investment process begins by establishing an overall macroeconomic outlook which
in turn forms the strategic backdrop for actual portfolio construction. Various
economic, social and political factors are considered, including global trends
(e.g., productivity enhancements), interest rates, inflation, central bank
policies, the regulatory environment, and the overall competitive landscape.
This analysis also seeks to uncover specific industries and companies that are
expected to benefit from the macroeconomic environment. The potential for
maximum capital appreciation is the basis for investment decisions; any income
is incidental.
Stock selection stresses rigorous hands-on fundamental internal research. The
primary focus is to identify companies with market expertise/dominance, durable
franchises, improving fundamental (e.g., margins, Return on Equity, Return on
Assets), strong balance sheets, global distribution capabilities and management
teams. Valuation is also an important consideration in selecting stocks. Stocks
are sold for three primary reasons: overvaluation relative to expected earnings
growth potential, forced displacement (i.e., a better investment idea surfaces)
or a permanent change in industry/company fundamentals that alters the original
investment thesis.
Principal Risks The Portfolio invests in 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, the Portfolio invests
to a large extent in small- to mid-sized companies which 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.
PERFORMANCE INFORMATION
The bar chart below and the performance table on the next page 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.
10
<PAGE> 14
This bar chart shows changes in the performance of the Portfolio's shares from
year to year. It does not include separate account charges imposed by the
insurance companies that write the annuity contracts and variable life policies;
if these charges were included they would have reduced performance.
[Chart Description: Illustrates volatility of an investment and shows changes in
Capital Appreciation Portfolio performance for 1999](CHART)
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
44.89% -2.77%
(DECEMBER 31, 1999) (SEPTEMBER 30, 1999)
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(AS OF THE CALENDAR YEAR ENDED PAST ONE SINCE
DECEMBER 31, 1999) YEAR INCEPTION
-------------------------------------------------------------------------------------
<S> <C> <C>
Enterprise Capital Appreciation Portfolio(1)................ 55.30% 65.95%
S&P 500/Barra Growth Index(2)............................... 28.24% 34.56%
</TABLE>
---------------
(1) Inception date is December 1, 1998.
(2) The S&P 500/Barra Growth Index is an unmanaged capitalization weighted index
composed of stocks of the S&P 500 with high price-to-book ratios relative to
the S&P 500 as a whole. It assumes the reinvestment of dividends and capital
gains and does not include any management fees or expenses. The Lipper
Multi-Cap Growth Index is an unmanaged index of the 30 largest funds, based
on total year-end net asset value, in the Lipper Multi-Cap Growth Fund
category. It assumes the reinvestment of dividends and capital gains and
does not include any management fees or expenses. One cannot invest in an
index.
Portfolio Manager Marsico Capital Management, LLC
11
<PAGE> 15
(PICTURE)
[Picture Description: Ticker: Old fashioned ticker tape: located to the left of
the section titled: 'Multi-Cap Growth Portfolio; Portfolio Profile']
MULTI-CAP GROWTH PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Long-term capital appreciation
Principal Investments Equity securities, such as common or
preferred stocks, which are listed on U.S. exchanges or
traded in the over-the-counter market
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
and medium size company stocks for the possibility of
higher returns; and want to diversify their holdings to
include small, medium and large company stocks
Investment Strategies The Multi-Cap Growth Portfolio
invests primarily in growth stocks. The Portfolio Manager
believes that these companies tend to fall into one of two
categories: High Unit Volume Growth and Positive Life Cycle
Change. High Unit Volume Growth companies are those vital,
creative companies that offer goods or services to a
rapidly expanding marketplace. They include both established and emerging firms,
offering new or improved products, or firms simply fulfilling an increased
demand for an existing line. Positive Life Cycle Change companies are those
companies experiencing a major change that is expected to produce advantageous
results. These changes may be as varied as new management; new products or
technologies; restructuring or reorganization; or merger and acquisition.
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. Moreover, because the Portfolio
can invest in mid-capitalization, small-capitalization and/or emerging growth
companies, it is riskier than large-capitalization portfolios since such
companies typically have greater earnings fluctuations and greater reliance on a
few key customers than larger companies.
PERFORMANCE INFORMATION
Information about Portfolio performance is not provided due to the fact that the
Portfolio does not have returns for a full calendar year.
Portfolio Manager Fred Alger Management, Inc.
12
<PAGE> 16
(PICTURE)
[Picture Description: Ticker: Old fashioned ticker tape: located to the left of
the section titled: 'Small Company Growth Portfolio; Portfolio Profile']
SMALL COMPANY GROWTH PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Capital appreciation
Principal Investments U.S. common stocks of small
capitalization companies
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 Portfolio 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 Portfolio
Manager will not buy a stock if its price-earnings ratio
exceeds its growth rate. By using this valuation parameter,
the Portfolio Manager believes it moderates some of the
inherent volatility in the small capitalization sector of the market. Securities
will be sold when the Portfolio 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
the Portfolio Manager's expectations. The Portfolio 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 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, the Fund invests
primarily in small sized companies which 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.
PERFORMANCE INFORMATION
The bar chart below and the performance table on the next page 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.
13
<PAGE> 17
This bar chart shows changes in the performance of the Portfolio's shares from
year to year. It does not include separate account charges imposed by the
insurance companies that write the annuity contracts and variable life policies;
if these charges were included they would have reduced performance.
[Chart Description: Illustrates volatility of an investment and shows changes in
Small Company Growth Portfolio performance for 1999](CHART)
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
33.23% -6.23%
(DECEMBER 31, 1999) (MARCH 31, 1999)
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(AS OF THE CALENDAR YEAR ENDED PAST ONE SINCE
DECEMBER 31, 1999) YEAR INCEPTION
-------------------------------------------------------------------------------------
<S> <C> <C>
Enterprise Small Company Growth Portfolio(1)................ 55.68% 63.29%
Russell 2000 Index(2)....................................... 21.26% 26.24%
</TABLE>
---------------
(1) Inception date is December 1, 1998.
(2) The Russell 2000 is an unmanaged index of the stocks of 2000 small and
mid-cap companies. It assumes the reinvestment of dividends and capital
gains and excludes management fees and expenses. The Lipper Small-Cap Growth
Index is an unmanaged index of the 30 largest funds, based on total year-end
net asset value, in the Lipper Small-Cap Growth Fund category. It assumes
the reinvestment of dividends and capital gains and does not include any
management fees or expenses. One cannot invest in an index.
Portfolio Manager William D. Witter, Inc.
14
<PAGE> 18
(PICTURE)
[Picture Description: Ticker: Old fashioned ticker tape: located to the left of
the section titled: 'Small Company Value Portfolio; Portfolio Profile']
SMALL COMPANY VALUE PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Maximum capital appreciation
Principal Investments U.S. common stocks of small
capitalization companies
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 Portfolio Manager believes are
undervalued -- that is, the stock's market price does not
fully reflect the company's value. The Portfolio Manager
uses a proprietary research technique to determine which
stocks have a market price that is less than the "private
market value," or what an investor would pay for the company. The Portfolio
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 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, the Fund invests
primarily in small-sized companies which 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.
PERFORMANCE INFORMATION
The bar chart and the performance table on the next page 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.
15
<PAGE> 19
This bar chart shows changes in the performance of the Portfolio's shares from
year to year. It does not include separate account charges imposed by the
insurance companies that write the annuity contracts and variable life policies;
if these charges were included they would have reduced performance.
[Chart Description: Illustrates volatility of an investment and shows changes in
Small Company Value Portfolio performance for 1990-1999](CHART)
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
19.20% -17.80%
(MARCH 31, 1991) (SEPTEMBER 30, 1998)
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(AS OF THE CALENDAR YEAR ENDED PAST ONE PAST FIVE PAST TEN
DECEMBER 31, 1999) YEAR YEARS YEARS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Enterprise Small Company Value Portfolio(1).......................... 24.02% 19.63% 16.87%
Russell 2000(2)...................................................... 21.26% 16.69% 13.40%
</TABLE>
---------------
(1) Inception date is August 1, 1988.
(2) The Russell 2000 is an unmanaged index of the stocks of 2000 small and
mid-cap companies. It assumes the reinvestment of dividends and capital
gains and excludes management fees and expenses. The Lipper Small-Cap Growth
Index is an unmanaged index of the 30 largest funds, based on total year-end
net asset value, in the Lipper Small-Cap Growth Fund category. It assumes
the reinvestment of dividends and capital gains and does not include any
management fees or expenses. One cannot invest in an index.
Portfolio Manager Gabelli Asset Management Company ("GAMCO Investors, Inc.")
16
<PAGE> 20
(PICTURE)
[Picture Description: Columns of various heights: located to the left of the
section titled: 'International Growth Portfolio; Portfolio Profile']
INTERNATIONAL GROWTH PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Capital appreciation
Principal Investments Non-U.S. equity securities
Investor Profile Investors who want an increase in the
value of their investment without regard to income and who
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
Portfolio Manager believes are undervalued. The Portfolio
Manager uses an approach that involves top-down country
allocation combined with bottom-up stock selection. The
Portfolio Manager looks for companies that are good
predictable businesses selling at attractive prices
relative to an estimate of intrinsic value. The Portfolio
Manager diversifies investments among European, Australian
and Far East ("EAFE") markets.
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 market securities may be
even more susceptible to these risks.
PERFORMANCE INFORMATION
The bar chart below and the performance table on the next page 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. It does not include separate account charges imposed by the
insurance companies that write the annuity contracts and variable life policies;
if these charges were included they would have reduced performance.
[Chart Description: Illustrates volatility of an investment and shows changes in
International Growth Portfolio performance for 1995-1999](CHART)
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
32.15% -13.69%
(DECEMBER 31, 1999) (SEPTEMBER 30, 1998)
</TABLE>
17
<PAGE> 21
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(AS OF THE CALENDAR YEAR ENDED PAST ONE PAST FIVE RETURN SINCE
DECEMBER 31, 1999) YEAR YEARS INCEPTION(1)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enterprise International Growth Portfolio................... 42.12% 17.27% 17.05%
MSCI EAFE Index(2).......................................... 26.96% 12.83% 12.73%
</TABLE>
---------------
(1) Inception date is November 18, 1994. Performance reflects annualized return
from November 30, 1994 to December 31, 1999.
(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. Includes invested dividends
and excludes any transaction or holding charges. One cannot invest directly
in any index.
Portfolio Manager Vontobel USA Inc.
18
<PAGE> 22
(PICTURE)
[Picture Description: Globe: located to the left of the section titled: 'Global
Socially Responsible Portfolio; Portfolio Profile']
GLOBAL SOCIALLY RESPONSIVE PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Total return
Principal Investments Common stock of companies located in
countries that are included in the MSCI World Index that
meet the Portfolio's social and investment criteria.
Investor Profile Investors who want to make socially
responsible investments and want the value of their
investment to grow, with the potential of receiving income.
Investment Strategies The Global Socially Responsible
Portfolio invests primarily in common stock of companies
that the Portfolio Manager believes are socially
responsible, which are located in countries that are
included in the MSCI World Index, including the U.S.,
Canada and Australia, and certain developed markets located
in Europe and the Far East. Like other socially responsible
investment vehicles, the Portfolio does not invest in
certain industries such as tobacco and gambling, or invest
in companies that are known to pollute the environment or violate human rights.
In addition to this avoidance strategy, the Portfolio also actively looks for
companies that are developing solutions to significant social problems by means
of good direction, leadership and momentum. The Portfolio Manager evaluates
companies for their criteria in the following areas: human rights, public
health, governance, products and marketing, workplace environment, environmental
stewardship and community. The Portfolio Manager believes that good corporate
citizenship has the potential to create good investment opportunities; wherever
possible, the Portfolio seeks to invest in companies that the Portfolio Manager
believes derive a competitive advantage from the socially responsive products,
policies and practices developed by such companies. The Portfolio Manager seeks
companies that combine this social criteria with an investment management
criteria of potentially high return on investment capital, strong quality of
management, sound financial resources and good overall business prospects. In
selecting equity securities, the Portfolio Manager uses its own valuation models
to determine fair value and looks for securities that are selling at discounts
to their fair value, independent of region or style bias. The Portfolio seeks to
own "growth" stocks when they are undervalued and "value" stocks when they are
attractive.
Principal Risks The Portfolio invests primarily in common stocks located in
countries that are included in the MSCI World Index. 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. In
addition, information regarding foreign companies may not be as readily
available as U.S. companies. Therefore, it may be difficult to determine whether
foreign companies meet the same social criteria as U.S. companies. The Portfolio
may be restricted by its focus on socially responsive investing and therefore,
the investments that the Portfolio Manager selects may underperform other
investments or the stock markets generally.
PERFORMANCE INFORMATION
Information about Portfolio performance is not provided due to the fact that the
Portfolio does not have returns for a full calendar year.
Portfolio Manager Rockefeller & Co., Inc.
19
<PAGE> 23
(PICTURE)
[Picture Description: Globe: located to the left of the section titled: 'Global
Financial Services Portfolio; Portfolio Profile']
GLOBAL FINANCIAL SERVICES PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Capital appreciation
Principal Investments Common stocks of domestic and
foreign financial services companies
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 in 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 Portfolio 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.
Principal Risks The Portfolio invests 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
industry 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 more sensitive to fluctuations in interest
rates than the economy as a whole. 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 and price competition.
PERFORMANCE INFORMATION
Information about Portfolio performance is not provided due to the fact that the
Portfolio does not have returns for a full year.
Portfolio Manager Sanford C. Bernstein & Co., Inc.
20
<PAGE> 24
(PICTURE)
[Picture Description: Globe: located to the left of the section titled:
'Internet Portfolio; Portfolio Profile']
INTERNET PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Long-term capital appreciation
Principal Investments Equity securities, including common
stocks, preferred stocks, warrants and other securities
convertible into common stock of companies primarily
engaged in Internet, Intranet and other "high tech" related
activities.
Investor Profile Investors who want an increase in the
value of their investment without regard to income and who
want to diversify their overall holdings with a
concentrated investment in companies engaged in Internet,
Intranet and other "high tech" related activities
Investment Strategies Under normal conditions, the
Internet Portfolio will invest at least 65% of its assets
in equity securities. In choosing which companies' stock
the Portfolio should purchase, the Portfolio Manager invests in those companies
listed on a U.S. securities exchange or NASDAQ which are engaged in the
research, design, development or manufacturing, or engaged to a significant
extent in the business of distributing products, processes or services for use
with Internet or Intranet related businesses. The Portfolio may also invest in
other "high tech" companies. The Internet is a world-wide network of computers
designed to permit users to share information and transfer data quickly and
easily. The world wide web("www"), which is a means of graphically interfacing
with the Internet, is a hyper-text based publishing medium containing text,
graphics, interactive feedback mechanisms and links within www documents and to
other www documents. An Intranet is the application of www tools and concepts to
a company's internal documents and databases. Other "high tech" companies may
include firms in the computer, communication, video, electronic, office and
factory automation and robotic sectors.
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. Moreover, because of large
investments in mid-capitalization, small-capitalization and/or emerging growth
companies, the Portfolio is riskier than large-capitalization funds since such
companies typically have greater earnings fluctuations and greater reliance on a
few key customers than larger companies. In addition, the value of companies
engaged in Internet and Intranet related activities is particularly vulnerable
to rapidly changing technology, extensive government regulation and relatively
high risks of obsolescence caused by scientific and technological advances. As a
result, the value of the Portfolio's shares may fluctuate more than shares of a
fund investing in a broader range of industries.
PERFORMANCE INFORMATION
Information about Portfolio performance is not provided due to the fact that the
Portfolio does not have returns for a full calendar year.
Portfolio Manager Fred Alger Management, Inc.
21
<PAGE> 25
(PICTURE)
[Picture Description: Antiqued piggy bank with various coins lying beside:
located to the left of the section titled: 'High-Yield Bond Portfolio; Portfolio
Profile']
HIGH-YIELD BOND PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Maximum current income
Principal Investments Debt securities rated below
investment grade, which are commonly known as "junk bonds"
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-yield, income-producing U.S.
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 Portfolio Manager after 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 Portfolio 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 in the lowest ratings categories rated Ca or lower by
Moody's or CC or lower by S&P or which, if unrated, in the judgment of the
Portfolio Manager have characteristics of such lower-grade bonds. Should an
investment be subsequently downgraded to Ca or lower or CC or lower, the
Portfolio 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 Portfolio Manager,
have characteristics similar to those described above; (3) convertible debt
securities; (4) puts, calls and futures as hedging devices; (5) foreign issuer
debt securities; and (6) short-term money market instruments, including
certificates of deposit, commercial paper, U.S. Government securities and other
income-producing cash equivalents.
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. High-yield 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 on the next page 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.
22
<PAGE> 26
This bar chart shows changes in the performance of the Portfolio's shares from
year to year. It does not include separate account charges imposed by the
insurance companies that write the variable annuity contracts and variable life
insurance policies, if these charges were included they which would have reduced
performance.
