<PAGE>
PROSPECTUS
- -------------------------------------------------------------------------------
MUTUAL OF AMERICA INSTITUTIONAL FUNDS, INC.
320 PARK AVENUE, NEW YORK, NEW YORK 10022
- -------------------------------------------------------------------------------
Mutual of America Institutional Funds, Inc. (the "Investment Company") is an
open-end management investment company (a mutual fund) currently issuing three
series of common stock. Shares of the Funds of the Investment Company are
offered on a no-load basis. All purchases and redemptions of Fund shares are
required to be made by wire transfer of federal funds.
The Investment Company is designed as an investment vehicle for endowments,
foundations, corporations, municipalities and other public entities and other
institutional investors. The minimum initial investment currently required is
$25,000, except that the Investment Company may waive this requirement for
certain institutional investors, and the minimum amount for additional
purchases currently is $5,000.
The ALL AMERICA FUND'S investment objective is to outperform the Standard &
Poor's Composite Index of 500 Stocks (the "S&P 500 Index") by providing a
diversified portfolio of assets with diversified management and a broad
exposure to the market. The objective for approximately 60% of its assets is
to provide investment results that to the extent practical correspond to the
price and yield performance of publicly traded common stocks in the aggregate,
as represented by the S&P 500 Index, and the investment objective for the
remaining approximately 40% of its assets is to achieve a high level of total
return, through both appreciation of capital and, to a lesser extent, current
income, by means of a diversified portfolio of securities that may include
common stocks, securities convertible into common stocks, bonds and money
market instruments. The All America Fund may invest in foreign securities and
American Depositary Receipts to the extent set forth in this Prospectus.
The BOND FUND'S primary investment objective is to provide a high level of
current income, with preservation of shareholders' capital a secondary
objective, by investing primarily in publicly traded, investment grade debt
securities.
The MONEY MARKET FUND'S investment objective is the realization of high
current income to the extent consistent with the maintenance of liquidity,
investment quality and stability of capital by investing in money market
instruments and other short-term debt securities. The Fund declares and pays
dividends of net investment income semi-annually, and as a result the Fund
does not maintain a stable net asset value per share of $1.00. INVESTMENTS IN
THE MONEY MARKET FUND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
Mutual of America Capital Management Corporation (the "Adviser") is the
investment adviser for the Funds, and Fred Alger Management, Inc., Oak
Associates, Ltd., and Palley-Needelman Asset Management, Inc. each serve as a
subadviser for a portion of the actively managed assets of the All America
Fund. Shares of the Funds are distributed by Mutual of America Securities
Corporation (the "Distributor"), an affiliate of the Adviser. An application
to purchase Fund shares is attached to this Prospectus. FOR INFORMATION ABOUT
HOW TO MAKE INITIAL AND SUBSEQUENT PURCHASES OF FUND SHARES AND HOW TO REDEEM
OR EXCHANGE FUND SHARES OWNED, REFER TO "PURCHASE OF SHARES" ON PAGE 15 AND
"REDEMPTION AND EXCHANGE OF SHARES" ON PAGE 16 OF THIS PROSPECTUS.
This Prospectus describes the investment objectives and policies of the Funds
and sets forth information about the Investment Company that a potential
investor should know before making an investment in Fund shares. A Statement
of Additional Information dated May 1, 1998 has been filed with the Securities
and Exchange Commission. The Statement of Additional Information is
incorporated by reference into this Prospectus and is available at no charge
by writing to the Investment Company at the above address or by calling 1-800-
914-8716.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
You should read this Prospectus carefully before investing and keep it for
future reference.
Prospectus dated May 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Annual Fees and Expenses............... 2
Financial Highlights................... 3
Performance of Funds and Similar Funds. 4
General Description of the Investment
Company............................... 5
Investment Objectives and Policies of
the Funds............................. 5
Investment Advisory, Subadvisory and
Administrative Arrangements........... 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Funds' Expenses................. 14
Portfolio Transactions.............. 15
Purchase of Shares.................. 15
Redemption and Exchange of Shares... 16
Dividends, Distributions and Taxes.. 17
Additional Information.............. 18
An Application is included with this
Prospectus
</TABLE>
----------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE INVESTMENT COMPANY, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
----------------------------------
ANNUAL FEES AND EXPENSES
<TABLE>
<CAPTION>
ALL AMERICA BOND MONEY
FUND FUND MARKET FUND
----------- ------ -----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES................ none none none
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fees........................ .50% .45% .20%
Other Expenses (after expense reimbursement)(1). .31% .25% .20%
---- ---- ----
TOTAL OPERATING EXPENSES (after expense
reimbursement)(1).............................. .81% .70% .40%
==== ==== ====
</TABLE>
- -------
(1) The Adviser has voluntarily agreed to limit the total expenses (excluding
taxes, brokerage commissions and extraordinary expenses) of the Funds to
an annual rate of .85% of net assets for the All America Fund, .70% of net
assets for the Bond Fund and .40% of net assets for the Money Market Fund.