[Chart Description: Illustrates volatility of an investment and shows changes in
High-Yield Bond Portfolio performance for 1995-1999](CHART)
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
5.47% -5.13%
(SEPTEMBER 30, 1997) (SEPTEMBER 30, 1998)
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(AS OF THE CALENDAR YEAR ENDED PAST ONE PAST FIVE RETURN SINCE
DECEMBER 31, 1999) YEAR YEARS INCEPTION(1)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enterprise High-Yield Bond Portfolio........................ 3.86% 9.95% 10.00%
Lehman Brothers High Yield Bond Index(2).................... 1.87% 10.03% 10.02%
</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. It includes reinvested interest and does not pay
commissions or expenses. If an index had expenses, its performance would be
lower. One cannot invest directly in an index.
Portfolio Manager Caywood-Scholl Capital Management
23
<PAGE> 27
(PICTURE)
[Picture Description: Stones: 'precious stones' lying in dishes of varying sizes
and shapes: located to the left of the section titled: 'Balanced Portfolio;
Portfolio Profile']
BALANCED PORTFOLIO
PORTFOLIO PROFILE
Investment Objective Long-term total return
Principal Investments A combination of equity, fixed
income and short-term securities
Investor Profile Investors who want the value of their
investment to grow and also want to receive income on their
investment
Investment Strategies Generally, between 55% and 75% of
the Balanced Portfolio's total assets will be invested in
equity securities. The portfolio allocation will vary based
upon the Portfolio Manager's assessment of the return
potential of each asset class. For equity investments, the
Portfolio Manager uses a bottom-up approach to stock
selection, focusing on high quality, well-established
companies that have a strong history of earnings growth;
attractive prices relative to the company's potential for
above average growth; long-term earnings and revenue
growth; strong balance sheets; a sustainable competitive
advantage; positions as (or the potential to become)
industry leaders; and the potential to outperform the market during downturns.
When selecting fixed income securities, the Portfolio Manager will seek to
maintain the Portfolio's weighted average duration within 20% of the duration of
the Lehman Brothers Government Corporate Index. Emphasis is also placed on
diversification and credit analysis. The Portfolio will only invest in fixed
income securities with an "A" or better rating. Fixed investments will include:
U.S. Government securities; corporate bonds; mortgage/asset-backed securities;
and money market securities and repurchase agreements.
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 events related to the issuer as well as to general economic or
governmental events.
PERFORMANCE INFORMATION
Information about Portfolio performance is not provided due to the fact that the
Portfolio does not have returns for a full calendar year.
Portfolio Manager Montag & Caldwell, Inc.
24
<PAGE> 28
(PICTURE)
[Picture Description: Stones: 'precious stones' lying in dishes of varying sizes
and shapes: located to the left of the section titled: 'Managed Portfolio;
Portfolio Profile']
MANAGED PORTFOLIO
PORTFOLIO 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 Portfolio Manager's assessment of relative investment
values
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 Portfolio Managers' evaluations
of economic and market trends and their perceptions 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 time, be invested in any specific types of
investments. However, the Portfolio invests primarily in equity securities at
times when the Portfolio Managers believe 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 Portfolio Managers deem 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.
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 factors affecting the issuer, or general economic or political
events, increasing the risk that the issuer may default on payments of interest
or principal. 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 on the next page 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. It does not include separate account charges imposed by the
insurance companies that write the variable annuity contracts and variable life
insurance policies; if these charges were included they would have reduced
performance.
25
<PAGE> 29
[Chart Description: Illustrates volatility of an investment and shows changes in
Managed Portfolio performance for 1990-1999](CHART)
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
20.79% -14.24%
(MARCH 31, 1991) (SEPTEMBER 30, 1998)
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
(AS OF THE CALENDAR YEAR ENDED PAST ONE PAST FIVE PAST TEN
DECEMBER 31, 1999) YEAR YEARS YEARS
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enterprise Managed Portfolio(1)............................. 9.22% 21.63% 17.53%
S&P 500(2).................................................. 21.03% 28.55% 18.21%
</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 U.S. 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. One cannot invest directly in an index.
Portfolio Managers OpCap Advisors
Sanford C. Bernstein & Co., Inc.
26
<PAGE> 30
ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS'
INVESTMENTS AND RISKS
EQUITY, SECTOR, INCOME AND DOMESTIC HYBRID PORTFOLIOS' INVESTMENTS
The table below shows the Equity, Sector, Income and Domestic Hybrid
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.
X = Types of securities in which a Portfolio invests.
<TABLE>
<CAPTION>
EQUITY FUNDS
SMALL SMALL
GROWTH & EQUITY CAPITAL MULTI-CAP COMPANY COMPANY INTERNATIONAL
GROWTH INCOME EQUITY INCOME APPRECIATION GROWTH GROWTH VALUE GROWTH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Stocks* X X X X X X X X
Foreign Stocks X
Bonds
<CAPTION>
INCOME DOMESTIC HYBRID
EQUITY FUNDS SECTOR PORTFOLIOS PORTFOLIOS FUNDS
GLOBAL GLOBAL
SOCIALLY FINANCIAL HIGH-YIELD
RESPONSIVE SERVICES INTERNET BOND MANAGED BALANCED
<S> <C> <C> <C> <C> <C> <C>
U.S. Stocks* X X X X X
Foreign Stocks X X
Bonds X X X
</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, Growth & Income, Equity, Equity
Income, Capital Appreciation, Balanced and Managed Portfolios intend 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. The
Multi-Cap Growth and Internet Funds intend to invest in large, medium and
small capitalization companies.
(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 and Balanced Portfolios
invest in bonds, they 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 Portfolio 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 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. However, the Managed Fund may invest in
securities ordinarily used by other Portfolios for defensive purposes as part of
its main investment strategy. In addition, active and frequent trading may have
an effect on performance due to additional expenses.
INITIAL PUBLIC OFFERINGS ("IPOS")
Some or all of the Portfolios may participate in the IPO market, and a
significant portion of those Portfolios' returns may be attributable to their
investment in IPOs, which have a magnified impact due to small asset bases.
There is no guarantee that as those Portfolios' assets grow they will continue
to experience substantially similar performance by investing in IPOs.
27
<PAGE> 31
HIGHER RISK SECURITIES AND INVESTMENT PRACTICES
<TABLE>
<CAPTION>
This table shows each Portfolio's investment limitations as a percentage of
portfolio assets. In each case the principal types of risk are described in the
following chart. 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)
Y* No policy limitation on usage; fund may be using currently
Y Permitted, but not typically used. GROWTH & EQUITY
N NOT PERMITTED GROWTH INCOME EQUITY INCOME
<S> <C> <C> <C> <C>
CONVENTIONAL SECURITIES
NON-INVESTMENT-GRADE SECURITIES. Securities rated below Baa/BBB are considered
junk bonds. Credit, market, interest rate, liquidity, valuation, information
risks. Y Y Y Y
FOREIGN EQUITIES
- Stocks issued by foreign companies. Market, currency, information, natural
event, political risks. Y Y Y Y
- 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. 20 20 20 20
RESTRICTED AND ILLIQUID SECURITIES. Securities not traded on the open market
May include illiquid Rule 144A securities. Liquidity, valuation, market risks. (10) (10) (10) (10)
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. 20 20 20 20
SECURITIES LENDING. The lending of securities to financial institutions, which
provide cash or government securities as collateral. Credit risk. N N N N
HEDGING. 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. Y Y Y Y
SHORT SALES. The selling of securities which have been borrowed on the
expectation that the market price will drop. Hedged leverage, market,
correlation, liquidity, opportunity risks. N N N N
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. Y Y Y Y
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. 5 5 5 5
DERIVATIVE SECURITIES. The Portfolios will not invest in derivatives except a
hedge against changes in the values of the Portfolios' securities resulting
from market conditions. Y Y Y Y
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.
- Futures and related options. Interest rate, currency, market, hedged or
speculative leverage, correlation, liquidity, opportunity risks. Y Y Y Y
- Puts and calls on securities and indices. Interest rate, currency, market,
leverage, correlation, liquidity, credit, opportunity risks. (5) (5) (5) (5)
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.
- HEDGED. Currency, hedged leverage, correlation, liquidity, opportunity
risks. Y Y Y Y
- SPECULATIVE. Currency, speculative leverage, liquidity risks. N N N N
OTHER DERIVATIVES, INCLUDING PUTS, CALLS AND INTEREST RATE SWAPS. Interest
rate, currency, market, leverage, correlation, liquidity, credit, opportunity
risk. Y Y Y Y
</TABLE>
28
<PAGE> 32
<TABLE>
<CAPTION>
SMALL SMALL GLOBAL GLOBAL
CAPITAL MULTI-CAP COMPANY COMPANY INTERNATIONAL SOCIALLY FINANCIAL HIGH-YIELD
APPRECIATION GROWTH GROWTH VALUE GROWTH RESPONSIVE SERVICES INTERNET BOND BALANCED
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Y Y Y Y Y Y Y Y Y* N
Y 20 Y Y Y* Y* Y* Y Y Y
20 Y 20 20 Y* Y* Y* Y N Y
(10) (15) (10) (10) (10) (10) (10) (15) (10) (15)
20 20 20 20 20 20 20 20 20 20
N 25 N N N N N 25 N 25
Y Y Y Y Y Y Y N Y N
N Y N N N N N N N N
Y Y Y Y Y Y Y Y Y Y
5 5 5 5 20 20 20 25 5 5
Y Y Y Y Y Y* Y* Y Y Y
Y Y Y Y Y Y Y Y Y Y
(5) Y (5) (5) (20) (5) (5) Y (20) Y
Y Y Y Y Y* Y* Y* Y Y Y
N Y N N N N N N N N
Y Y Y Y Y Y Y Y Y Y
<CAPTION>
MANAGED
<S> <C>
Y
Y
20
(10)
20
N
Y
N
Y
5
Y
Y
(5)
Y
N
Y
</TABLE>
29
<PAGE> 33
RISK TERMINOLOGY
CORRELATION RISK: the risk that changes in the value of a hedging
instrument will not match that 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 increase 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: the 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.
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 RISK: the risk of losses attributable to government or political
actions. Political risks range 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.
30
<PAGE> 34
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 ("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.
REPORTS TO CONTRACTHOLDERS
Every year the Portfolios will send you an annual report (along with an
updated prospectus) and a semi-annual report, which contain important financial
information. To reduce expenses, the Portfolios will send one annual
contractholder report, one semi-annual contractholder report and one annual
prospectus per household, unless you instruct the Portfolios or your financial
advisor otherwise.
31
<PAGE> 35
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. 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 on
each day the New York Stock Exchange is open. Investment securities, other than
debt securities, listed on either a national or foreign securities exchange or
traded in the over-the-counter National Market System are valued each business
day at the last reported 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.
Investments for which market 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.
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 Trustees. Short-term debt securities
having a remaining maturity of sixty days or less are valued at amortized cost,
which approximates market value. Any securities for which market quotations are
not readily available are valued at their fair value as determined in good faith
by the Trustees.
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. The High-Yield Bond Portfolio declares daily and
pays monthly dividends of investment income.
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 continue 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 Contracts, see
the accompanying Prospectus for the Contracts.
32
<PAGE> 36
PORTFOLIO MANAGEMENT
THE INVESTMENT ADVISOR
Enterprise Capital Management, Inc. serves as the investment advisor to
each of the Portfolios. The Advisor selects Portfolio Managers for the
Portfolios, subject to the approval of the Trustees of the Portfolios, and
reviews each Portfolio Manager's continued performance. Evaluation Associates,
Inc., which has had 31 years of experience in evaluating investment advisors for
individuals and institutional investors, assists the Advisor in selecting
Portfolio 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 Portfolio Managers
without obtaining shareholder approval each time. The exemptive order permits
the Advisor, with the Trustees' approval, to employ new Portfolio Managers for
the Portfolios, change the terms of the Agreements with Portfolio Managers or
enter into a new Agreement with a Portfolio Manager. Shareholders of a Portfolio
have the right to terminate an Agreement with a Portfolio 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 Portfolio Manager changes or other
material amendments to the Agreements with Portfolio 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 $4 billion as
of December 31, 1999. Performance of the funds of The Enterprise Group of Funds,
Inc. that are similar to the Portfolios may differ from those of the Portfolios
due to a number of factors including the size of such Portfolios, 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, 1999 by each Portfolio. The Advisor in turn compensated
each Portfolio Manager at no additional cost to the Portfolio.
<TABLE>
<CAPTION>
FEE (AS A PERCENTAGE OF
AVERAGE DAILY NET
NAME OF PORTFOLIO ASSETS)
-------------------------------------------------------------------------------------
<S> <C>
Growth Portfolio............................................ 0.75%
Growth and Income Portfolio................................. 0.75%
Equity Portfolio............................................ 0.78%
Equity Income Portfolio..................................... 0.75%
Capital Appreciation Portfolio.............................. 0.75%
Multi-Cap Growth Portfolio.................................. 1.00%
Small Company Growth Portfolio.............................. 1.00%
Small Company Value Portfolio............................... 0.80%
International Growth Portfolio.............................. 0.85%
Global Socially Responsive Portfolio........................ 0.90%
High-Yield Bond Portfolio................................... 0.60%
Balanced Portfolio.......................................... 0.75%
Managed Portfolio........................................... 0.72%
</TABLE>
33
<PAGE> 37
THE PORTFOLIO MANAGERS
The following chart sets forth certain information about each of the
Portfolio Managers. The Portfolio Managers are responsible for the day-to-day
management of the Portfolios. The Portfolio Managers typically manage assets for
institutional investors and high net worth individuals. Collectively, the
Portfolio Managers manage assets in excess of $250 billion for all clients,
including Enterprise Accumulation Trust.
<TABLE>
<CAPTION>
NAME OF PORTFOLIO AND NAME THE PORTFOLIO MANAGER'S
AND ADDRESS OF PORTFOLIO MANAGER EXPERIENCE PORTFOLIO MANAGERS
<S> <C> <C>
Growth Portfolio Montag & Caldwell and its Ronald E. Canakaris, President
predecessors have been engaged and Chief Investment Officer of
Montag & Caldwell, Inc. in the business of providing Montag & Caldwell, is
("Montag & Caldwell") investment counseling to responsible for the day-to-day
3455 Peachtree Road, N.E. individuals and institutions investment management of the
Suite 1200 since 1945. Total assets under Growth Portfolio and has more
Atlanta, Georgia 30326-3248 management for all clients were than 30 years' experience in
approximately $35.1 billion as the investment industry. He has
of December 31, 1999. Usual been President of Montag &
investment minimum is $40 Caldwell for more than 15
million. years.
Growth and Income Portfolio RSI has been providing James P. Coughlin, President
investment advisory services and Chief Investment Officer of
Retirement System Investors Inc. since 1989. Total assets under RSI, is responsible for the
("RSI") management for RSI were $974 day-to-day management of the
317 Madison Avenue million as of December 31, Portfolio and has more than 30
New York, New York 10017 1999. years' experience in the
investment industry. He has
served as President and Chief
Investment Officer of RSI since
1989.
Equity Portfolio The board of Trustees named TCW Glen E. Bickerstaff is
Fund Manager effective November responsible for the day-to-day
TCW Investment Management 1, 1999. TCW was founded in management of the Portfolio and
Company 1971 and as of December 31, is a Managing Director of TCW,
("TCW") 1999, TCW and its affiliated which he joined in May of 1998.
865 South Figueroa Street companies had approximately $71 He has more than 19 years of
Suite 1800 billion under management. Usual investment industry experience,
Los Angeles, California 90017 investment minimum for equity and he previously served as
accounts is $100 million. Senior Portfolio Manager and
Vice President for Transamerica
Investment Services.
Equity Income Portfolio 1740 Advisers has provided John V. Rock, President and
investment advisory services Director of 1740 Advisers, is
1740 Advisers, Inc. since 1971. 1740 Advisers is an responsible for the day-to-day
("1740 Advisers") affiliate of the Advisor. Total investment management of the
1740 Broadway assets under management for Portfolio and has more than 35
New York, New York 10019 1740 Advisers as of December years' experience in the
31, 1999, were approximately investment industry. He has
$2.1 billion. Usual investment served as President of 1740
minimum is $20 million. Advisers since 1974.
</TABLE>
34
<PAGE> 38
<TABLE>
<CAPTION>
NAME OF PORTFOLIO AND NAME THE PORTFOLIO MANAGER'S
AND ADDRESS OF PORTFOLIO MANAGER EXPERIENCE PORTFOLIO MANAGERS
<S> <C> <C>
Capital Appreciation Portfolio The Board of Trustees named Marsico Thomas F. Marsico is responsible
Fund Manager effective November 1, for the day-to-day management of
Marsico Capital 1999. Marisco has been providing the Portfolio. He has more than 19
Management, LLC investment counseling since 1997. years of investment industry
("Marsico") As of December 31, 1999, total experience. He founded Marisco in
1200 17th Street assets under management for all 1997 and previously served as
Suite 1300 clients were approximately $14.1 Portfolio Manager for Janus Capital
Denver, Colorado 80202 billion. Usual investment minimum Corporation.
is $100 million.
Multi-Cap Growth Portfolio Alger has been an investment David Alger is the individual
adviser since 1964. As of December responsible for the day-to-day
Fred Alger Management, Inc. 31, 1999, total assets under management of the Portfolio. Mr.
("Alger") management for all clients were Alger has been employed by Alger as
1 World Trade Center approximately $17.4 billion. Usual Executive Vice President and
Suite 9333 investment minimum is $5 million. Director of Research since 1971 and
New York, NY 10048 as President since 1995. He has
more than 30 years experience in
the investment industry.
Small Company Growth Portfolio Witter has provided investment William D. Witter, President of
advisory services since 1977. As of Witter, and Paul B. Phillips,
William D. Witter, Inc. ("Witter") December 31, 1999 total assets Managing Director of Witter, are
One Citicorp Center under management for all clients responsible for the day-to-day
153 East 53rd Street were $1.4 billion. Usual investment management of the Portfolio. They
New York, New York 10022 minimum is $1 million. have more 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 Portfolio Gabelli's predecessor, Gabelli & Mario J. Gabelli has served as
Company, Inc., was founded in 1977. chief investment officer of Gabelli
Gabelli Asset Management As of March 31, 2000 total assets since its inception in 1977 and is
Company under management for all clients responsible for the day-to-day
("GAMCO Investors, Inc.") were $9.3 billion. Usual investment management of the Portfolio. He has
One Corporate Center minimum is $1 million. more than 28 years' experience in
Rye, New York 10580 the investment industry.
International Growth Portfolio Vontobel has provided investment Fabrizio Pierallini, Senior Vice
counseling since 1984. Vontobel's President and Managing Director of
Vontobel USA Inc. ("Vontobel") assets under management for all Vontobel International Investments
450 Park Avenue clients were $2.1 billion as of is responsible for the day-to-day
New York, New York 10022 December 31, 1999. Usual investment management of the Portfolio. Mr.
minimum is $10 million. Pierallini has been employed by
Vontobel since 1994. He previously
served as assistant
director/portfolio manager for the
Swiss Bank and has more than 18
years experience in the investment
industry.
Global Socially Responsive
Portfolio
Rockefeller & Co., Inc.
30 Rockefeller Plaza
54th Floor
New York, New York 10112
</TABLE>
35
<PAGE> 39
<TABLE>
<CAPTION>
NAME OF PORTFOLIO AND NAME THE PORTFOLIO MANAGER'S
AND ADDRESS OF PORTFOLIO MANAGER EXPERIENCE PORTFOLIO MANAGERS
<S> <C> <C>
Global Financial Services Sanford Bernstein was The day-to-day management of
Portfolio established in 1967 and as of this Portfolio is performed by
December 31, 1999 had $88 Sanford Bernstein's
Sanford C. Bernstein & Co., Inc. billion in assets under International Policy Group,
("Sanford Bernstein") management. Usual investment which is chaired by Andrew S.
767 Fifth Avenue minimum is $5 million. Adelson, who has more than 20
New York, New York 10153-0185 years' experience in the
investment industry. He joined
Sanford Bernstein in 1980 and
has served as Chief Investment
Officer of International
Investment Services since 1990.
Internet Portfolio Alger has been an investment David Alger is responsible for
adviser since 1964, and managed the day-to-day management of
Alger investments of approximately the Portfolio. Mr. Alger has
1 World Trade Center $17.4 billion at December 31, been employed as Executive Vice
Suite 9333 1999. Usual investment minimum President and Director of
New York, NY 10048 is $5 million. Research at Alger since 1971
and as President since 1995. He
has more than 30 years
experience in the investment
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, is
Management ("Caywood-Scholl") income instruments since 1986. responsible for the day-to-day
4350 Executive Drive, Suite 125 As of December 31, 1999 assets management of the Portfolio. He
San Diego, California 92121 under management for all has more than 30 years'
clients approximated $1.4 investment industry experience.
billion. Usual investment He joined Caywood-Scholl in
minimum is $1 million. 1986 as Managing Director and
Chief Investment Officer and
has held those positions since
1986.
Balanced Portfolio Montag & Caldwell and its Ronald E. Canakaris, President
predecessors have been engaged and Chief Investment Officer of
Montag & Caldwell in the business of providing Montag & Caldwell and Helen M.
3455 Peachtree Road, N.E. investment counseling to Donahue, Assistant Vice
Suite 1200 individuals and institutions President, are responsible for
Atlanta, Georgia 30326-3248 since 1945. Total assets under the day-to-day investment
management for all clients were management of the Balanced
approximately $35.1 billion as Portfolio. They have more than
of December 31, 1999. Usual 36 years' combined experience
investment minimum is $40 in the investment industry. Mr.
million. Canakaris has been President of
Montag & Caldwell for more than
15 years. Ms. Donahue has
served as Assistant Vice
President since 1997.
</TABLE>
36
<PAGE> 40
<TABLE>
<CAPTION>
NAME OF PORTFOLIO AND NAME THE PORTFOLIO MANAGER'S
AND ADDRESS OF PORTFOLIO MANAGER EXPERIENCE PORTFOLIO MANAGERS
<S> <C> <C>
Managed Fund The two Fund Managers are Richard J. Glasebrook II,
allocated net cash flows into Managing Director of
OpCap Advisors and redemptions out of the Fund Oppenheimer Capital is
1345 Avenue of the Americas on a 50/50 basis. OpCap handles responsible for the day-to-day
47th Floor both equity and fixed income management of OpCap's portion
New York, New York 10105 investments and Sanford of the Fund. He has more than
and Bernstein handles equities. 25 years' investment industry
Sanford C. Bernstein & Co., Inc. experience. Mr. Glasebrook has
("Sanford Bernstein") OpCap has provided investment served as Managing Director of
767 Fifth Avenue counseling services since 1987. Oppenheimer Capital since 1994
New York, New York As of December 31, 1999, and immediately prior to that
10153-0185 Oppenheimer Capital and its served as Senior Vice
affiliates have over $52.1 President.
billion under management. Usual
investment minimum is $20 Day-to-day management of
million. Sanford Bernstein's portion of
the Fund will be handled by
Sanford Bernstein was Sanford Bernstein's Investment
established in 1967 and as of Policy Group, chaired by Steven
December 31, 1999, had $88 Pisarkiewicz, who has 15 years
billion in assets under of experience in the investment
management. Usual investment industry. He joined Sanford
minimum is $5 million. Bernstein in 1989 and assumed
his current position as
Chairman and Chief Investment
Officer for Structured Equity
Services in 1998.
</TABLE>
37
<PAGE> 41
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:)
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
DECEMBER 31, 12/01/98 THROUGH
ENTERPRISE GROWTH PORTFOLIO 1999 12/31/98
----------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 5.27 $ 5.00
-------------------------------
Income from investment operations:
Net investment income (loss)................................ 0.02(C) 0.00
Net realized and unrealized gain (loss) on investments...... 1.27 0.27
-------------------------------
Total from investment operations............................ 1.29 0.27
-------------------------------
Less dividends and distributions:
Dividends from net investment income........................ -- --
Distributions from capital gains............................ -- --
-------------------------------
Total distributions......................................... -- --
-------------------------------
Net asset value, end of period.............................. $ 6.56 $ 5.27
-------------------------------
Total return................................................ 24.48% 5.40%(B)
Net assets end of period (000).............................. $230,720 $ 1,943
Ratio of expenses to average net assets..................... 0.84% 1.15%(A)
Ratio of expenses to average net assets (excluding
reimbursement)............................................. 0.84% 25.33%(A)
Ratio of net investment income (loss) to average net
assets..................................................... 0.29% (0.25)%(A)
Ratio of net investment income (loss) to average net assets
(excluding reimbursement).................................. 0.29% (24.43)%(A)
Portfolio turnover.......................................... 30% 1%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
ENTERPRISE DECEMBER 31, 12/01/98 THROUGH
GROWTH AND INCOME PORTFOLIO 1999 12/31/98
---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 5.11 $ 5.00
-------------------------------
Income from investment operations:
Net investment income (loss)................................ 0.07(C) 0.00
Net realized and unrealized gain (loss) on investments...... 0.98 0.11
-------------------------------
Total from investment operations............................ 1.05 0.11
-------------------------------
Less dividends and distributions:
Dividends from net investment income........................ -- --
Distributions from capital gains............................ 0.00(D) --
-------------------------------
Total distributions......................................... -- --
-------------------------------
Net asset value, end of period.............................. $ 6.16 $ 5.11
-------------------------------
Total return................................................ 20.55% 2.20%(B)
Net assets end of period (000).............................. $89,887 $ 537
Ratio of expenses to average net assets..................... 0.94% 1.05%(A)
Ratio of expenses to average net assets (excluding
reimbursement)............................................. 0.94% 60.68%(A)
Ratio of net investment income (loss) to average net
assets..................................................... 1.22% (0.45)%(A)
Ratio of net investment income (loss) to average net assets
(excluding reimbursement).................................. 1.22% 60.08%(A)
Portfolio turnover.......................................... 1% 9%
</TABLE>
38
<PAGE> 42
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
ENTERPRISE EQUITY PORTFOLIO 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 36.82 $ 35.09 $ 28.86 $ 23.35 $ 18.14
----------------------------------------------------
Income from investment operations:
Net investment income (loss)................................ 0.23(C) 0.46 0.30 0.37 0.33
Net realized and unrealized gain (loss) on investments...... 4.86 3.00 7.13 5.52 6.38
----------------------------------------------------
Total from investment operations............................ 5.09 3.46 7.43 5.89 6.71
----------------------------------------------------
Less dividends and distributions:
Dividends from net investment income........................ (0.52) (0.37) (0.32) (0.09) (0.49)
Distributions from capital gains............................ (2.77) (1.36) (0.88) (0.29) (1.01)
----------------------------------------------------
Total distributions......................................... (3.29) (1.73) (1.20) (0.38) (1.50)
----------------------------------------------------
Net asset value, end of period.............................. $ 38.62 $ 36.82 $ 35.09 $ 28.86 $ 23.35
----------------------------------------------------
Total return................................................ 15.61% 9.90% 25.76% 25.22% 38.44%
Net assets end of period (000).............................. $587,324 $621,338 $517,803 $314,907 $167,963
Ratio of expenses to average net assets..................... 0.82% 0.83% 0.84% 0.81% 0.69%
Ratio of expenses to average net assets (excluding
reimbursement)............................................. 0.82% 0.83% 0.84% 0.81% 0.72%
Ratio of net investment income (loss) to average net
assets..................................................... 0.63% 1.42% 1.42% 1.94% 1.94%
Ratio of net investment income (loss) to average net assets
(excluding reimbursement).................................. 0.63% 1.42% 1.42% 1.94% 1.91%
Portfolio turnover.......................................... 155% 30% 17% 30% 29%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
ENTERPRISE DECEMBER 31, 12/01/98 THROUGH
EQUITY INCOME PORTFOLIO 1999 12/31/98
---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 5.09 $ 5.00
-------------------------------
Income from investment operations:
Net investment income (loss)................................ 0.06(C) --
Net realized and unrealized gain (loss) on investments...... 0.23 0.09
-------------------------------
Total from investment operations............................ 0.29 0.09
-------------------------------
Less dividends and distributions:
Dividends from net investment income........................ (0.01) --
Distributions from capital gains............................ -- --
-------------------------------
Total distributions......................................... (0.01) --
-------------------------------
Net asset value, end of period.............................. $ 5.37 $ 5.09
-------------------------------
Total return................................................ 5.70% 1.80%(B)
Net assets end of period (000).............................. $27,997 $ 465
Ratio of expenses to average net assets..................... 1.05% 1.05%(A)
Ratio of expenses to average net assets (excluding
reimbursement)............................................. 1.20% 66.67%(A)
Ratio of net investment income (loss) to average net
assets..................................................... 1.21% 0.54%(A)
Ratio of net investment income (loss) to average net assets
(excluding reimbursement).................................. 1.06% (65.07)%(A)
Portfolio turnover.......................................... 18% 0%
</TABLE>
39
<PAGE> 43
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:)
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
DECEMBER 31, 12/01/98 THROUGH
ENTERPRISE CAPITAL APPRECIATION PORTFOLIO 1999 12/31/1998
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 5.57 $ 5.00
--------------------------------
Income from investment operations:
Net investment income (loss)................................ (0.03)(C) --
Net realized and unrealized gain (loss) on investments...... 3.11 0.57
--------------------------------
Total from investment operations............................ 3.08 0.57
--------------------------------
Less dividends and distributions:
Dividends from net investment income........................ -- --
Distributions from capital gains............................ -- --
--------------------------------
Total distributions......................................... -- --
--------------------------------
Net asset value, end of period.............................. $ 8.65 $ 5.57
--------------------------------
Total return................................................ 55.30% 11.40%(B)
Net assets end of period (000).............................. $33,129 $ 511
Ratio of expenses to average net assets..................... 1.16% 1.30%(A)
Ratio of expenses to average net assets (excluding
reimbursement)............................................. 1.16% 63.71%(A)
Ratio of net investment income (loss) to average net
assets..................................................... (0.41)% (0.95)%(A)
Ratio of net investment income (loss) to average net assets
(excluding reimbursement).................................. (0.41)% (63.36)%(A)
Portfolio turnover.......................................... 247% 1%
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
7/15/99 THROUGH
ENTERPRISE MULTI-CAP GROWTH PORTFOLIO 12/31/99
-----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................ $ 5.00
---------------
Income from investment operations:
Net investment income (loss)................................ (0.01)(C)
Net realized and unrealized gain (loss) on investments...... 9.64
---------------
Total from investment operations............................ 9.63
---------------
Less dividends and distributions:
Dividends from net investment income........................ --
Distributions from capital gains............................ --
---------------
Total distributions......................................... --
---------------
Net asset value, end of period.............................. $ 14.63
---------------
Total return................................................ 192.60%(B)
Net assets end of period (000).............................. $47,960
Ratio of expenses to average net assets..................... 1.40%(A)
Ratio of expenses to average net assets (excluding
reimbursement)............................................. 1.52%(A)
Ratio of net investment income (loss) to average net
assets..................................................... (0.21)(A)
Ratio of net investment income (loss) to average net assets
(excluding reimbursement).................................. (0.32)(A)
Portfolio turnover.......................................... 21%
</TABLE>
40
<PAGE> 44
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:)
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
DECEMBER 31, 12/01/98 THROUGH
ENTERPRISE SMALL COMPANY GROWTH PORTFOLIO 1999 12/31/98
----------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period........................ $ 5.46 $ 5.00
--------------------------------
Income from investment operations:
Net investment income (loss)................................ (0.05)(C) --
Net realized and unrealized gain (loss) on investments...... 3.09 0.46
--------------------------------
Total from investment operations............................ 3.04 0.46
--------------------------------
Less dividends and distributions:
Dividends from net investment income........................ -- --
Distributions from capital gains............................ -- --
--------------------------------
Total distributions......................................... -- --
--------------------------------
Net asset value, end of period.............................. $ 8.50 $ 5.46
--------------------------------
Total return................................................ 55.68% 9.20%(B)
Net assets end of period (000).............................. $23,429 $ 469
Ratio of expenses to average net assets..................... 1.40% 1.40%(A)
Ratio of expenses to average net assets (excluding
reimbursement)............................................. 1.55% 60.67%(A)
Ratio of net investment income (loss) to average net
assets..................................................... (0.81)% (1.26)%(A)
Ratio of net investment income (loss) to average net assets
(excluding reimbursement).................................. (0.96)% (60.54)%(A)
Portfolio turnover.......................................... 37% 4%
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------
ENTERPRISE SMALL COMPANY VALUE PORTFOLIO 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 27.36 $ 26.70 $ 20.22 $ 18.48 $ 17.56
--------------------------------------------------------
Income from investment operations:
Net investment income (loss)................................ 0.04(C) 0.16 0.05 0.25 0.32
Net realized and unrealized gain (loss) on investments...... 6.27 2.33 8.91 1.82 1.75
--------------------------------------------------------
Total from investment operations............................ 6.31 2.49 8.96 2.07 2.07
--------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income........................ (0.16) (0.08) (0.15) (0.12) (0.40)
Distributions from capital gains............................ (2.06) (1.75) (2.33) (0.21) (0.75)
--------------------------------------------------------
Total distributions......................................... (2.22) (1.83) (2.48) (0.33) (1.15)
--------------------------------------------------------
Net asset value, end of period.............................. $ 31.45 $ 27.36 $ 26.70 $ 20.22 $ 18.48
--------------------------------------------------------
Total return................................................ 24.02% 9.61% 44.32% 11.21% 12.28%
Net assets end of period (000).............................. $455,563 $406,801 $365,266 $192,704 $166,061
Ratio of expenses to average net assets..................... 0.84% 0.85% 0.86% 0.84% 0.69%
Ratio of expenses to average net assets (excluding
reimbursement)............................................. 0.84% 0.85% 0.86% 0.84% 0.72%
Ratio of net investment income (loss) to average net
assets..................................................... 0.12% 0.56% 0.21% 1.35% 1.86%
Ratio of net investment income (loss) to average net assets
(excluding reimbursement).................................. 0.12% 0.56% 0.21% 1.35% 1.83%
Portfolio turnover.......................................... 23% 37% 58% 137% 70%
</TABLE>
41
<PAGE> 45
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
ENTERPRISE ------------------------------------------------------------------
INTERNATIONAL GROWTH PORTFOLIO 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 6.74 $ 6.18 $ 6.05 $ 5.39 $ 4.96
------------------------------------------------------------------
Income from investment operations:
Net investment income (loss).................... 0.03(C) 0.06 0.06 0.05 0.04
Net realized and unrealized gain (loss) on
investments.................................... 2.74 0.84 0.26 0.63 0.67
------------------------------------------------------------------
Total from investment operations................ 2.77 0.90 0.32 0.68 0.71
------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income............ (0.12) (0.07) (0.04) -- (0.04)
Distributions from capital gains................ (0.10) (0.27) (0.15) (0.02) (0.24)
------------------------------------------------------------------
Total distributions............................. (0.22) (0.34) (0.19) (0.02) (0.28)
------------------------------------------------------------------
Net asset value, end of period.................. $ 9.29 $ 6.74 $ 6.18 $ 6.05 $ 5.39
------------------------------------------------------------------
Total return.................................... 42.12% 14.83% 5.26% 12.65% 14.64%