If this policy were not in effect, the Other Expenses and Total Operating
Expenses as a percentage of average net assets would have been .55% and
1.00% for the Bond Fund for 1997 and 2.27% and 2.47% (annualized) for the
Money Market Fund for the period May 1, 1997 through December 31, 1997.
See "Investment Advisory and Administrative Arrangements."
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
------ -------
<S> <C> <C>
All America Fund............................................ $ 8 $25
Bond Fund................................................... $ 7 $22
Money Market Fund........................................... $ 4 $13
</TABLE>
The information in the table above is an estimate based on the Funds' expected
expenses after expense reimbursements and is provided for purposes of
assisting you in understanding the various costs and expenses that an investor
in the Funds will bear, directly or indirectly. THE 5% HYPOTHETICAL ANNUAL
RETURN AND ESTIMATED ANNUAL EXPENSES SHOULD NOT BE CONSIDERED TO BE A
REPRESENTATION OF FUTURE FUND PERFORMANCE OR EXPENSES, BOTH OF WHICH MAY BE
GREATER OR LESSER THAN SHOWN. For a more detailed discussion of the Funds'
fees and expenses, see "Investment Advisory, Subadvisory and Administrative
Arrangements."
2
<PAGE>
FINANCIAL HIGHLIGHTS
Income and capital changes per share for a share of each Fund outstanding
throughout the periods shown and other supplementary data are set forth below.
The data has been audited by the Investment Company's independent auditor,
Arthur Andersen LLP. The financial statements of the Investment Company, along
with the report of Arthur Andersen thereon, as of and for the period ended
December 31, 1997 are set forth in the Investment Company's Statement of
Additional Information, dated May 1, 1998. Further information about the
performance of the Funds, including management's discussion of performance, is
contained in the Investment Company's annual report to shareholders, which may
be obtained without charge by request to the Investment Company.
<TABLE>
<CAPTION>
ALL AMERICA FUND BOND FUND MONEY MARKET FUND
------------------------- ------------------------- -----------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996(e) 1997 1996(e) 1997(f)
------------ ------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.98 $10.00 $10.13 $10.01 $10.00
Income From Investment
Operations
Net Investment Income. .08 .06 .59 .38 .35
Net Gains or Losses on
Securities (realized
and unrealized)...... 2.77 .98 .29 .12 --
------ ------ ------ ------ ------
Total From
Investment
Operations......... 2.85 1.04 .88 .50 .35
------ ------ ------ ------ ------
Less Dividend
Distributions
From net investment
income............... (.08) (.06) (.59) (.38) (.20)
From capital gains.... (1.10) -- (.01) -- --
------ ------ ------ ------ ------
Total Distributions. (1.18) (.06) (.60) (.38) (.20)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $12.65 $10.98 $10.41 $10.13 $10.15
====== ====== ====== ====== ======
Total Return(a)......... 26.0% 10.4% 8.9% 5.0% 3.5%
Net Assets, End of
Period (millions)...... $ 56.7 $ 55.5 $ 22.1 $ 21.0 $ 7.5
Ratio of Net Investment
Income to Average Net
Assets(b).............. .59% .95% 5.69% 5.63% 5.17%
Ratio of Expenses to
Average Net Assets(b).. .84% .87% 1.00% .90% 2.47%
Ratio of Expenses to
Average Net Assets
After Expense
Reimbursement(b)....... .81% .85% .70% .70% .40%
Portfolio Turnover
Rate(b)(c)............. 35.96% 9.33% 56.18% 17.85% N/A
Average Commission Rate
Paid(d)................ $.0321 $.0483 N/A N/A N/A
</TABLE>
- -------
(a) Not annualized. Total return would have been lower had certain expenses
not been reimbursed by the Adviser.
(b) Annualized.
(c) Portfolio turnover rate excludes all short-term securities.
(d) Average commission rate paid per share of common and preferred stock.
(e) Commenced operations May 1, 1996.
(f) Commenced operations May 1, 1997.
N/A = Not applicable
3
<PAGE>
PERFORMANCE OF FUNDS AND SIMILAR FUNDS
The investment policies, objectives and strategies of the All America Fund,
the Bond Fund and the Money Market Fund of the Investment Company, described
herein, are substantially identical to those of the All America Fund, the Bond
Fund and the Money Market Fund (herein called the "VP" or "Variable Products"
Funds) of the Mutual of America Investment Corporation. In addition, the
Adviser and Subadvisers for the Variable Products All America, Bond and Money
Market Funds are the same as for the Investment Company's All America, Bond
and Money Market Funds, and the portfolio managers are the same. See
"Investment Advisory, Subadvisory and Administrative Arrangements" in this
Prospectus. Shares of the Mutual of America Investment Corporation's funds are
sold only to separate accounts of Mutual of America Life Insurance Company
("Mutual of America") and its indirect wholly owned subsidiary, The American
Life Insurance Company of New York, as a funding medium for variable
accumulation annuity contracts and variable life insurance policies issued by
such companies. The VP All America, VP Bond and VP Money Market Funds are the
respective successors, pursuant to a reorganization effected on October 31,
1986, of Mutual of America's Separate Account No. 2 Stock, Bond and Money
Market Funds, which commenced operations in January 1985.