Net assets end of period (000).................. $ 134,255 $ 91,794 $ 78,148 $ 52,768 $ 18,598
Ratio of expenses to average net assets......... 1.01% 1.22% 1.19% 1.38% 1.55%
Ratio of expenses to average net assets
(excluding reimbursement)...................... 1.01% 1.22% 1.19% 1.38% 2.21%
Ratio of net investment income (loss) to average
net assets..................................... 0.41% 1.04% 1.34% 1.32% 1.17%
Ratio of net investment income (loss) to average
net assets (excluding reimbursement)........... 0.41% 1.04% 1.34% 1.32% 0.51%
Portfolio turnover.............................. 129% 55% 28% 21% 27%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
ENTERPRISE HIGH-YIELD BOND PORTFOLIO 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 5.37 $ 5.71 $ 5.51 $ 5.31 $ 4.98
-----------------------------------------------------
Income from investment operations:
Net investment income (loss)................................ 0.46(C) 0.46 0.51 0.45 0.45
Net realized and unrealized gain (loss) on investments...... (0.26) (0.26) 0.20 0.21 0.35
-----------------------------------------------------
Total from investment operations............................ 0.20 0.20 0.71 0.66 0.80
-----------------------------------------------------
Less dividends and distributions:
Dividends from net investment income........................ (0.46) (0.46) (0.51) (0.45) (0.45)
Distributions from capital gains............................ (0.05) (0.08) -- (0.01) (0.02)
-----------------------------------------------------
Total distributions......................................... (0.51) (0.54) (0.51) (0.46) (0.47)
-----------------------------------------------------
Net asset value, end of period.............................. $ 5.06 $ 5.37 $ 5.71 $ 5.51 $ 5.31
-----------------------------------------------------
Total return................................................ 3.86% 3.60% 13.38% 12.95% 16.59%
Net assets end of period (000).............................. $109,816 $101,865 $68,364 $34,411 $15,223
Ratio of expenses to average net assets..................... 0.69% 0.72% 0.77% 0.85% 0.85%
Ratio of expenses to average net assets (excluding
reimbursement)............................................. 0.69% 0.72% 0.77% 0.94% 1.59%
Ratio of net investment income (loss) to average net
assets..................................................... 8.76% 8.19% 8.47% 8.57% 8.51%
Ratio of net investment income (loss) to average net assets
(excluding reimbursement).................................. 8.76% 8.19% 8.47% 8.48% 7.77%
Portfolio turnover.......................................... 97% 109% 175% 175% 115%
</TABLE>
42
<PAGE> 46
FINANCIAL HIGHLIGHTS (CONTINUED)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:)
<TABLE>
<CAPTION>
FOR THE PERIOD
7/15/99 THROUGH
ENTERPRISE BALANCED PORTFOLIO 12/31/99
-----------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................ $ 5.00
------
Income from investment operations:
Net investment income (loss)................................ 0.04(C)
Net realized and unrealized gain (loss) on investments...... 0.16
------
Total from investment operations............................ 0.20
------
Less dividends and distributions:
Dividends from net investment income........................ --
Distributions from capital gains............................ --
------
Total distributions......................................... --
------
Net asset value, end of period.............................. $ 5.20
------
Total return................................................ 4.00%(B)
Net assets end of period (000).............................. $9,886
Ratio of expenses to average net assets..................... 0.95%(A)
Ratio of expenses to average net assets (excluding
reimbursement)............................................. 1.89%(A)
Ratio of net investment income (loss) to average net
assets..................................................... 1.93%(A)
Ratio of net investment income (loss) to average net assets
(excluding reimbursement).................................. 0.99%(A)
Portfolio turnover.......................................... 13%
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
ENTERPRISE ------------------------------------------------------------------
MANAGED PORTFOLIO 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 40.56 $ 40.78 $ 34.31 $ 28.06 $ 20.82
------------------------------------------------------------------
Income from investment operations:
Net investment income (loss).................... 0.50(C) 0.71 0.35 0.59 0.40
Net realized and unrealized gain (loss) on
investments.................................... 2.65 2.53 8.06 5.99 8.97
------------------------------------------------------------------
Total from investment operations................ 3.15 3.24 8.41 6.58 9.37
------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income............ (0.79) (0.43) (0.55) (0.06) (0.75)
Distributions from capital gains................ (6.62) (3.03) (1.39) (0.27) (1.38)
------------------------------------------------------------------
Total distributions............................. (7.41) (3.46) (1.94) (0.33) (2.13)
------------------------------------------------------------------
Net asset value, end of period.................. $ 36.30 $ 40.56 $ 40.78 $ 34.31 $ 28.06
------------------------------------------------------------------
Total return.................................... 9.22% 7.95% 24.50% 23.47% 46.89%
Net assets end of period (000).................. $2,292,467 $2,739,305 $2,672,932 $1,935,343 $1,264,718
Ratio of expenses to average net assets......... 0.76% 0.76% 0.76% 0.74% 0.67%
Ratio of expenses to average net assets
(excluding reimbursement)...................... 0.76% 0.76% 0.76% 0.74% 0.67%
Ratio of net investment income (loss) to average
net assets..................................... 1.23% 1.66% 1.14% 2.16% 1.80%
Ratio of net investment income (loss) to average
net assets (excluding reimbursement)........... 1.23% 1.66% 1.14% 2.16% 1.80%
Portfolio turnover.............................. 90% 46% 32% 29% 31%
</TABLE>
A Annualized
B Not annualized
C Based on average shares outstanding.
D Less than $.01 per share.
43
<PAGE> 47
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.
Atlanta Financial Center
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. 811-05543
44
<PAGE> 48
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
Multi-Cap Growth Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
International Growth Portfolio
Global Socially Responsive Portfolio
SECTOR PORTFOLIOS:
Global Financial Services Portfolio
Internet Portfolio
INCOME PORTFOLIO:
High-Yield Bond Portfolio
DOMESTIC HYBRID PORTFOLIOS:
Balanced 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 1, 2000, which has been filed with the Securities and
Exchange Commission. The Trust sells shares to variable accounts 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 1, 2000.
<PAGE> 49
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
General Information and History................................................................1
Investment Objectives and Policies.............................................................1
Equity Portfolios.....................................................................1
Sector Portfolios.....................................................................
Income Portfolio......................................................................7
Domestic Hybrid Portfolios............................................................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
Portfolio 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>
<PAGE> 50
<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>
<PAGE> 51
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 fourteen
classes, each of which representing shares of a 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 contractholder approval.
Equity and Sector Portfolios
Under normal market conditions, at least 65% of the total assets of the
nine Equity Portfolios and two Sector Portfolios will be invested in common
equity securities. The remainder of the Equity Portfolios' and Sector
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. Treasury, notes and bonds, American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs"), rights and warrants.
The Growth, Growth and Income, Equity, Equity Income, Capital
Appreciation, Multi-Cap Growth, Global Financial Services, Small Company Growth,
Small Company Value, Internet and Global Socially Responsive 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 total assets in foreign
securities provided they are listed on a domestic or foreign securities exchange
or are represented by ADRs or EDRs. The Global Financial Services Portfolio may
invest over 50% of its total assets in foreign securities. No Portfolio may
invest more than 10% of its total 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.
<PAGE> 52
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 will invest in securities of companies
which the Portfolio Manager believes to be financially sound and will consider
such factors as the sales, growth and profitability prospects for the economic
sector and markets in which the company operates and for the services or
products it provides; the financial condition of the company; its ability to
meet its liabilities and to provide income in the form of dividends; the
prevailing price of the security; how that price compares to historical price
levels of the security to current price levels in the general market, and to
the prices of competing companies; projected earnings estimates and earnings
growth rate of the company, and the relation of those figures to the current
price. 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 total 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 or EDRs 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.
<PAGE> 53
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 Fund's investment strategy blends top-down economic and industry
analysis with bottom-up selection. The Fund Manager's investment approach
emphasizes: large capitalization U.S. companies that, in the Fund Manager's
opinion, have the ability to produce above-average earnings growth. The
investment process begins by establishing an overall macroeconomic outlook,
which in turn forms the strategic backdrop for actual portfolio construction.
Various economic, social and political factors are considered, including global
trends (e.g., productivity enhancements), interest rates, inflation, central
bank policies, the regulatory environment and the overall competitive landscape.
This analysis also seeks to uncover specific industries and companies that are
expected to benefit from the macroeconomic environment. The potential for
maximum capital appreciation is the basis for investment decisions; any income
is incidental.
The Fund's stock selection process stresses rigorous hands-on
fundamental internal research. The primary focus is to identify companies with
market expertise/dominance, durable franchises, improving fundamentals (e.g.,
margins, Return on Equity, Return on Assets), strong balance sheets, strong
global distribution capabilities and management teams. Valuation is also an
important consideration in selecting stocks. Stocks are sold for three primary
reasons: overvaluation relative to expected earnings growth potential, forced
displacement (i.e., a better investment idea surfaces) or a permanent change in
industry/company fundamentals that alters the original investment thesis.
Multi-Cap Growth Portfolio. The Multi-Cap Growth Portfolio invests
primarily in growth stocks. The Portfolio Manager believes that these companies
tend to fall into one of two categories: High Unit Volume Growth and Positive
Life Cycle Change. High Unit Volume Growth companies are those vital, creative
companies that offer goods or services to a rapidly expanding marketplace. They
include both established and emerging firms, offering new or improved products,
or firms simply fulfilling an increased demand for an existing line. Positive
Life Cycle Change companies are those companies experiencing a major change that
is expected to produce advantageous results. These changes may be as varied as
new management; products or technologies; restructuring or reorganization; or
merger and acquisition.
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 total assets in warrants and rights to purchase common stocks.
In pursuing its objective, the Portfolio Manager will seek out the
stocks of small companies that are expected to have above average growth in
earnings and are reasonably valued. The Portfolio 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 Portfolio
Manager will not buy a stock if the price-earnings ratio exceeds the growth
rate. By using this valuation parameter, the Portfolio Manager believes it
moderates some of the inherent volatility in the small-capitalization sector of
the market. Securities will be sold when the Portfolio 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 Portfolio 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 its total 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 $1.5 billion.
<PAGE> 54
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 the 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 Portfolio 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
Portfolio Manager terms the private market value (PMV) of the companies. The
Portfolio 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 an operating policy of the Portfolio that it will invest at
least 80% of its total assets (except when maintaining a temporary defensive
position) in equity securities of companies domiciled outside the United States.
That portion of the Portfolio not invested in equity securities is, in normal
circumstances, invested in U.S. and foreign government securities, high-grade
commercial paper, certificates of deposit, foreign currency, bankers
acceptances, cash and cash equivalents, time deposits, repurchase agreements and
similar money market instruments, both foreign and domestic. The Portfolio may
invest in convertible debt securities of foreign issuers which are convertible
into equity securities at such time as a market for equity securities is
established in the country involved.
The International Growth Portfolio 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 Portfolio 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 Portfolio will normally have at least 65% of
its total assets invested in European and Pacific Basin equity securities. The
International Growth Portfolio 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 Portfolio will invest not be limited to companies
of any particular size.
Using a bottom-up investment approach, Vontobel USA invests in
large- and medium-capitalization companies that have a long record of successful
operations in their core business. Typically such companies occupy a leading
position in their industry, have consistently generated free cash flow, and have
achieved earnings growth through increasing market share and unit sales volumes.
Vontobel USA's goal is to construct a portfolio of the best companies in the
developed markets of Europe and the Pacific Basin without making any country
bets. With approximately 80-100 stocks, the International Growth Fund also seeks
to be well diversified in terms of industry exposure. Vontobel USA analyzes
approximately 35 international equity markets, including those comprised in
Morgan Stanley Capital International's EAFE (Europe, Australia and Far East).
The Adviser also gives consideration to such factors as market liquidity,
accessibility to foreign investors, regulatory protection of shareholders,
accounting and disclosure standards, transferability of funds and foreign
exchange controls, if any.
<PAGE> 55
Global Socially Responsive Portfolio. The objective of the Global
Socially Responsive Portfolio is total return primarily through investments in
common stock of companies that the Portfolio Manager believes are socially
responsive, which are located in countries that are included in the MSCI World
Index, including the U.S., Canada and Australia, and certain developed markets
in Europe and the Far East.
Like other socially responsible investment vehicles, the Portfolio
does not invest in companies that are known to ignore human rights issues,
violate environmental laws and regulations, have significant and continuing
records of discrimination or unfair labor practices, or companies that have a
history of poor governance. The Portfolio also does not invest in companies
that derive more than 2% of their revenue from alcohol, tobacco, gambling,
weapons or weapons systems. The Portfolio also avoids companies that produce,
own or operate nuclear power plants, and companies that conduct product testing
on animals for personal care products or that do not subscribe to and
rigorously enforce appropriate care standards for legally required animal
testing.
In addition to this avoidance strategy, the Portfolio also actively
looks for companies that are developing solutions to significant social
problems by means of good direction, leadership and momentum. The Portfolio
Manager evaluates companies for their criteria in the following areas:
Human Rights- companies' policies towards matters of justice and
equity and a living wage.
Public Health- ways in which corporate behavior affects the health of
workers, customers and members of local communities whether through the quality
of products, workplace conditions, environmental management, marketing
practices or otherwise.
Governance- companies' policies and procedures, particularly in the
relationship between the Board and management and between the company and its
shareholders. The Portfolio Manager looks for diversity among the Board, for
leadership in representing the ownership interests of shareholders and for
transparency of reporting and accountability.
Products and Marketing- product quality and customer service as well as
the practice of responsible marketing. The Portfolio Manager places heavy
emphasis on the development of innovative products addressed to solving
important social and environmental problems.
Workplace Environment- the degree to which human resources and other
policies are supportive of workers and their families. The Portfolio Manager
looks for leadership in providing equal opportunity on a non-discriminatory
basis, in responding to the changing needs of working families, and in providing
continual training and opportunities for upgrading skills.
<PAGE> 56
Environmental Stewardship- the practices of companies relating to
environmental impact, including the elimination of waste, especially toxic
waste, recycling, especially in taking responsibility for a product and its
packaging, the sustainable use of natural resources and respect for such values
as biodiversity and scenic beauty.
Community- ways in which companies use their influence to support and
sustain the communities in which they operate.
These criteria represent standards that very few companies can satisfy.
The Portfolio Manager will use subjective judgment in evaluating companies in
the context of these criteria. These criteria may be changed by the Board of
Trustees without shareholder approval. In some cases, the Portfolio may invest
in a company that does not satisfy these social criteria if the Portfolio
Manager believes that the company is developing solutions to social problems.
For example, the Portfolio may invest in stock of a company that is known to
pollute the environment if the Portfolio Manager believes the company's
management is putting in place a credible and innovative program to reduce or
eliminate dangerous emissions.
The Portfolio Manager believes that good corporate citizenship has the
potential to create good investment opportunities; wherever possible, the
Portfolio seeks to invest in companies that the Portfolio Manager believes
derive a competitive advantage from the socially responsive products, policies
and practices developed by such companies. The Portfolio Manager seeks companies
that combine this social criteria with an investment management criteria of
potentially high return on investment capital, strong quality of management,
sound financial resources and good overall business prospects. In selecting
equity securities, the Portfolio Manager uses its own valuation models to
determine fair value and looks for securities that are selling at discounts to
their fair value, independent of region or style bias. The Portfolio seeks to
own "growth" stocks when they are undervalued and "value" stocks when they are
attractive.
The Portfolio will invest up to 1% of its total assets in "community
development" loans or investments, including deposits with community development
banks, credit unions and federally sponsored CDFIs and other similar
organizations around the world. These investments often lack liquidity. The
Portfolio Manager, on behalf of the Portfolio, will vote proxies from portfolio
companies on social resolutions in a manner consistent with its social policy
and will disclose its votes at the end of the "season."
<PAGE> 57
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
<PAGE> 58
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 Portfolio 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 Portfolio Manager has utilized for
more than two decades. The Portfolio 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.
In addition to targeting high return potential, process is also geared
to control volatility. To evaluate the potential risk/reward tradeoff, the
Portfolio 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. At
least 65% of total assets of the Fund will be invested in financial services
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 Portfolio 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.