Below are average annual total returns for the Funds of the Investment Company
and the VP Funds for the periods indicated. Information about the VP Funds has
been provided by the Adviser. Past performance of the Funds and the Variable
Products Funds is not predictive of future performance. Investors should not
consider performance data for the VP Funds as an indication of the future
performance of the All America, Bond and Money Market Funds offered under this
Prospectus.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
FUND ONE YEAR SINCE MAY 1, 1996*
---- -------- ------------------
<S> <C> <C>
All America.................................... 26.0% 21.9%
Bond........................................... 8.9% 8.4%
</TABLE>
- -------
* Inception.
AVERAGE ANNUAL TOTAL RETURNS OF SIMILAR FUNDS FOR PERIODS ENDED DECEMBER 31,
1997
<TABLE>
<CAPTION>
FUND ONE YEAR FIVE YEARS TEN YEARS SINCE MAY 1, 1996(1)
---- -------- ---------- --------- --------------------
<S> <C> <C> <C> <C>
VP All America........ 26.8% N/A(2) N/A(2) 23.0%
VP Bond............... 10.4% 8.4% 9.1%(3) 9.8%
</TABLE>
- -------
(1) For comparison, average annual total return for the VP All America Fund
and VP Bond Fund are given from this date.
(2) The VP All America Fund began operations in its current form on May 2,
1994, from which date its investment policies, objectives and strategies
have been substantially identical to those of the All America Fund. VP All
America Fund's average annual total return for the period May 2, 1994
through December 31, 1997 was 23.4%.
(3) The current portfolio manager of the VP Bond Fund, who has been the
portfolio manager of the Bond Fund since inception, became the VP Bond
Fund's portfolio manager in February 1991.
MONEY MARKET TOTAL RETURN AND YIELD INFORMATION
For the Money Market Fund, total return was 3.5% for the period May 1, 1997
(commencement of operations) through December 31, 1997. Set forth below is the
current yield information for the Money Market Fund for the seven-day period
ended December 31, 1997, computed to include and exclude realized and
unrealized gains and losses. Yields may fluctuate from the amounts shown.
<TABLE>
<S> <C>
Annualized Yield:
Including gains and losses..................................... 5.6%
Excluding gains and losses..................................... 5.6%
Average maturity of portfolio at end of period................... 18.4 Days
</TABLE>
For the VP Money Market Fund, total return was 5.5% for 1997 and current yield
(annualized) for the seven-day period ended December 31, 1997 was 5.6%.
Results for the VP All America Fund, VP Bond Fund and VP Money Market Fund are
different than the results that were or would have been obtained for the All
America Fund, Bond Fund and Money Market Fund of the Investment Company. The
total operating expenses for each of the VP All America Fund and VP Bond Fund
were .50% of average net assets during the periods shown above and for the VP
Money Market Fund were .25% of average net assets (additional expenses were
paid at the separate account level), while the annual total operating expenses
of the All America Fund, Bond Fund and Money Market Fund of the Investment
Company are estimated as .85%, .70% and .40%, respectively, of average net
assets. The VP All America Fund, from May 1994 until June 1995, had a
Subadviser for approximately 10% of the Fund's assets currently managed by the
Adviser. In addition, the assets of the VP All America Fund, VP Bond Fund and
VP Money Market Fund at year end 1997 were $700 million, $414 million and
$67.5 million, respectively.
4
<PAGE>
GENERAL DESCRIPTION OF THE INVESTMENT COMPANY
The Investment Company was formed as a Maryland corporation on October 27,
1994. It is a diversified, open-end management investment company as those
terms are defined in the Investment Company Act of 1940 (the "1940 Act"). Its
investment adviser is Mutual of America Capital Management Corporation (the
"Adviser"). Shares of the Funds are offered on a no-load basis.
As a "series" type of mutual fund, the Investment Company issues separate
classes (or series) of stock, each representing a separate portfolio of
securities ("Fund"). Currently, the Investment Company consists of the All
America Fund, the Bond Fund and the Money Market Fund. Additional Funds may be
established in the future. The Investment Company does not issue certificates
for shares of Funds purchased.
The Investment Company is designed primarily as an investment vehicle for
endowments, foundations, corporations, municipalities or other public entities
and other institutional investors. Currently, the Investment Company requires
a minimum initial investment of $25,000, except that this requirement may be
waived by the Investment Company in its discretion for certain institutional
investors. The minimum amount for additional purchases of Fund shares
currently is $5,000.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
INVESTMENT OBJECTIVES
Each Fund of the Investment Company has a different investment objective which
it pursues through separate investment policies. The investment objectives of
each Fund may not be changed without the approval of the holders of a majority
of the outstanding shares of each Fund affected. There can be no assurance
that a Fund will meet its objectives. The investment objectives and policies
of each Fund are discussed below. Particular types of securities in which the
Funds may invest and any applicable percentage limitations for such securities
are discussed below under "Other Portfolio Strategies and Associated Risk
Factors."
The differences in objectives and policies among the Funds can be expected to
affect the return of each Fund and the degree of market and financial risk to
which each Fund is subject. As used in the following discussion, "market risk"
refers to the volatility of the reaction of the price of a security to changes
in conditions in the securities markets in general and, with particular
reference to debt securities, changes in the overall level of interest rates
(prices decline when interest rates rise); "financial risk" refers to the
ability of an issuer of a debt security to pay principal and interest on that
security and to the earning stability and overall financial soundness of an
issuer of an equity security; and "current income volatility" refers to the
degree and rapidity with which changes in the overall level of interest rates
become reflected in the level of current income of a Fund.
ALL AMERICA FUND
The investment objective of the All America Fund is to outperform the Standard
& Poor's Composite Index of 500 Stocks (the "S&P 500 Index") by providing a
diversified portfolio of assets with diversified management and a broad
exposure to the market. At least 65% of the All America Fund's total assets
will be invested in equity securities under normal market conditions, and the
issuers of at least 80% of the Fund's total assets will be United States
corporations or entities.
INDEXED ASSETS. The investment objective for approximately 60% of the assets
of the All America Fund (the "Indexed Assets") is to provide investment
results that to the extent practical correspond to the price and yield
performance of publicly traded common stocks in the aggregate, as represented
by the S&P 500 Index.
The Adviser will attempt to duplicate the investment results of the S&P 500
Index, which is composed of 500 selected common stocks, most of which are
listed on the New York Stock Exchange. Standard & Poor's Corporation chooses
the stocks to be included in the S&P 500 Index solely on a statistical basis.
The inclusion of a stock in the S&P 500 Index does not imply an opinion by
Standard & Poor's Corporation that the stock is an attractive investment. An
investment in the Fund involves risks similar to those of investing in common
stocks. The Adviser will attempt to fully invest the Indexed Assets at all
times in the stocks that comprise the S&P 500 Index, and at least 80% of the
Indexed Assets will be so invested. The weightings of stocks in the S&P 500
Index are based on each stock's relative total market capitalization; that is,
its market price per share times the number of shares outstanding. Stocks will
be selected for the Fund's portfolio in the order of their weightings in the
S&P 500 Index beginning with the heaviest weighted stocks. The percentage of
the Fund's assets invested in each of the selected stocks will be
approximately the same as the percentage the stock represents in the S&P 500
Index.
5
<PAGE>
The Adviser will manage the Indexed Assets using a computer program to
determine which stocks are to be purchased or sold to replicate the S&P 500
Index to the extent feasible. Initially the Fund contemplates executing all
transactions through a single broker. From time to time, administrative
adjustments may be made in the Fund's portfolio because of changes in the
composition of the S&P 500 Index, but such changes should be infrequent.
The Adviser believes that the indexing approach described above is an
effective method of substantially duplicating percentage changes in the S&P
500 Index. It is a reasonable expectation that there will be a close
correlation between the Indexed Assets' performance and that of the S&P 500
Index in both rising and falling markets. The Adviser will attempt to achieve
a correlation between the performance of the Indexed Assets and that of the
S&P 500 Index of at least 0.95, without taking into account expenses. A
correlation of 1.00 would indicate perfect correlation, which would be
achieved when the Indexed Assets' net asset value, including the value of its
dividend and capital gains distributions, increases or decreases in exact
proportion to changes in the S&P 500 Index. The Fund will invest in stock
index futures contracts, options on stock indexes, options on stock index
future contracts, puts and calls to the extent necessary to attempt to achieve
this correlation. The Adviser's ability to correlate the Indexed Assets'
performance with the S&P 500 Index, however, may be affected by, among other
things, changes in securities markets, the manner in which the S&P 500 Index
is calculated by Standard & Poor's Corporation and the timing of purchases and
redemptions. In the future, the Board of Directors, subject to the approval of
shareholders, may select another index if such a standard of comparison is
deemed to be more representative of the performance of common stocks in
general.
The Adviser's ability to duplicate the performance of the S&P 500 Index also
depends to some extent on the size of the Fund's portfolio and the size of
cash flows into and out of the Fund. Investment changes to accommodate these
cash flows are made to maintain the similarity of the Fund's portfolio to the
S&P 500 Index to the maximum practicable extent. Mutual of America Life
Insurance Company, the indirect parent corporation of the Adviser, invested
$50 million in the All America Fund in connection with the commencement of the
Fund's operations and will endeavor, itself or through an affiliate, to
maintain a minimum asset balance in the Fund (including its investments and
the investments of other shareholders) which is at least $25 million at any
time, but does not guarantee to do so. As shareholders invest in the Fund,
over time Mutual of America Life reserves the right to reduce its investment
in the Fund consistent with the above Fund target minimum balance.