<PAGE> 59
The Portfolio Manager employs a centralized investment approach in all
portfolios. The Global Investment Policy Group uses its many years of experience
and market memory to review analysts' latest research findings and forecasts.
The group integrates the work of analysts, economists and the quantitative
group, systematically applying valuation and portfolio construction processes to
select securities. The Portfolio Managers then apply the Investment Policy
Group's decisions, deviating only to conform to Portfolio objectives.
The Portfolio 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 Portfolio Manager's analysts are
centrally located so that the senior professionals can control the quality of
their findings.
Internet Portfolio. Under normal conditions, the Internet Portfolio
will invest at least 65% of its assets in equity securities. In choosing which
companies' stock the Portfolio should purchase, the Portfolio Manager invests
in those companies listed on a U.S. securities exchange or NASDAQ which are
engaged in the research, design, development or manufacturing, or engaged to a
significant extent in the business of distributing products, processes or
services for use with Internet or Intranet related businesses. The Portfolio
may also invest in other "high tech" companies. The Internet is a world-wide
network of computers designed to permit users to share information and transfer
data quickly and easily. The World Wide Web ("WWW"), which is a means of
graphically interfacing with the Internet, is a hyper-text based publishing
medium containing text, graphics, interactive feedback mechanisms and links
within WWW documents and to other WWW documents. An Intranet is the application
of WWW tools and concepts to a company's internal documents and databases. Other
"high tech" companies may include firms in the computer, communication, video,
electronic, office and factory automation and robotics sectors.
International Internet Fund. The International Internet Fund pursues
its goal by investing primarily in foreign companies engaged in Internet or
Intranet related businesses. Under normal market conditions, the International
Internet Fund will invest at least 65% of its total assets in equity securities
of foreign companies that are engaged in the research, design, development and
manufacturing of products, processes or services or engaged to a significant
extent in the business of distributing such products, processes or services for
use with the Internet or Intranet related businesses and other "high-tech"
related industries. The International Internet Fund will invest in foreign
equity securities and American Depository Receipts ("ADRs"). ADRs are U.S.
dollar-denominated receipts representing shares of foreign-based corporations.
ADRs are issued by U.S. banks or trust companies, and entitle the holder to all
dividends and capital gains that are paid out of the underlying foreign shares.
The Internet is a world-wide network of computers designed to permit users to
share information and transfer data quickly and easily. The World Wide Web
("www"), which is a means of graphically interfacing with the Internet, is a
hyper-text based publishing medium containing text, graphics, interactive
feedback mechanisms and links within www.documents and to other www documents.
The Intranet is the application of www tools and concepts to a company's
internal documents and databases. Other "high-tech" companies may include firms
in the computer, communications, video, electronics, office and factory
automation and robotics sectors.
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 net assets (at
least 65% of total 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 Portfolio Manager
after careful examination of the economic outlook to determine those industries
that appear favorable for investments. Industries going through a perceived
decline generally are not candidates for selection. After the industries are
selected, bonds of issuers within those industries are selected based on their
creditworthiness, their yields in relation to their credit and the relative
strength of their common stock prices. Companies near or in bankruptcy are not
considered for investment. The Portfolio does not purchase bonds which are
rated Ca or lower by Moody's or CC or lower by S&P or which, if unrated, in the
judgment of the Portfolio Manager, have characteristics of such lower-grade
bonds. Should an investment purchased with the above-described credit quality
requisites be downgraded to Ca or lower or CC or lower, the Portfolio Manager
shall have discretion to hold or liquidate the security.
<PAGE> 60
Subject to the restrictions described above, under normal
circumstances, up to 20% of the Portfolio's total assets may include: (1) bonds
rated Caa by Moody's or CCC by S&P; (2) unrated debt securities which, in the
judgment of the Portfolio Manager have characteristics similar to those
described above; (3) convertible debt securities; (4) puts, calls and futures
as hedging devices; (5) foreign issuer debt securities; and (6) short-term
money market instruments, including certificates of deposit, commercial paper,
U.S. Government Securities and other income-producing cash equivalents. For a
discussion of put, calls, and futures and their related risks, see "Certain
Investment Techniques and Associated Risks."
Domestic Hybrid Portfolios
The Balanced Portfolio. Generally between 55% and 75% of the Balanced
Portfolio's total assets will be invested in equity securities. The asset
allocation will vary based upon the Portfolio Manager's assessment of the
return potential of each asset class. For equity investments, the Portfolio
Manager uses a bottom-up approach to stock selection, focusing on high quality,
well-established companies that have a strong history of earnings growth;
attractive prices relative to the company's potential for above average;
long-term earnings and revenue growth; strong balance sheets; a sustainable
competitive advantage; the potential to become (or currently are) industry
leaders; and the potential to outperform the market during downturns. When
selecting fixed income securities, the Portfolio Manager will seek to maintain
the Fund's weighted average duration within 20% of the duration of the Lehman
Brothers Government Corporate Index. Emphasis is also placed on diversification
and credit analysis. The Portfolio will only invest in fixed income securities
with an "A" or better rating. Fixed income investments will include: U.S.
Government securities; corporate bonds; mortgage/asset-backed securities; and
money market securities and repurchase agreements.
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 Portfolio Managers' 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 Portfolio Managers deem it
advisable in order to preserve capital. In addition, the Portfolio may also
invest up to 20% of its total assets in foreign securities provided that they
are listed on a domestic or foreign securities exchange or are represented by
ADRs or EDRs listed on a domestic securities exchange or traded in the United
States over-the-counter market.
The allocation of the Portfolio's assets among the different types of
permitted investments will vary from time to time based upon the Portfolio
Managers' evaluations of economic and market trends and their perceptions 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.
<PAGE> 61
Mortgage-Related Securities and Asset-Backed Securities
The Balanced Portfolio may invest in assets other than U.S. Government
Securities, including collateralized mortgage-related securities ("CMOs") and
asset-backed securities, as well as Real Estate Mortgage Investment Conduits
("REMICs") and Multi-Pass-Throughs. These securities are considered to be
volatile and may be thinly traded. CMOs are obligations fully collateralized by
a portfolio of mortgages or mortgage-related securities. Payments of principal
and interest on the mortgages are passed through to the holders of the CMOs on
the same schedule as they are received, although certain classes of CMOs have
priority over others with respect to the receipt of prepayments on the
mortgages. Therefore, depending on the type of CMOs in which the Balanced
Portfolio invests, the investment may be subject to a greater or lesser risk
of prepayment than other types of mortgage-related securities. REMIC's are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that
they issue multiple classes of securities. As with CMOs, the mortgages which
collateralize the REMICs in which the Balanced Portfolio may invest include
mortgages backed by GNMA certificates or other mortgage pass-throughs issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or issued
by private entities, which are not guaranteed by any government agency.
While there are many versions of CMOs and asset-backed securities, some
include "Interest Only" or "IO" -- where all interest payments go to one class
of holders, "Principal Only" or "PO" -- where all of the principal goes to a
second class of holders, "Floaters" -- where the coupon rate floats in the same
direction as interest rates and "Inverse Floaters" -- where the coupon rate
floats in the opposite direction as interest rates. All of these securities are
volatile; they also have particular risks in differing interest rate
environments as described below.
The yield to maturity on an IO class is extremely sensitive to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on yield to maturity and, therefore, the market value of the IO. As
interest rates rise and fall, the value of IOs tends to move in the same
direction as interest rates. Accordingly, investment in IOs can theoretically
be expected to contribute to stabilizing the Portfolio's net asset value.
However, if the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Portfolio may fail to fully recoup its initial
investment in these securities even if the securities are rated AAA or the
equivalent. Conversely, while the yield to maturity on a PO class is also
extremely sensitive to rate of principal payments (including prepayments) on
the related underlying mortgage assets, a slow rate of principal payments may
have a material adverse effect on yield to maturity and therefore the market
value of the PO. As interest rates rise and fall, the value of POs tends to
move in the opposite direction from interest rates. This is typical of most
debt instruments.
Floaters and Inverse Floaters ("Floaters") are extremely sensitive to the
rise and fall in interest rates. The coupon rate on these securities is based
on various benchmarks, such as LIBOR ("London Inter-Bank Offered Rate") and the
11th District cost of funds (the base rate). The coupon rate on Floaters can be
affected by a variety of terms. Floaters an be reset at fixed intervals over
the life of the Floater, float with a spread to the base rate or be a certain
percentage rate minus a certain base rate. Some Floaters have floors below which
the interest rate cannot be reset and/or ceilings above which the interest rate
cannot be reset. The coupon rate and/or market value of Floaters tend to move
in the same direction as the base rate while the coupon rate and/or market
value of Inverse Floaters tend to move in the opposite direction from the base
rate.
The market value of all CMOs and other asset-backed securities are
determined by supply and demand in the bid/ask market, interest rate movements,
the yield curve, forward rates, prepayment assumptions and credit of the
underlying issuer. Further, the price actually received on a sale may be
different from bids when the security is being priced. CMOs and asset-backed
securities trade over a bid and ask market through several large market makers.
Due to the complexity and concentration of derivative securities, the liquidity
and, consequently, the volatility of these securities can be sharply influenced
by market demand.
Asset-backed and mortgage-related securities may not be readily marketable.
To the extent any of these securities are not readily marketable in the judgment
of the Portfolio Managers (subject to the oversight of the Trustees, the
investment restriction limiting the Portfolio's investment in illiquid
instruments will apply. However, IOs and POs issued by the U.S. Government, its
agencies and instrumentalities, and backed by fixed-rate mortgages may be
excluded from this limit, if, in the judgment of the respective Portfolio
Managers (subject to the oversight of the Board of Directors) such IOs and POs
are readily marketable. The Government Securities Portfolio does not intend to
invest in residual interest, privately issued securities or subordinated classes
of underlying mortgages.
Other Mortgage-Backed Securities. The Balanced Portfolio may invest in
other mortgage-backed securities. The Portfolio Manager expects that
governmental, government-related or private entities may create mortgage loan
pools and other mortgage-related securities offering mortgage pass-through and
mortgage-collateralized investments in addition to those described above. The
mortgages underlying these securities may include alternative mortgage
instruments, that is, mortgage instruments whose principal or interest payments
may vary or whose terms to maturity may differ from customary long-term
fixed-rate mortgages. As new types of mortgage-related securities are developed
and offered to investors, the Portfolio Manager will, consistent with the
Portfolio's investment objective, policies and quality standards, consider
making investments in such new types of mortgage-related securities.
<PAGE> 62
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
Financial Services Portfolio and Global Socially Responsive 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
or instrumentality does not meet its commitment.
Information on Time Deposits and Variable Rate Notes
The Portfolios may invest in fixed time deposits, whether or not
subject to withdrawal penalties; however, investment in such deposits which are
subject to withdrawal penalties, other than overnight deposits, are subject to
10% limit on illiquid investments set forth below in the Certain Other
Securities section hereafter.
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 Portfolio
<PAGE> 63
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 Portfolios (other than the Balanced Portfolio, which may not invest in
high-yield securities) 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
<PAGE> 64
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 March 31, 2000, the High-Yield Bond
Portfolio consisted of securities classified as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL
RATINGS INVESTMENTS
------- -------------
<S> <C>
Baa1-Baa3................................................... 2%
Ba1-Ba3..................................................... 25%
B1-B3....................................................... 68%
Caa......................................................... 3%
</TABLE>
<PAGE> 65
<TABLE>
<S> <C>
Non-rated*.................................................. 2%
</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"). (The Multi-Cap Growth,
the Internet and the Balanced Portfolios are not subject to this restriction).
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 Portfolio 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 derivative transactions except 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, other than the Multi-Cap Growth Portfolio, will not
enter into a hedging transaction (except for closing transactions) if,
immediately thereafter, the sum of the value of securities underlying open
contracts and options would exceed 5% of the Portfolio's total assets taken at
the time of investing.
CERTAIN SECURITIES
The Portfolios may invest in the following described securities,
except as otherwise indicated. These securities are commonly referred to as
derivatives. The value of the securities underlying such derivative securities,
if executed, in the aggregate, may not exceed 5% of total assets at the time
the Portfolio entered into the derivative agreement; provided, however, that
the International Growth Portfolio and the High-Yield Bond Portfolio are
subject to a 20% limitation.
CALL OPTIONS. The Portfolios may purchase call options. The Portfolios
may write (sell) call options ("calls") that are listed on national securities
exchanges or are available in the over-the-counter market through primary
broker-dealers. The Portfolios may purchase or write options that may or may
not be listed on a national securities exchange and issued by the Options
Clearing Corporation. Call options are short-term contracts with a duration of
nine months or less. The 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
<PAGE> 66
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, Global Financial Services
Portfolio and Global Socially Responsive Portfolio may purchase and write
covered call options on foreign and U.S. securities and indices and enter into
related closing transactions.
A Portfolio may write options in connection with buy-and-write
transactions; that is, a Portfolio may purchase a security and then write a call
option against that security. The exercise price of the call the Portfolio
determines to write will depend upon the expected price movement of the
underlying security. The exercise price of a call option may be below
("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option is written.
Buy-and-write transactions using in-the-money call options may be used when it
is expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions using
out-of-the-money call options may be used when it is expected that the premiums
received from writing the call option plus the appreciation in the market price
of the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If the call options
are exercised in such transactions, the maximum gain to the Portfolio will be
the premium received by it for writing the option, adjusted upwards or
downwards by the difference between the Portfolio's purchase price of the
security and the exercise price. If the options are not exercised and the price
of the underlying security declines, the amount of such decline will be offset
in part, or entirely, by the premium received.
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, 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 the Portfolio to sell the underlying security before that
time.
<PAGE> 67
The Portfolios may use options traded on U.S. exchanges, and to the
extent permitted by law, options traded over-the-counter. It is the position of
the SEC that over-the-counter options are illiquid. Accordingly, the Portfolios
will invest in such options only to the extent consistent with their limit on
investments in illiquid securities.
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 indices. 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.
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 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.
The Portfolios may use this investment technique to hedge against
anticipated future adverse price changes which otherwise might either adversely
affect the value of the securities or currencies held in a 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, a Portfolio 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. 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.
In connection with transactions on options on stock index futures, the
Multi-Cap Growth Portfolio and the Internet Portfolio will be required to
deposit as "initial margin" an amount of cash or other specified assets equal
to, with respect to the Multi-Cap Growth Portfolio 1% to 10% of the face amount
of the contract, and between 5% to 8% of the contract amount with respect to the
Internet Portfolio. Thereafter, subsequent payments (referred to as "variation
margin") are made to and from the broker to reflect changes in the value of the
option or Futures Contract. The Multi-Cap Growth Portfolio and the Internet
Portfolio may not at any time commit to Futures Contracts, index options and
options on Futures Contracts that, if executed, would amount to more than 5% of
their total assets. However, with respect to the Multi-Cap Growth Portfolio,
in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5% limitation.
In an effort to compensate for the imperfect correlation of movements
in the price of the securities being hedged and movements in the price of the
stock index futures, the Multi-Cap Growth Portfolio may, if it uses a hedging
strategy, buy or sell stock index futures contracts in a greater or lesser
dollar amount than the dollar amount of the securities being hedged if the
historical volatility of the stock index futures has been less or greater than
that of the securities. Such "over hedging" or "under hedging" may adversely
affect the Portfolio's net investment results if market movements are not as
anticipated when the hedge is established.
<PAGE> 68
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 if 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 Portfolio Manager may be incorrect in its
prediction of movements in stock, bond, currency prices and interest rates.
Index Options. All of the Equity, Sector and Hybrid Portfolios may
invest in options on stock indices. These options are based on indices 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.
For a call option on an index, the option is covered if a Portfolio
maintains with its sub-custodian cash or liquid securities equal to the
contract value. With respect to the Balanced Portfolio, the option is also
covered if the Portfolio maintains with its custodian a diversified stock
portfolio equal to the contract value.
The use of options on securities indexes entails the risk that trading
in the options may be interrupted if trading in certain securities included in
the index is interrupted.
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 the Portfolio receiving
or paying as the case may be, only the net amount of the two payments). The net
amount of the excess, if any, of the Portfolio's obligations
<PAGE> 69
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 Portfolio Manager is incorrect in its forecasts of market values, interest
rates and other applicable factors, the investment performance of the Portfolio
will be less favorable than it would have been if this investment technique were
never used. Interest rate swaps do not involve the delivery of securities or
other underlying assets or principal. Thus, if the other party to an interest
rate swap defaults, the Portfolio's risk of loss consists of the net amount of
interest payments that the Portfolio is contractually entitled to receive.
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 the Global Socially
Responsive 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, the
Global Financial Services Portfolio and the Global Socially Responsive Portfolio
may incur costs in connection with conversions between various currencies.
To manage exposure to currency fluctuations, a Portfolio may alter
equity or money market exposures (in its normal asset allocation mix as
previously identified, where applicable), 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
Portfolios 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.
<PAGE> 70
The Portfolios may conduct their 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 Portfolios 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 Portfolio Manager believes that the currency of a particular
country may suffer a significant decline against the U.S. dollar or against
another currency, the Portfolio may enter into a currency contract to sell, for
a fixed amount of U.S. dollars or other appropriate currency, the amount of
foreign currency approximating the value of some or all of the Portfolio's
securities denominated in such foreign currency.