ACTIVE ASSETS. The investment objective for the remaining approximately 40% of
the assets (the "Active Assets") is to achieve a high level of total return,
through both appreciation of capital and, to a lesser extent, current income,
by means of a diversified portfolio of securities that may include common
stocks, securities convertible into common stocks, bonds and money market
instruments. The Active Assets will be invested by the Adviser and three
subadvisers (each a "Subadviser", and together the "Subadvisers"), under a
subadvisory agreement (each a "Subadvisory Agreement") between the Adviser and
each of the Subadvisers. The Adviser will allocate the Active Assets to
maintain, to the extent practicable under current market conditions,
approximately equal amounts with the Subadvisers and the Adviser. The
Subadvisers are Fred Alger Management, Inc. ("Alger Management"), Oak
Associates, Ltd. ("Oak Associates"), and Palley-Needelman Asset Management,
Inc. ("Palley-Needelman"). See "Investment Advisory Arrangements--The
Subadvisers".
The Subadvisers and the Adviser each follow a different approach for the
investment of the Active Assets. Palley-Needelman invests its portion of
Active Assets in stocks that Palley-Needelman considers to be of high quality
with lower than average price volatility and low price/earning ratios.
Companies generally will have below market debt levels, earnings growth of 10%
or more, current yield greater than the average of the S&P 500, and market
capitalization of $1 billion or more. Oak Associates invests in mid- and
large- sized capitalization stocks that have low current income and the
potential for significant growth. Oak Associates monitors 400 stocks and at
any one time invests its portion of the Fund in approximately 15-25 common
stocks without regard for market industry weighting. Alger Management invests
in stocks that it considers to be fundamentally sound with the potential for
strong growth and for earnings in excess of market expectations. The
securities of these companies often are traded in the over-the-counter market.
Except during temporary defensive periods, the Alger Management portion of the
Fund invests at least 65% of its assets in equity securities of companies
that, at the time of the Fund's purchase of the securities, have total market
capitalization within the range of capitalization of the companies included in
the Russell 2000 Growth Index or the S&P SmallCap 600 Index, updated
quarterly. The Adviser generally invests in stocks that it considers
undervalued. Its approach is to identify companies with strong financials,
substantial cash flow, conservative accounting, usually low debt-to-equity
ratios and average market capitalization generally below $1 billion. Some of
the companies whose stocks are purchased by Oak Associates, or by the Adviser
for its portion of the Active Assets, may have limited Wall Street coverage
and low institutional ownership.
Each of the Subadvisers and the Adviser will seek to achieve the investment
objective of the Active Assets by investing in such securities that, based on
certain fundamental and/or technical standards of selection, it determines
offer attractive opportunities for total return through capital appreciation
and, to a lesser degree, income. Assets in the All America Fund
6
<PAGE>
will be rebalanced periodically to retain the approximate 60%/40% relationship
between Indexed Assets and Active Assets. The Adviser may manage cash
allocated to the Active Assets prior to investment in securities by the
Subadvisers.
The Active Assets of the All America Fund may be invested from time to time in
foreign equity securities. A portion of the All America Fund's assets may be
invested in money market instruments, pending more permanent investment or to
effectively utilize cash reserves. (See "Money Market Fund" below for a
discussion of money market instruments.) If, in light of economic conditions
and/or the general level of common stock prices, the Adviser or a Subadviser
considers that the All America Fund's investment objectives will not be met by
using most of its portion of the Active Assets to buy equities or their
equivalents, assets may be invested for temporary defensive purposes in high-
grade debt securities or maintained in cash. The All America Fund will not
invest in debt securities rated below investment grade. Securities which are
subsequently downgraded may continue to be held and will be sold only if, in
the judgment of the Adviser or a Subadviser, it is advantageous to do so.
The All America Fund also may enter into transactions in options on securities
and options, futures contracts and options on futures contracts on indexes of
securities, and engage in the buying and selling of options (both puts and
calls): (1) on individual securities, (2) on groups of securities and (3) on
futures of groups of securities. Any option or future purchased or sold by the
Fund will be listed on a domestic exchange.
Because the All America Fund invests primarily in common stocks or in futures
contracts with respect thereto, the Fund is expected to be subject to
moderately high levels of market risk and moderate levels of financial risk.
BOND FUND
The primary investment objective of the Bond Fund is to provide a high level
of current income. A secondary objective is preservation of shareholders'
capital. The Bond Fund seeks to realize these objectives through careful
selection and, when appropriate, active trading of bonds and other
investments. The Adviser's emphasis generally is on income generation rather
than market timing. The assets of the Bond Fund will consist primarily of
publicly traded bonds. "Bonds" for this purpose means bonds and other types of
debt securities, such as notes and debentures, and may include mortgage-backed
securities and asset-backed securities, subject to the limitations set forth
below under "Other Portfolio Strategies and Associated Risk Factors". Debt
securities may carry certain equity features, such as conversion or exchange
rights, or warrants for the acquisition of stocks of the same or different
issuers, or participations based on revenues, sales or profits. Average
maturities of securities held by the Bond Fund will vary according to market
conditions and the stage of the interest rate cycle. Under normal market
conditions, at least 65% of the Bond Fund's total assets will be invested in
debt securities.