At the maturity of a forward contract, the Portfolio may either sell a
portfolio security and make delivery of the foreign currency, or it may retain
the security and terminate its contractual obligation to deliver the foreign
currency by repurchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Portfolio may realize a gain or loss from currency
transactions.
The Portfolios 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.
The Internet Portfolio may also engage in currency swaps, which are
agreements to exchange cash flows based on the difference among two or more
currencies.
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 with the exception of Repurchase
Agreements which are subject to a limitation of 20% of the Portfolio's total
assets.
<PAGE> 71
Money Market Instruments. The Equity Portfolios, the Sector Portfolios
and the Domestic Hybrid Portfolios may invest from time to time in "money market
instruments," a term that includes, among other things, bank obligations,
commercial paper, time deposits, loan participations ("LPs"), and, except with
respect to the Multi-Cap Growth Portfolio, variable amount master demand notes.
The Multi-Cap Growth Portfolio may invest in corporate bonds with remaining
maturities of one year and the Internet Portfolio may invest in corporate bonds
with remaining maturities of 397 days or less. The Balanced Portfolio may also
invest in short-term corporate obligations, foreign commercial paper, and
variable and floating-rate instruments.
Bank obligations include bankers' acceptances, including Yankee
Bankers' Acceptances and foreign bankers' acceptances. Eurodollar Time Deposits
("ETDs") and Canadian Time Deposits ("CTDs"), and with respect to the Internet
Portfolio, Schedule B's. In addition, bank obligations include U.S.
dollar-denominated instruments issued or supported by the credit of U.S. or
foreign banks or savings institutions and U.S. dollar-denominated obligations of
foreign branches of U.S. banks or of U.S. branches of foreign banks, all of the
same type as domestic bank obligations. The Internet Portfolio will invest in
obligations of foreign banks or foreign branches of U.S. banks only where the
Portfolio Manager deems the instrument to present minimal credit risks. Such
investments may nevertheless entail risks that are different from those of
investments in domestic obligations of U.S. banks due to differences in
political, regulatory and economic systems and conditions. All investments in
bank obligations by the Internet Portfolio and the Balanced Portfolio are
limited to the obligations of financial institutions having more than $1 billion
in total assets at the time of purchase.
A Euro CD is a receipt from a bank for funds deposited at that bank for
a specific period of time at some specific rate of return and denominated in
U.S. dollars. It is the liability of a U.S. bank branch or foreign bank located
outside the U.S. Almost all Euro CDs are issued in London. Yankee CDs are
certificates of deposit that are issued domestically by foreign banks. It is a
means by which foreign banks may gain access to U.S. markets through their
branches which are located in the United States, typically in New York. These
CDs are treated as domestic securities. ETDs are U.S. dollar-denominated
deposits on a foreign branch of a U.S. bank or a foreign bank and CTDs are
essentially the same as ETDs except they are issued by Canadian offices of major
Canadian banks. Schedule Bs are obligations issued by Canadian branches of
foreign or domestic banks and Yankee BAs are U.S. dollar denominated bankers'
acceptances issued by a U.S. branch of a foreign bank and held in the
United States.
Domestic and foreign banks are subject to extensive but different
government regulations which may limit the amount and types of their loans and
the interest rates that may be charged. In addition, the profitability of the
banking industry is largely dependent upon the availability and cost of funds to
finance lending operations and the quality of underlying bank assets.
Investments in obligations of foreign branches of U.S. banks and of U.S.
branches of foreign banks may subject a Fund to additional investment risks,
including future political and economic developments, the possible imposition of
withholding taxes on interest income, possible seizure
<PAGE> 72
or nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on such
obligations. In addition, foreign branches of U.S. banks and U.S. branches of
foreign banks may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and record keeping standards than
those applicable to domestic branches of U.S. banks.
Euro CDs, Yankee CDs and foreign bankers' acceptances involve risks
that are different from investments in securities of U.S. banks. The major risk,
which is sometimes referred to as "sovereign risk," pertains to possible
future unfavorable political and economic developments, possible withholding
taxes, seizures of foreign deposits, currency controls, interest limitations, or
other governmental restrictions which might affect payment of principal or
interest. Investment in foreign commercial paper also involves risks that are
different from investments in securities of commercial paper issued by U.S.
companies. Non-U.S. securities markets generally are not as developed or
efficient as those in the United States. Such securities may be less liquid and
more volatile than securities of comparable U.S. corporations. Non-U.S. issuers
are not generally subject to uniform accounting and financial reporting
standards, practices and requirements comparable to those applicable to U.S.
issuers. In addition, there may be less public information available about
foreign banks, their branches and other issuers.
Time deposits usually trade at a premium over Treasuries of the same
maturity. Investors regard such deposits as carrying some credit risk, which
Treasuries do not; also, investors regard time deposits as being sufficiently
less liquid than Treasuries; hence, investors demand some extra yield for buying
time deposits rather than Treasuries. The investor in a loan participation has a
dual credit risk to both the borrower and also the selling bank. The second risk
arises because it is the selling bank that collects interest and principal and
sends it to the investor.
Commercial paper may include variable and floating-rate instruments,
which are unsecured instruments that permit the interest on indebtedness
thereunder to vary. Variable-rate instruments provide for periodic adjustments
in the interest rate. Floating-rate instruments provide for automatic adjustment
of the interest rate whenever some other specified interest rate changes. Some
variable and floating-rate obligations are direct lending arrangements between
the purchaser and the issuer and there may be no active secondary market.
However, in the case of variable and floating-rate obligations with the demand
feature, a Portfolio may demand payment of principal and accrued interest at a
time specified in the instrument or may resell the instrument to a third party.
In the event an issuer of a variable or floating-rate obligation defaulted on
its payment obligation, a Portfolio might be unable to dispose of the note
because of the absence of a secondary market and could, for this or other
reasons, suffer a loss to the extent of the default. Substantial holdings of
variable and floating-rate instruments could reduce portfolio liquidity.
Variable- and Floating-Rate Instruments and Related Risks. The Balanced
Portfolio may acquire variable- and floating-rate instruments. The Portfolio
Manager will consider the earning power, cash flows and other liquidity ratios
of the issuers and guarantors of such instruments and, if the instruments are
subject to demand features, will monitor their financial status with respect to
the ability of the issuer to meet its obligation to make payment on demand.
Where
<PAGE> 73
necessary to ensure that a variable- or floating-rate instrument meets the
Portfolio's quality requirements, the issuer's obligation to pay the principal
of the instrument will be backed by an unconditional bank letter or line of
credit, guarantee, or commitment to lend.
Because variable and floating-rate instruments are direct lending
arrangements between the lender and the borrower, it is not contemplated that
such instruments will generally be traded, and there is generally no established
secondary market for these obligations, although they are redeemable at face
value. Accordingly, where these obligations are not secured by letters of credit
or other credit support arrangements, the Portfolio's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand.
The same credit research must be done for master demand notes as in
accepted names for potential commercial paper issuers to reduce the chances of
a borrower getting into serious financial difficulties.
Loan Participations. The Balanced Portfolio may also engage in Loan
Participations ("LPs"). LPs are loans sold by the lending bank to an investor.
The loan participant borrower may be a company with highly-rated commercial
paper that finds it can obtain cheaper funding through an LP than with
commercial paper and can also increase the company's name recognition in the
capital markets. LPs often generate greater yield than commercial paper.
The borrower of the underlying loan will be deemed to be the issuer except
to the extent the Portfolio derives its rights from the intermediary bank which
sold the LPs. Because LPs are undivided interests in a loan made by the issuing
bank, the Portfolio may not have the right to proceed against the LP borrower
without the consent of other holders of the LPs. In addition, LPs will be rated
as illiquid if, in the judgment of the Portfolio Manager, they cannot be sold
within seven days.
Foreign Bankers' Acceptances. The Balanced Portfolio may purchase foreign
bankers' acceptances. Foreign bankers' acceptances are short-term (270 days or
less), non-interest-bearing notes sold at a discount and redeemed by the
accepting foreign bank at maturity for full face value and denominated in U.S.
dollars. Foreign bankers' acceptances are the obligations of the foreign bank
involved, to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and the drawer to pay the face amount of the
instrument upon maturity.
Foreign Commercial Paper. The Balanced Portfolio may purchase foreign
commercial paper. Foreign commercial paper consists of short-term unsecured
promissory notes denominated in U.S. dollars, either issued directly by a
foreign firm in the U.S., or issued by a "domestic shell" subsidiary of a
foreign firm established to raise dollars for the firm's operations abroad or
for its U.S. subsidiary. Like commercial paper issued by U.S. companies,
foreign commercial paper is rated by the rating agencies (Moody's, S&P) as to
the issuer's creditworthiness. Foreign commercial paper can potentially provide
the investor with a greater yield than domestic commercial paper.
Supranational Bank Obligations. The Internet Portfolio may invest in
supranational bank obligations. Supranational banks are international banking
institutions designed or supported by national governments to promote economic
reconstruction, development or trade between nations (e.g., The World Bank).
Obligations of supranational banks may be supported by appropriated but unpaid
commitments of their member countries and there is no assurance these
commitments will be undertaken or met in the future.
<PAGE> 74
Master Demand Notes. All Portfolios except the Multi-Cap Growth, may
purchase variable amount master demand notes. However, the Portfolios, except
the Multi-Cap Growth Portfolio, the Internet Portfolio and the Balanced
Portfolio, will not purchase such securities if the value of such securities,
taken at the current value, would exceed 5% of the Portfolio's total assets.
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 Portfolio Managers, subject to the overall
review of the Portfolio's Trustees and the Advisor, monitor the financial
condition of the issuers to evaluate their ability to repay the notes.
U.S. Government Obligations. The Portfolios may purchase obligations
issued or guaranteed by the U.S. Government and U.S. Government agencies and
instrumentalities. Obligations of certain agencies and instrumentalities of the
U.S. Government, such as those of the Government National Mortgage Association
("GNMA"), are supported by the full faith and credit of the U.S. Treasury.
Others, such as those of the Export-Import Bank of the United States, are
supported by the right of the issuer to borrow from the U.S. Treasury; and still
others, such as those of the Student Loan Marketing Association, are supported
only by the credit of the agency or instrumentality issuing the obligation. No
assurance can be given that the U.S. Government would provide financial support
to U.S. government-sponsored instrumentalities if it is not obligated to do so
by law. Examples of the types of U.S. Government obligations that may be
acquired by the Portfolios include U.S. Treasury Bills, U.S. Treasury Notes and
U.S. Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm
Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration, Federal National Mortgage Association ("FNMA"), GNMA, General
Services Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation ("FHLMC"), Federal
Intermediate Credit Banks Maritime Administration, some of which are discussed
below.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities guaranteed
by the GNMA include GNMA Mortgage Pass-Through Certificates (also known as
"Ginnie Maes") which are guaranteed as to the timely payment of principal and
interest by GNMA and such guarantee is backed by the full faith and credit of
the United States. GNMA is a wholly-owned U.S. Government corporation within the
<PAGE> 75
Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by the
FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as
"Fannie Maes") which are solely the obligations of the FNMA and are not backed
by or entitled to the full faith and credit of the United States, but are
supported by the right of the issuer to borrow from the U.S. Treasury. FNMA is a
government-sponsored organization owned entirely by private stockholders. Fannie
Maes are guaranteed as to timely payment of the principal and interest by FNMA.
Mortgage-related securities issued by the FHLMC include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "PCs"). FHLMC is a
corporate instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are
not guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage loans. When FHLMC
does not guarantee timely payment of principal, FHLMC may remit the amount due
on account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable. Under normal market conditions, the Internet Portfolio will not
invest to a significant extent, or on a routine basis, in U.S. Government
securities.
The Balanced Portfolio may also invest in other mortgage-backed
securities. These are issued by private issuers, generally originators of and
investors in mortgage loans, including savings associations, mortgage bankers,
commercial banks, investment bankers, and special purpose entities. These
private mortgage-backed securities may be supported by U.S. Government
mortgage-backed securities or some form of non-government credit enhancement.
Mortgage-backed securities have either fixed or adjustable interest rates. The
rate of return on mortgage-backed securities may be affected by prepayments of
principal on the underlying loans, which generally increase as interest rates
decline; as a result, when interest rates decline, holders of these securities
normally do not benefit from appreciation in market value to the same extent as
holders of other non-callable debt securities. In addition, like other debt
securities, the values of mortgage-related securities, including government and
government-related mortgage pools, generally will fluctuate in response to
market interest rates.
Mortgage-backed securities have greater market volatility then other
types of securities. In addition, because prepayments often occur at times when
interest rates are low or are declining, the Portfolios may be unable to
reinvest such funds in securities which offer comparable yields. The yields
provided by these mortgage securities have historically exceeded the yields on
other types of U.S. Government securities with comparable maturities in large
measure due to the risks associated with prepayment features.
<PAGE> 76
The Balanced Portfolio may also invest in pass-through certificates issued
by non-governmental issuers. Pools of conventional residential mortgage loans
created by such issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government guarantees of payment. Timely payment of interest and principal of
these pools is, however, generally supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance. The
insurance and guarantees are issued by government entities, private insurance
and the mortgage poolers. Such insurance and guarantees and the creditworthiness
of the issuers thereof will be considered in determining whether a
mortgage-related security meets the Portfolio's quality standards. The Portfolio
may buy mortgage-related securities without insurance or guarantees if through
an examination of the loan experience and practices of the poolers, the
investment manager determines that the securities meet the Portfolio's quality
standards.
Repurchase Agreements. All Portfolios may enter into repurchase agreements
usually having maturities of one business day and not more than one week. 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. The
repurchase price generally equals the price paid by a Portfolio plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the securities underlying the repurchase agreement). Repurchase
agreements may be considered loans by a Portfolio collateralized by the
underlying instrument. 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 Portfolio 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 must find it satisfactory before engaging in
repurchase agreements.
The Portfolios may 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
<PAGE> 77
Securities and Exchange Commission, are members of the National Association of
Securities Dealers, Inc. ("NASD") and have similarly rated commercial paper
outstanding.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by a Portfolio pursuant to a Portfolio's agreement to
repurchase the securities at an agreed upon price, date and rate of interest.
During the reverse repurchase agreement period, a Portfolio continues to receive
principal and interest payments on these securities. Because reverse repurchase
agreements are considered borrowings, the Internet Portfolio and the Balanced
Portfolio may only enter into such agreements for temporary or emergency
purposes. The Internet Portfolio may only sell portfolio securities to financial
institutions such as banks and broker/dealers and requiring to repurchase them
at a mutually specified date and price ("reverse purchase agreements"). Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a Portfolio may decline below the repurchase price. A Portfolio will
pay interest on amounts obtained pursuant to a reverse repurchase agreement.
While reverse repurchase agreements are outstanding, a Portfolio will maintain
cash, U.S. Government securities or other liquid securities in a segregated
account in an amount at least equal to the market value of the securities, plus
accrued interest, subject to the agreement. With respect to the Balanced
Portfolio, liquid securities include equity securities and debt securities that
are unencumbered 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.
Each Portfolio may invest in commercial obligations issued in reliance on
the "private placement" exemption from registration afforded by Section 4(2) of
the Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the Federal Securities laws, and generally is sold to
institutional investors who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors through or with the assistance of the
issuer or investment dealers which make a market on the Section 4(2) paper, thus
providing liquidity.
The Portfolios may invest in restricted securities governed by Rule 144A
under the Securities Act of 1933. In adopting Rule 144A, the Securities and
Exchange Commission specifically stated that restricted securities traded under
Rule 144A may be treated as liquid for purposes of investment limitations if the
board of directors (or the Portfolio Manager acting subject to the board's
supervision) determines that the securities are in fact liquid. Examples of
factors that will be taken into account in evaluating the liquidity of a Rule
144A security by a Portfolio, both with respect to the initial purchase and on
an ongoing basis, will include, among others: (1) the frequency of trades and
quotes for the security; (2) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
transfer). If institutional trading in restricted securities were to decline to
limited levels, the liquidity of a Portfolio's holdings could be adversely
affected. This investment practice could have the effect of increasing the level
of illiquidity in a Portfolio during any period that qualified institutional
buyers become uninterested in purchasing these restricted securities.
<PAGE> 78
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, other than the Multi-Cap Growth Portfolio which is subject
to the 20% limitation, invest directly in foreign securities. The Growth, Growth
& Income, Equity, Equity Income, Capital Appreciation, Small Company Growth,
Small Company Value and Managed Portfolios may also invest in both sponsored and
unsponsored ADRs, and EDRs which are securities of U.S. issuers backed by
securities of foreign issuers, subject to a 20% limitation. The Multi-Cap
Growth, Internet and Balanced Portfolios may invest in ADRs, American Depository
Shares or U.S. dollar denominated securities of foreign issuers without
limitation. The High Yield Bond Portfolio may not invest in ADRs. The Internet
Portfolio typically will only purchase foreign securities which are represented
by sponsored or unsponsored ADRs listed on a domestic securities exchange or
included in the NASDAQ National Market System, or foreign securities listed
directly on a domestic securities exchange or included on the NASDAQ National
Market System. There may be less information available about unsponsored ADRs
and EDRs, and therefore, they may carry higher credit risks. The Portfolios may
also invest in securities of foreign branches of domestic banks and domestic
branches of foreign banks.