It is contemplated that at least 80% of the Bond Fund's assets will consist of
(1) domestic debt securities that have at the time of purchase a rating of at
least Baa3 as determined by Moody's Investors Services, Inc. or BBB- as
determined by Standard & Poor's Corporation or equivalent ratings of a similar
nationally recognized rating service, which are investment grade securities;
(2) securities issued or guaranteed by the United States Government or its
agencies or instrumentalities; (3) cash; and (4) the types of money market
instruments in which the Money Market Fund may invest. These instruments
should be subject to little financial risk, to moderately high levels of
market risk and to moderate current income volatility. Instruments rated in
the lowest category of investment grade debt (BBB or Baa) may have speculative
characteristics, and adverse changes in economic conditions or other adverse
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than would be the case with higher rated investment
grade instruments. (A description of corporate bond ratings is set forth in
the Investment Company's Statement of Additional Information.)
The remaining assets of the Bond Fund may be invested in (1) other debt
securities that are unrated or rated lower than Baa3 or BBB-, which are
sometimes referred to as high yield/high risk securities or "junk bonds", (2)
Canadian and other foreign debt securities, and (3) debt securities issued in
foreign markets by domestic issuers or their overseas subsidiaries if
guaranteed by the parent.
The market value of fixed-income debt securities is affected by changes in
general market interest rates. If interest rates fall, the market value of
fixed-income securities tends to rise; however, if interest rates rise, the
market value of fixed-income securities tends to fall. In recent years the
volatility of the market for debt securities has increased significantly, and
the market value of longer-term obligations has been subject to wide
fluctuations, particularly as contrasted with short-term instruments. The Bond
Fund may sell securities and realize gain or income to the extent such
realizations are considered advantageous in light of existing market
conditions.
It is not currently contemplated that more than 5% of the Bond Fund's total
assets will consist of unrated securities or securities rated lower than Baa3
or BBB- ("junk bonds"). These securities may be subject to greater market and
financial risk than higher quality (lower yield) securities. Since lower rated
and unrated securities are generally issued by corporations that are not as
creditworthy or financially secure as issuers of higher rated securities,
there is a greater risk that issuers of
7
<PAGE>
lower rated (higher yield) securities will not be able to pay the principal
and interest due on such securities, especially during periods of adverse
economic conditions. Risk factors related to investments in lower rated and
unrated securities are more fully described in the Statement of Additional
Information.
The Bond Fund will not directly purchase common stocks. However, the Bond Fund
may have up to 10% of the value of its total assets invested in stocks
acquired either by conversion of fixed-income securities or by the exercise of
warrants attached thereto. In addition, the Bond Fund may purchase preferred
stocks, limited to 5% of the Bond Fund's total assets.
The Bond Fund may enter into transactions in options, futures contracts and
options on futures contracts on United States Treasury securities and
Government National Mortgage Association ("Ginnie Mae") Securities. To be
included in the Bond Fund, options and futures must be traded on a domestic
exchange.
MONEY MARKET FUND
The investment objective of the Money Market Fund is the realization of high
current income to the extent consistent with the maintenance of liquidity,
investment quality and stability of capital. The Fund will invest only in
money market instruments and other short-term debt securities.
Specifically, the Money Market Fund will invest only in the following kinds of
money market instruments, payable in United States dollars: (1) securities
issued or guaranteed by the United States Government or one of its agencies or
instrumentalities ("government securities"); (2) negotiable certificates of
deposit, bank time deposits, bankers' acceptances and other short-term debt
obligations of domestic banks and foreign branches of domestic banks and U.S.
branches of foreign banks (see "Other Portfolio Strategies and Associated Risk
Factors--Foreign Securities and ADRs"), which at the time of their most recent
annual financial statements show assets in excess of $5 billion; (3)
certificates of deposit, time deposits and other short-term debt obligations
of domestic savings and loan associations, which at the time of their most
recent annual financial statements show assets in excess of $5 billion; (4)
repurchase agreements covering government securities, certificates of deposit,
commercial paper or bankers' acceptances; (5) commercial paper; (6) variable
amount floating rate notes; and (7) debt securities issued by a corporation.
These instruments are more fully described in the Statement of Additional
Information.
The Money Market Fund may also enter into transactions in options, futures
contracts and options on futures, contracts on United States Treasury
securities and Eurodollar deposits. Such transactions and instruments are more
fully described below and in the Statement of Additional Information.
The Money Market Fund declares dividends of net investment income on a semi-
annual basis (see "Dividends, Distributions and Taxes"). Its net asset value
per share will reflect income that has been earned but not yet paid as a
dividend, until the income is distributed on the next dividend payment date.
Accordingly, the Fund does not maintain a stable net asset value per share.