Investments in foreign equity and debt securities involve risks
different from those encountered when investing in securities of domestic
issuers. The appropriate Portfolio Managers and the Advisor, subject to the
overall review of the Portfolios' 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
<PAGE> 79
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. Because the Internet
Portfolio's liquidity and ability to manage its holdings might be affected when
it earmarks cash or portfolio securities to cover such purchase commitments, the
Portfolio Manager expects that its commitments to purchase when-issued
securities and forward commitments will not exceed 25% of the value of the
Portfolio's total assets absent unusual market conditions.
Portfolio Depositary Receipts. To the extent otherwise consistent with
its investment policies and applicable law, the Multi-Cap Growth Portfolio may
invest up to 5% of its total assets in Portfolio Depositary Receipts,
exchange-traded shares issued by investment companies, typically unit investment
trusts, holding portfolios of common stocks designed to replicate and,
therefore, track the performance of various broad securities indices or sectors
of such indices. For example, the Portfolios may invest in Standard & Poor's
Depositary Receipts R (SPDRs), issued by a unit investment trust whose portfolio
tracks the S&P 500 Composite Stock Price Index, or Standard & Poor's MidCap 400
Depositary Receipts R (MidCap SPDRs), similarly linked to the S&P MidCap 400
Index.
Short sales. The Multi-Cap Growth Portfolio may sell securities "short
against the box." While a short sale is the sale of a security the Multi-Cap
Growth Portfolio does not own, it is "against the box" if at all times when the
short position is open the Multi-Cap Growth Portfolio owns an equal amount of
the securities or securities convertible into, or exchangeable without further
consideration for, securities of the same issue as the securities sold short.
<PAGE> 80
Temporary Defensive Tactics
Any or all of the Portfolios may at times for defensive purposes, at
the determination of the Portfolio Manager, temporarily place all or a portion
of their assets in cash, short-term commercial paper (i.e., short-term
unsecured promissory notes issued by corporations to finance short-term credit
needs), United States Government securities, high-quality debt securities
(including "Eurodollar" and "Yankee Dollar" obligations, i.e., U.S. issuer
borrowings payable overseas in U.S. funds and obligations of foreign issuers
payable in U.S. funds), and obligations of banks when in the judgment of the
Portfolio Manager such investments are appropriate in light of economic or
market conditions. For temporary defensive purposes, the International Growth
Portfolio, the Global Financial Services Portfolio and Global Socially
Responsive 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.
Other Investments. Each Portfolio may, in the future, be authorized to
invest in securities other than those listed here and in the Prospectus,
provided that such investment would be consistent with that Portfolio's
investment objective and that it would not violate any fundamental investment
policies or restrictions applicable to 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 total 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
<PAGE> 81
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 and the Internet
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. (The Multi-Cap Growth Portfolio, the Global Financial
Services Portfolio and the Internet Portfolio are not subject to this
restriction).
4. Make loans of money, 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.
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 Portfolio Manager owns more than 1/2 of 1% of the
outstanding securities of such issuer, and such officers, trustees and directors
who own more than 1/2 of 1% own in the aggregate more than 5% of the outstanding
voting securities of such issuer. (The Global Financial Services Portfolio, the
Multi-Cap Growth Portfolio, the Internet Portfolio and the Balanced Portfolio
are not subject to this restriction).
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.)
<PAGE> 82
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
(excluding short-term securities) by the average market value of investments of
that Portfolio. The Portfolio Managers intend to manage each Portfolio's assets
by buying and selling securities to help attain its investment objective. This
may result in increases or decreases in a Portfolio's current income available
for distribution to its shareholders. While none of the Portfolios is managed
with the intent of generating short-term capital gains, each of the Portfolios
may dispose of investments (including money market instruments) regardless of
the holding period if, in the opinion of the Portfolio Manager, an issuer's
creditworthiness or perceived changes in a company's
<PAGE> 83
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.
During 1999, the portfolio turnover rate for the Equity, Capital
Appreciation and International Growth Portfolios exceeded 100% due to change in
management style which resulted from the appointment of new Portfolio Managers.
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 Portfolio 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.
<PAGE> 84
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH PRINCIPAL OCCUPATION
THE TRUST PAST FIVE YEARS
--------------------------- --------------------
<S> <C>
Arthur T. Dietz (76) 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 Life Insurance Company
Trustee of New York ("MONY") since 1994; Executive Vice President, MONY (1991-1994);
Trustee, MONY since 1993; Senior Vice President, MONY (1989 - 1991);
Director, MONY Life Insurance Co. of America since 1989; Director, MONY
Brokerage, Inc. since 1990; Director, MONY International Holdings, Inc.
since 1994; Director, MONY Life Insurance Company of the Americas, Ltd.
since 1994, Director, 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. Director, The American College.
Arthur Howell (81) 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. from 1985-2000;
Chairman Emeritus, Crescent Banking Co., Inc., 2000;
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 builders) 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>
<PAGE> 85
<TABLE>
<CAPTION>
NAME, AGE AND POSITION WITH PRINCIPAL OCCUPATION
THE TRUST PAST FIVE YEARS
--------------------------- ---------------------
<S> <C>
*Michael I. Roth (54) Chairman and Chief Executive Officer, Trustee MONY since
Trustee 1993; President and Chief Executive Officer, MONY
1991-1993; President and Chief Operating Officer, MONY
Life, 1991 to 1993; Director, MONY Life Insurance Company
of America since 1991; Director, ARES Holdings Inc.
1995-1998; 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 1982-1987; Director,
American Council of Life Insurance (ACLI); Director, The
Life Insurance Counsel of New York; Director, Pitney
Bowes, Inc.; Director, Promus Hotel Trust; Director,
Insurance Marketplace Standards Association; Director,
Enterprise Foundation (a charitable foundation which
develops housing and which is not affiliated with The
Enterprise Group of Funds, Inc.); Director, Metropolitan
Development Association of Syracuse and Central New York;
Director, Lincoln Center for the Performing Arts
Leadership Committee; Director, The Enterprise Group of
Funds, Inc.
*Victor Ugolyn (52) 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 (44) Secretary, The Enterprise Group of Funds, Inc. since
Secretary 1991; Senior Vice President, Secretary and Chief
Counsel, Enterprise Capital Management, Inc. since
1989; Senior Vice President, Secretary and Chief
Counsel, Enterprise Fund Distributors, Inc. since
1989.
Herbert M. Williamson (49) 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 (36) 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.
<PAGE> 86
Arthur T. Dietz, Arthur Howell and Lonnie H. Pope 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 1999:
<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 $18,125 None None $36,250
Arthur Howell $18,125 None None $36,250
William A.
Mitchell, Jr. $16,250 None None $32,500
Lonnie H. Pope $18,125 None None $36,250
</TABLE>
* Each Trustee received fees for services as a Director of The Enterprise Group
of Funds, Inc.
At April 14, 2000, 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
<PAGE> 87
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 Portfolio Manager's Agreements with each of the Portfolio
Managers. The Advisor is a 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 daily net assets were as follows:
<PAGE> 88
<TABLE>
<CAPTION>
PORTFOLIO TOTAL EXPENSES
--------- --------------
<S> <C>
Growth 0.84%
Growth and Income 0.94%
Equity 0.82%
Equity Income 1.05%
Capital Appreciation 1.16%
Multi-Cap Growth 1.40%
Small Company Growth 1.40%
Small Company Value 0.84%
Global Socially Responsive 0.90%
Global Financial Services N/A
International Growth 1.01%
Internet N/A
High-Yield Bond 0.69%
Balanced N/A
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, 2000, and ending no earlier than May 1,
2001, that expenses incurred by the Portfolios will not exceed the following
percentages of average daily net assets: Growth 1.15%; Growth and Income 1.05%;
Equity 1.15%; Equity Income 1.05%; Capital Appreciation 1.30%; Multi-Cap Growth
1.40%; Small Company Growth 1.40%; Small Company Value 1.30%; International
Growth 1.55%; Global Financial Services 1.55%; Internet 1.45%; High-Yield Bond
0.85%; Balanced .95%; and Managed 1.05%. The Portfolio 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 Portfolio Manager, as the case may
be, is not liable for any act or omission in the course of, or in connection
with, the rendition of services thereunder. The Agreement permits the 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 Portfolio Manager Agreements without obtaining Contractholder approval
each time. On April 28, 1997,
<PAGE> 89
Contractholders voted affirmatively to give the Trust this ongoing authority.
With Board approval, the Advisor is permitted to employ new Portfolio Managers
for the Portfolios, change the terms of the Portfolio Manager Agreements or
enter into a new Agreement with that Portfolio Manager. Contractholders of a
Portfolio continue to have the right to terminate the Portfolio Manager's
Agreement for 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 Portfolio Manager changes or other material amendments to Portfolio
Manager Agreements that occur under these arrangements.
PORTFOLIO MANAGER ARRANGEMENTS
Under the Portfolio Manager Agreements, the Portfolio 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 Portfolio Managers for each Portfolio.
<TABLE>
<CAPTION>
PORTFOLIO NAME AND CONTROL FEE PAID BY THE ADVISOR TO THE
PERSONS OF THE PORTFOLIO PORTFOLIO MANAGER ON AN ANNUAL BASIS
MANAGER AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Growth Portfolio Montag & Caldwell, Inc. 0.30% for assets under management
("Montag & Caldwell"). up to $1 billion; 0.20% thereafter.
Montag & Caldwell is
controlled by Alleghany
Trust.
Growth and Income Portfolio Retirement System 0.30% for assets under management
Investors Inc. ("RSI") which up to $100 million; 0.25% on the next
is a subsidiary of Retirement $100 million; and 0.20% for assets
System Group Inc. greater than $200 million.
Equity Portfolio TCW Investment Management 0.40% for assets under management
Company ("TCW"). TCW is up to $1 billion and 0.30% thereafter.
a wholly owned subsidiary
of TCW Management Company,
a Nevada Corporation, whose
direct and indirect
subsidiaries, including
Trust Company of the West
and TCW Asset Management
Company, provide a variety
of trust, investment
management and investment
advisory services.
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
PORTFOLIO NAME AND CONTROL FEE PAID BY THE ADVISOR TO THE
PERSONS OF THE PORTFOLIO PORTFOLIO MANAGER ON AN ANNUAL BASIS AS A
MANAGER PERCENTAGE OF AVERAGE DAILY NET ASSETS
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Equity Income Portfolio 1740 Advisers, Inc. ("1740 0.30% for assets under management
Advisers"). It is a subsidiary up to $100 million; 0.25% on the next
of MONY. $100 million; and 0.20% thereafter.
Capital Appreciation Portfolio Marsico Capital Management, 0.50% for assets under management
LLC ("Marsico"). Marsico up to $100 million; 0.45% for assets
is owned 50% by its under management for the next $100
employees and 50% by Bank of million; 0.35% for assets greater than
America Corp. $200 million up to $300 million and
0.30% thereafter.
Multi-Cap Growth Portfolio Fred Alger Management, Inc. 0.40% for assets under management.
("Alger"). Alger is owned
by its employees.
Small Company Growth William D. Witter, Inc. 0.65% for assets under management
Portfolio ("Witter"). Witter is owned up to $50 million; 0.55% for assets
by its employees. under management for the next $50
million; and 0.45% for assets
thereafter.
Small Company Value Portfolio GAMCO Investors, Inc. is a 0.40% for assets under management
wholly owned subsidiary of up to $1 billion and 0.30% thereafter.
Gabelli Asset Management Inc.
International Growth Portfolio Vontobel USA Inc. 0.40% for assets under management
("Vontobel"). Vontobel up to $100 million; 0.35% for assets
is a wholly-owned under management from $100 million
subsidiary of Bank J. to $200 million; 0.30% for assets
Vontobel of Zurich, from $200 million to $500
Switzerland. million and 0.25% for assets greater
than $500 million.
Global Socially Responsive Rockefeller & Co., Inc. 0.45% for assets up to $100,000,000;
Portfolio 0.40% for assets from $100,000,000 to
$200,000,000; 0.30% for assets over
$200,000,000.
Global Financial Services Sanford C. Bernstein & 0.50% for assets up to $100 million;
Portfolio Co., Inc. ("Sanford 0.40% for assets from $100 million to
Bernstein") is owned by $300 million; 0.30% for assets over
its employees. $300 million.
Internet Portfolio Alger, which is owned 0.40% for assets under management.
by its employees.
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
FEE PAID BY THE ADVISOR TO THE
PORTFOLIO NAME AND CONTROL PORTFOLIO MANAGER ON AN ANNUAL BASIS
PERSONS OF THE PORTFOLIO AS A PERCENTAGE OF AVERAGE
MANAGER DAILY NET ASSETS
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
High-Yield Bond Portfolio Caywood-Scholl Capital 0.30% for assets under management
Management ("Caywood- up to $100 million and 0.25%
Scholl"). It is a thereafter.
wholly-owned subsidiary
of RCM Global Investors LLC,
an affiliate of Dresdner Bank
AG.
Balanced Portfolio Montag & Caldwell is 0.30% for assets under management up
controlled by Alleghany to $100,000,000; 0.25% for assets from
Corporation. $100,000,000 to $200,000,000; and
0.20% for assets greater than
$200,000,000.
Managed Portfolio OpCap Advisors ("OpCap"), 0.40% for assets under management
OpCap is a majority-owned up to $1 billion and 0.30% for assets
subsidiary of PIMCO Advisors, from $1 billion to $2 billion and 0.25%
L.P., a limited partnership. thereafter.
Sanford Bernstein is owned
by its employees.
Sanford Bernstein is owned 0.40% for assets under management up to
by its employees. $10 million; 0.30% for assets from $10 million
up to $50 million; 0.20% for assets from $50
million up to $100 million; and 0.10% for
assets in excess of $100 million.
</TABLE>
The tables below sets forth the 1999, 1998 and 1997 breakdown by
Portfolio of (1) the investment advisory fee paid to the Advisor, (2) the
percentage of the investment advisory fee to be paid by the Advisor to the
Portfolio Manager, (3) the fund management fee paid by the Advisor to the
Portfolio Manager, (4) the net advisory fee left to the Advisor after payment of
the Portfolio management fee, and (5) the amount of the expense reimbursement
paid by the Advisor to the Portfolio.
<TABLE>
<CAPTION>
1999
Portfolio (1) (2) (3) (4) (5)
--------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Growth $ 803,715 37.74% $ 303,284 $ 500,431 $ 0
Growth and Income 254,121 39.99% 101,624 152,497 0
Equity 4,795,026 51.11% 2,450,680 2,344,346 0
Equity Income 100,472 40.00% 40,189 60,283 20,025
Capital Appreciation 93,033 64.32% 59,842 33,191 0
Multi-Cap Growth 62,958 40.00% 25,183 37,775 7,249
Small Company Growth 70,898 65.00% 46,084 24,814 10,339
Small Company Value 3,455,816 50.25% 1,736,438 1,719,378 0
International Growth 854,890 48.34% 413,284 441,606 0
High-Yield Bond 706,221 48.75% 344,259 361,962 0
Balanced 14,927 39.99% 5,970 8,957 18,765
Managed 18,815,456 43.05% 8,100,208 10,715,248 0
</TABLE>
<TABLE>
<CAPTION>
1998
Portfolio (1) (2) (3) (4) (5)
--------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Growth $ 471 40% $ 188 $ 283 $15,176
Equity 4,523,391 51% 2,305,888 2,217,503 0
Growth and Income 193 40% 77 116 15,350
Equity Income 176 40% 70 105 15,357
Capital Appreciation 184 67% 122 61 15,292
Small Company Growth 259 65% 168 90 15,324
Small Company Value 3,204,761 50% 1,607,480 1,597,281 0
International Growth 730,659 53% 386,819 343,839 0
High-Yield Bond 520,951 50% 260,455 260,496 0
Managed 20,174,424 45% 8,990,865 11,183,559 0
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
1997
Portfolio (1) (2) (3) (4) (5)
--------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Equity $ 3,319,628 51% $1,664,835 $1,654,793 0
Small Company Value 2,119,841 50% 1,060,105 1,059,736 0
International Growth 604,348 53% 319,949 284,399 0
High-Yield Bond 299,011 50% 149,505 149,506 0
Managed 16,976,135 45% 7,855,235 9,120,900 0
</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 Fund 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
<PAGE> 93
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.
<PAGE> 94
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. Investment securities, other than debt securities, listed on either a
national or foreign securities exchange or traded in the over-the-counter
National Market System are valued each business day at the last reported 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.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Each Portfolio 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 Portfolio Manager in
selecting brokers and dealers to effect securities transactions for a Portfolio
is whether such brokers and dealers can obtain the most favorable combination of
price and execution for the transaction. This does not mean that the execution
decision must be based solely on whether the lowest possible
<PAGE> 95
commission costs may be obtained. In seeking to achieve the best combination of
price and execution, the Portfolio Managers evaluate the overall quality and
reliability of broker-dealers and the service they provide, including their
general execution capability, reliability and integrity, willingness to take
positions in securities, general operational capabilities and financial
condition.