For purposes of the Money Market Fund's investment policy only, "money market
instruments and other short-term debt securities" shall mean securities having
a remaining maturity of up to 13 months. The dollar-weighted average maturity
of the securities held by the Money Market Fund will not exceed 90 days.
All of the securities held by the Money Market Fund will have received (or be
of comparable quality to securities which have received), at the time of the
purchase, a rating in one of the two highest categories by any two nationally
recognized statistical rating agencies and at least 95% of the securities held
by the Money Market Fund will have received (or be of comparable quality to
securities which have received), at the time of purchase, the highest rating
by any two such rating agencies. (The Board of Directors of the Investment
Company must approve or ratify the purchase of any security (other than any
government security) which has received no rating or which has been rated by
only one rating agency.) Securities which are subsequently downgraded below
the two highest categories will be disposed of as soon as practicable absent a
finding by the Board of Directors that this would not be in the best interests
of the Fund.
The Money Market Fund will not invest more than 5% of its total assets in
securities of, or subject such assets to puts from, any one issuer (other than
government securities and repurchase agreements fully collateralized by
government securities) provided that (x) the Fund may invest up to 10% of its
total assets in securities issued or guaranteed by a single issuer with
respect to which the Fund has an unconditional put and (y) with respect to 25%
of its total assets the Fund may, with respect to securities meeting the
highest investment criteria, exceed the 5% limit for up to three business
days.
The Money Market Fund should be subject to relatively little market or
financial risk but a relatively high level of current income volatility.
8
<PAGE>
INVESTMENT RESTRICTIONS
The Investment Company has adopted a number of restrictions and policies
relating to the investment of its assets and its activities which are
fundamental policies and may not be changed without the approval of the
holders of the Investment Company's outstanding voting securities (including a
majority of the shares of each Fund). No Fund will: (1) with respect to at
least 75% of the value of its total assets, invest more than 5% of its total
assets in the securities of any one issuer (including repurchase agreements
with any one institution), other than securities issued or guaranteed by the
United States Government or its agencies or instrumentalities; (2) with
respect to at least 75% of the value of its total assets, purchase more than
5% of the outstanding voting securities of an issuer, except that such
restriction shall not apply to securities issued or guaranteed by the United
States Government or its agencies or instrumentalities; (3) make an investment
in an industry if that investment would make the Fund's holding in that
industry exceed 25% of the Fund's total assets (other than investments by the
Money Market Fund in obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities); or (4) invest more than 10% of
its total assets in repurchase agreements or time deposits maturing in more
than seven days or in portfolio securities not readily marketable. An investor
should refer to the Statement of Additional Information for a complete
description of such restrictions and policies.
OTHER PORTFOLIO STRATEGIES AND ASSOCIATED RISK FACTORS
Lending of Securities
A Fund may lend its securities, but not in excess of 30% of its total assets,
to brokers, dealers and financial institutions and receive as collateral cash,
securities issued or guaranteed by the United States Government or its
agencies or instrumentalities, or letters of credit of certain banks selected
by the Adviser, which at all times while the loan is outstanding will be
maintained in amounts equal to at least 100% of the current market value of
the loaned securities. The Fund will continue to receive interest or dividends
on the securities lent, and in addition will receive a portion of the income
generated by the short-term investment of cash received as collateral, or,
alternatively, where securities or a letter of credit are used as collateral,
a lending fee paid directly to the Fund by the borrower of the securities.
Such loans will be terminable by the Fund at any time and will not be made to
affiliates of the Fund. The Fund will have the right to regain record
ownership of loaned securities in order to exercise beneficial rights, such as
voting rights or subscription rights. The Fund may pay reasonable fees to
persons unaffiliated with the Fund for services or for arranging such loans.
Loans of securities will be made only to firms that the Adviser deems
creditworthy. As with an extension of credit, however, there are risks of
delay in recovery and even loss of rights in the collateral, should the
borrower of securities default, become the subject of bankruptcy proceedings
or otherwise be unable to fulfill its obligations or fail financially.
Borrowing
A Fund may borrow money from banks for temporary purposes, such as meeting
redemption requests, and may pledge assets to secure such borrowings. The
aggregate amount borrowed by a Fund may not exceed 5% of its total assets.
Repurchase Agreements
Repurchase Agreements are more fully described in the Statement of Additional
Information. If a seller of a repurchase agreement defaults and does not
repurchase the security subject to the agreement, the Fund would look to the
collateral security underlying the seller's repurchase agreement, including
the securities subject to the repurchase agreement, for satisfaction of the
seller's obligation to the Fund; in such event the Fund might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines. In addition, there is a risk that, if the
issuer of the repurchase agreement becomes involved in bankruptcy proceedings,
the Fund might be delayed or prevented from liquidating the underlying
security or otherwise obtaining it for its own purposes.
Foreign Securities and ADRs
In addition to investing in domestic securities, each Fund may invest in
securities of foreign issuers, including such securities traded outside the
United States. No Fund, however, will trade in foreign exchange or invest in
securities of foreign issuers if, at the time of acquisition, more than 15% of
its total assets taken at market value at the time of investment would be
invested in foreign securities.