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
Portfolio 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 Portfolio Managers; information
received in connection with directed orders of other accounts managed by the
Portfolio Managers or its affiliates may or may not be useful to the 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 Portfolio Managers, to make available additional views for
consideration and comparison, and to enable the Portfolio Managers to obtain
market information for the valuation of securities held by the Trust. Portfolio
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 Portfolio 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 Portfolio Managers or an affiliate are
combined, which in some cases could have a detrimental effect on the price or
volume of the security in a particular transaction as far as a 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.
<PAGE> 96
The following table sets forth the amounts of the brokerage
commissions paid to the broker-dealers by each Portfolio for the fiscal years
ended December 31, 1999, 1998 and 1997.
<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 215,047.00 4,795.00 2.23% 0.00%
Growth and Income 63,236.00 -- 0.00% 0.00%
Equity 1,735,243.00 29,540.00 1.70% 0.00%
Equity Income 33,538.00 944.00 2.81% 0.00%
Capital Appreciation 35,498.00 500.00 1.41% 0.00%
Small Company Growth 16,811.00 -- 0.00% 0.00%
Small Company Value 313,463.00 267,327.00 85.28% 0.18%
International Growth 355,084.09 -- 0.00% 0.00%
High-Yield Bond -- -- 0.00% 0.00%
Managed 3,463,392.00 874,562.00 25.25% 0.02%
Multi-Cap Growth 14,345.00 14,317.00 99.80% 6.66%
Balanced 6,179.00 -- 0.00% 0.00%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Growth 1,133. 0. 0% 0%
--------------------------------------------------------------------------------------------------------------------
Growth and Income 387. 0. 0% 0%
--------------------------------------------------------------------------------------------------------------------
Equity 416,690. 13,080. 0% 0%
--------------------------------------------------------------------------------------------------------------------
Equity Income 378. 0. 3.14% .004%
--------------------------------------------------------------------------------------------------------------------
Capital Appreciation 128. 0. 0% 0%
--------------------------------------------------------------------------------------------------------------------
Small Company
Growth 347. 0. 0% 0%
--------------------------------------------------------------------------------------------------------------------
Small Company
Value 470,442. 0. 0% 0%
--------------------------------------------------------------------------------------------------------------------
International Growth 254,852. 0. 0% 0%
--------------------------------------------------------------------------------------------------------------------
High-Yield Bond 19. 0. 0% 0%
--------------------------------------------------------------------------------------------------------------------
Managed 2,419,897. 47,474. 1.96% 0.002%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<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>
<PAGE> 97
PERFORMANCE COMPARISONS
The average annual total return for the year ended December 31, 1999,
for the five-year period ended December 31, 1999, and the period from inception
through December 31, 1999, 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
1999 1999 TO DECEMBER 31,
PORTFOLIO (ONE YEAR) (FIVE YEARS) 1999(1)(2)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth 24.48% 28.52%
Growth and Income 20.55% 21.26%
Equity 15.61% 22.60% 16.72%
Equity Income 5.70% 7.01%
Capital Appreciation 55.30% 65.95%
Small Company Growth 55.68% 63.29%
Small Company Value 24.02% 19.63% 16.87%
International Growth 42.12% 17.27% 17.05%
High-Yield Bond 3.86% 9.95% 10.00%
Managed 9.22% 21.63% 17.53%
</TABLE>
<PAGE> 98
(1) Reflects waiver of advisory fees and assumption of other expenses by
the Portfolio Manager in its previous role as Investment Advisor.
Without such waivers and assumptions, the average annual total return
during the period would have been lower.
(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. The date
of inception of the Growth, Growth and Income, Capital Appreciation,
Equity Income and Small Company Growth Portfolios is November 17, 1998.
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 $10,000
T = average annual total return
N = number of years
ERV = ending redeemable value of hypothetical $10,000
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, Multi-Cap Growth, Internet, Global
Financial Services, Equity Income, International Growth and Global Socially
Responsive Portfolios and for the equity securities of the Balanced and Managed
Portfolios, 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, Multi-Cap Growth, Internet,
Global Financial Services and Small Company Value and Global Socially Responsive
Portfolios (or as to obligations purchased during that 30-day period, based on
the purchase price plus accrued interest); (ii)
<PAGE> 99
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 $10,000 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
<PAGE> 100
Brothers Corporate/Government Index, and various rankings by independent
evaluators such as Morningstar and Lipper, 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.
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 Portfolio's
total assets is represented by cash, government securities and other securities
limited in respect of any one issuer to 5% of the Portfolio's total 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 total
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
<PAGE> 101
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
<PAGE> 102
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 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
Portfolio Manager Agreement, or a change in a fundamental policy are matters
which require separate voting by each Portfolio. To the extent required by law,
the Variable Accounts, which are the shareholders of the Portfolio, will vote
the shares of the 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.
<PAGE> 103
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, whose address is 2400 Eleven Penn Center,
Philadelphia PA 19103, 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
The Trust's Semi-Annual Report dated June 30, 1999, which was filed
with the Securities & Exchange Commission on August 25, 1999 (accession number
0000950123-99-007972, and the Trust's Annual Report dated December 31, 1999,
which was filed with the Securities & Exchange Commission on February 25, 2000
(accession number 0000950123-00-001620), are hereby incorporated by reference
into this Statement of Additional Information.
<PAGE> 104
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.
<PAGE> 105
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.
<PAGE> 106
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
<PAGE> 107
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.
<PAGE> 108
PART C
OTHER INFORMATION
Item 23. Exhibits.
(a) (i) Registrant's Charter [Declaration of Trust]. Incorporated
herein by reference to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (Reg. No.
33-21534), filed on July 15, 1999.
(ii) Amendments to Charter [Declaration of Trust].
Incorporated herein by reference to Post-Effective Amendment
No. 19 to Registrant's Registration Statement on Form N-1A
(Reg. No. 33-21534), filed on July 15, 1999.
(b) By-Laws. Incorporated herein by reference to Post-Effective
Amendment No. 19 to Registrant's Registration Statement on
Form N-1A (Reg. No. 33-21534), filed on July 15, 1999.
(c) Not applicable.
(d) (i) Investment Adviser's Agreement between Registrant and
Enterprise Capital Management, Inc. ("Enterprise
Capital"). Incorporated herein by reference to Post
Effective Amendment No. 17 to Registrant's
Registration Statement on Form N-1A (Reg. No.
33-21534), filed on May 3, 1999.
(ii) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and Montag &
Caldwell, Inc., as sub-adviser. Incorporated herein
by reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A
(Reg. No. 33-21534), filed on May 3, 1999.
(iii) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and Retirement
Systems Investors Inc., as sub-adviser. Incorporated
herein by reference to Post-Effective Amendment No.
17 to Registrant's Registration Statement on Form
N-1A (Reg. No. 33-21534), filed on May 3, 1999.
(iv) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and TCW
Investment Management Company, as sub-adviser.
Incorporated herein by reference to Post-Effective
Amendment No. 20 to Registrant's Registration
Statement on Form N-1A (Reg. No. 33-21534), filed
April 27, 2000.
(v) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and 1740
Advisers, Inc., as sub-adviser. Incorporated herein
by reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A
(Reg. No. 33-21534), filed on May 3, 1999.
(vi) Portfolio Manager's Agreement among Enterprise
Accumulation Trust. Enterprise Capital and Marsico
Capital Management, LLC, as sub-adviser. Incorporated
herein by reference to Post-Effective Amendment No.
20 to Registrant's Registration Statement on Form
N-1A (Reg. No. 33-21534), filed April 27, 2000.
(vii) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and William
D. Witter, Inc. as sub-adviser. Incorporated herein
by reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A
(Reg. No. 33-21534), filed on May 3, 1999.
<PAGE> 109
(viii) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and GAMCO
Investors, Inc. as sub-adviser. Incorporated herein
by reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A
(Reg. No. 33-21534), filed on May 3, 1999.
(ix) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and Vontobel
USA Inc. as sub-adviser. Incorporated herein by
reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A
(Reg. No. 33-21534), filed on May 3, 1999.
(x) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and Sanford C.
Bernstein & Co., Inc. as sub-adviser. Incorporated
herein by reference to Post-Effective Amendment No.
17 to Registrant's Registration Statement on Form
N-1A (Reg. No. 33-21534), filed on May 3, 1999.
(xi) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and
Caywood-Scholl Capital Management as sub-adviser.
Incorporated herein by reference to Post-Effective
Amendment No. 17 to Registrant's Registration
Statement on Form N-1A (Reg. No. 33-21534), filed on
May 3, 1999.
(xii) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and Fred Alger
Management, Inc. as sub-adviser. Incorporated herein
by reference to Post-Effective Amendment No. 18 to
Registrant's Registration Statement on Form N-1A
(Reg. No. 33-21534), filed on May 28, 1999.
(xiii) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and Fred Alger
Management, Inc. as sub-adviser. Incorporated herein
by reference to Post-Effective Amendment No. 18 to
Registrant's Registration Statement on Form N-1A
(Reg. No. 33-21534), filed on May 28, 1999.
(xiv) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Capital and Montag &
Caldwell, Inc. as sub-adviser. Incorporated herein by
reference to Post-Effective Amendment No. 18 to
Registrant's Registration Statement on Form N-1A
(Reg. No. 33-21534), filed on May 28, 1999.
(xv) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Accumulation Trust,
Enterprise Capital and OpCap Advisors, as
sub-adviser. Incorporated herein by reference to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A (Reg. No.
33-21534), filed April 27, 2000.
(xvi) Portfolio Manager's Agreement among Enterprise
Accumulation Trust, Enterprise Accumulation Trust,
Enterprise Capital and Sanford C. Bernstein & Co.,
Inc., as sub-adviser. Incorporated herein by
reference to Post-Effective Amendment No. 20 to
Registrant's Registration Statement on Form N-1A
(Reg. No. 33-21534), filed April 27, 2000.
(e) Distribution Agreement. Incorporated herein by reference to
Post-Effective Amendment No. 19, to Registrant's Registration
Statement on Form N-1A (Reg. No. 33-21534), filed on July
15, 1999.
(f) Not applicable.
(g) Custody Agreement. Incorporated herein by reference to
Post-Effective Amendment No. 19, to Registrant's Registration
Statement on Form N-1A (Reg. No. 33-21534), filed on July
15, 1999.
(h) Inapplicable.
(i) Opinion of Counsel, filed as Exhibit (i) to Post-Effective
Amendment No. 20, dated April 28, 2000, to Registration
Statement on Form N-1A (Reg. no. 33-21534), is incorporated.
<PAGE> 110
(j) Consent of Independent Accountants.
(k) Inapplicable.
(l) Agreement Related to Initial Capital. Incorporated herein by
reference to Post-Effective Amendment No. 19, to Registrant's
Registration Statement on Form N-1A (Reg. No. 33-21534), filed
on July 15, 1999.
(m) Inapplicable.
(n) Inapplicable.
(o) (i) Inapplicable.
(ii) Powers of Attorney, Incorporated herein by reference to
Post-Effective Amendment No. 17 to Registrant's
Registration Statement on Form N-1A (Reg. No.
33-21534), filed on May 3, 1999.
(p) Code of Ethics
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.
Item 25. Indemnification.
Reference is made to the provisions of Article Six of Registrant's
Articles of Incorporation which is incorporated herein by reference to
Post-Effective Amendment No. 39 to the Registration Statement on Form
N-1A (File No. 2-28097) filed on April 26, 1995.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of Registrant pursuant to the foregoing provision or otherwise,
Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment of Registrant of expenses
incurred or paid by a director, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person, Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such
<PAGE> 111
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication
of such issue.
Item 26. Business and Other Connections of the Investment Adviser.
See "Management of The Fund" 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 Adviser
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
Post-Effective Amendment to the Registrant's Registration Statement and
to the registration of Form ADV (File No. 801-27181) of Enterprise
Capital Management, Inc. filed under the Investment Adviser Act of
1940, which is incorporated herein by reference.
Montag & Caldwell, Inc.; Retirement System Investors Inc.; TCW
Investment Management Company; 1740 Advisers, Inc.; Marsico Capital
Management, LLC; Fred Alger Management, Inc.; William D. Witter, Inc.;
GAMCO Investors, Inc.; Vontobel USA Inc.; Sanford C. Bernstein & Co.,
Inc.; Caywood-Scholl Capital Management; OpCap Advisors; and
Rockefeller & Co., Inc., the Portfolio Managers of certain of the
Portfolios 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
TCW Investment Management Company 801-29075
1740 Advisers, Inc. 801-08176
Marsico Capital Management, LLC. 801-54914
Fred Alger Management, Inc. 801-06709
William D. Witter, Inc. 801-12695
GAMCO Investors, Inc. 801-14132
Vontobel USA Inc. 801-34910
Rockefeller & Co., Inc. 801-15106
Sanford C. Bernstein & Co., Inc. 801-10488
Caywood-Scholl Capital Management 801-26996
OpCap Advisors 801-27180
</TABLE>
Item 27. Principal Underwriters.
(a) Enterprise Fund Distributors, Inc. is the principal
underwriter of the Portfolios' shares.
(b) The information contained in the registration on Form BD of
Enterprise Fund
<PAGE> 112
Distributor's Inc. (File No. 8-8-815577), filed under the
Securities Exchange Act of 1934, is incorporated herein by
reference.
(c) Inapplicable.
Item 28. Location and Accounts and Records.
<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 Investment Adviser
Management, Inc. Same as above.
State Street Bank and Trust Custodian One Heritage Drive
Company The Joseph Palmer Building
North Quincy, MA 02171
</TABLE>
The records of the Fund Managers are kept at the following locations:
<TABLE>
<S> <C>
Growth Portfolio Montag & Caldwell, Inc.
3455 Peachtree Road, N.E.
Suite 1200
Atlanta, GA 30326-3248
Growth & Income Portfolio Retirement Systems Investors Inc.
317 Madison Avenue
New York, NY 10017
Equity Portfolio TCW Investment Management Company
865 South Figueroa Street, Suite 1800
Los Angeles, CA 90017
Equity Income Portfolio 1740 Advisers, Inc.
1740 Broadway
New York, NY 10019
Capital Appreciation Portfolio Marsico Capital Management, LLC
1200 17th Street
Suite 1300
Denver, Colorado 80202
Multi-Cap Growth Portfolio Fred Alger Management, Inc.
1 World Trade Center
Suite 9333
New York, NY 10048
</TABLE>
<PAGE> 113
<TABLE>
<S> <C>
Small Company Growth Portfolio William D. Witter, Inc.
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Small Company Value Portfolio GAMCO Investors, Inc.
One Corporate Center
Rye, NY 10580
International Growth Portfolio Vontobel USA Inc.
450 Park Avenue
New York, New York 10022
Global Socially Responsive Portfolio Rockefeller & Co., Inc.
30 Rockefeller Plaza
54th Floor
New York, NY 10112
Global Financial Services Portfolio Sanford C. Bernstein & Co., Inc.
767 Fifth Avenue
New York, NY 10153-0185
Internet Portfolio Fred Alger Management, Inc.
1 World Trade Center
Suite 9333
New York, NY 10048
High-Yield Bond Portfolio Caywood-Scholl Capital Management
4350 Executive Drive, Suite 125
San Diego, CA 92121
Balanced Portfolio Montag & Caldwell, Inc.
3455 Peachtree Road, N.E.
Suite 1200
Atlanta, GA 30326-3248
Managed Portfolio OpCap Advisors
1345 Avenue of the Americas
47th Floor
New York, NY 10105-4800
Sanford C. Bernstein & Co., Inc.
767 Fifth Avenue
New York, New York 10048
</TABLE>
Item 29. Management Services.
Inapplicable.
Item 30. Undertakings.
Inapplicable.
<PAGE> 114
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 18th day of July 2000.
ENTERPRISE ACCUMULATION TRUST
By: /s/ Victor Ugolyn
---------------------------------------
Victor Ugolyn
Chairman, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement of the Registrant has
been signed below by the following persons in the capacities and on the date
indicated:
<TABLE>
<S> <C> <C>
/s/ Victor Ugolyn
--------------------------------- Chairman, President and Chief July 18, 2000
Victor Ugolyn Executive Officer
/s/ Phillip G. Goff
--------------------------------- Principal Financial and Accounting July 18, 2000
Phillip G. Goff Officer
*
---------------------------------
Arthur T. Dietz Director July 18, 2000
*
---------------------------------
Samuel J. Foti Director July 18, 2000
*
---------------------------------
Arthur Howell Director July 18, 2000
*
---------------------------------
Lonnie H. Pope Director July 18, 2000
*
---------------------------------
William A. Mitchell, Jr. Director July 18, 2000
*
---------------------------------
Michael I. Roth Director July 18, 2000
By: /s/ Catherine R. McClellan
------------------------------
(Attorney-in-Fact)
</TABLE>
<PAGE> 115
[EXHIBIT INDEX]
<TABLE>
<CAPTION>
Exhibit Description Number
------- ------------------
<S> <C>
(i) Opinion and Consent of Counsel
(p) Code of Ethics
</TABLE>