Because investments in foreign securities, particularly those of non-
governmental issuers, involve considerations which are not ordinarily
associated with investing in domestic issuers, the Investment Company will
consider these special factors before investing in foreign securities. These
considerations include changes in currency rates, currency exchange control
regulations, the possibility of expropriation, the unavailability of financial
information or the difficulty of interpreting financial information prepared
under foreign accounting standards, less liquidity and more volatility in
foreign securities
9
<PAGE>
markets, the impact of political, social or diplomatic developments and the
difficulty of assessing economic trends in foreign countries. If it should
become necessary, the Funds could encounter greater difficulties involving
legal processes abroad than would be encountered in the United States. In
addition, transaction costs in foreign securities may be higher. The
Investment Company will not invest in foreign securities unless, in its
opinion, such investments will meet the standard and objectives of a
particular Fund. No Fund may concentrate its investments in any particular
foreign country except Canada. Foreign issues guaranteed by domestic
corporations are considered to be domestic securities.
ADRs are dollar-denominated receipts issued generally by domestic banks and
representing the deposit with the bank of a security of a foreign issuer. ADRs
are publicly traded on exchanges or over-the-counter in the United States.
ADRs are not subject to the percentage limitations contained in the preceding
paragraph. No Fund will purchase ADRs if the transaction would cause more than
20% of the Fund's total assets to be invested in ADRs.
Convertible Securities
The All America Fund may invest in convertible securities, which normally
provide a higher yield than the underlying stock but a lower yield than a
fixed-income security without the convertibility feature. The price of the
convertible security normally will vary to some degree with changes in the
price of the underlying stock, although the higher yield tends to make the
convertible security less volatile than the underlying common stock. The price
of the convertible security also will vary to some degree inversely with
interest rates.
Rule 144A Investments, Section 4(2) Commercial Paper and Illiquid Securities
Each Fund, with respect to not more than 10% of its total assets, may purchase
securities which are not readily marketable, or "illiquid", including
repurchase agreements of more than seven days' duration and variable and
floating rate demand notes not requiring receipt of the principal note amount
within seven days' notice. A Fund may incur higher transaction costs and
require more time to complete transactions for the purchase and sale of
illiquid securities than for readily marketable securities.
The Adviser will make a factual determination as to whether securities with
contractual or legal restrictions on resale purchased by a Fund are liquid,
based on the frequency of trades and quotes, the number of dealers and
potential purchasers, dealer undertakings to make a market, and the nature of
the security and the marketplace, pursuant to procedures adopted and regularly
reviewed by the Board of Directors of the Investment Company. Securities which
are eligible for purchase and sale under Rule 144A of the Securities Act of
1933 (the "1933 Act") shall be considered liquid, provided the Adviser has not
made a contrary determination regarding liquidity in accordance with the
Board's procedures. Rule 144A permits certain qualified institutional buyers
to trade in securities even though the securities are not registered under the
1933 Act. In addition, commercial paper privately placed in accordance with
Section 4(2) of the 1933 Act also will be considered liquid, provided the
requirements set forth in the Board's procedures are satisfied.
Zero Coupon Securities and Discount Notes; Redeemable Securities
The Bond Fund may invest in discount notes (having maturities of one year or
less) and zero coupon securities, some of which may be U.S. Government agency
securities. Discount notes and zero coupon securities do not pay interest, but
rather are issued at prices discounted from the principal (par) amount due at
maturity. The difference between the issue price and the principal amount due
at maturity (or the amount due at the expected redemption date in some cases
if the securities are callable) is called "original issue discount". A Fund
must accrue original issue discount as income, even if the Fund does not
actually receive any payment under the security during the accrual period. The
purchase price paid for zero coupon securities at the time of issuance, or
upon any subsequent resale, reflects a yield-to-maturity required by the
purchaser from the purchase date to the maturity date (or expected redemption
date).
Zero coupon securities and discount notes may fluctuate more in market value
and be more difficult for a Fund to resell during periods of interest rate
changes in the economy than comparable securities that pay interest in cash at
regular intervals. The market values of outstanding debt securities generally
decline when interest rates are rising, and during such periods a Fund may
lose more investment capital if it sells zero coupon securities prior to their
maturity date or expected redemption date than if it sells comparable
interest-bearing securities. In general, the longer the remaining term to
maturity or expected redemption of a security, the greater the impact on
market value from rising interest rates.
An issuer of debt securities, including zero coupon securities, often has the
right after a period of time to redeem (call) securities prior to their stated
maturity date, either at a specific date or from time to time. When interest
rates rise, an issuer of debt securities generally is less likely to redeem
securities that were issued at a lower interest rate, or for a lower amount of
original issue discount in the case of zero coupon securities. In such
instance, the period until redemption or maturity of
10
<PAGE>
the security may be longer than the purchaser initially anticipated, and the
market value of the debt security may decline. If an issuer redeems a security
when prevailing interest rates are relatively low, a Fund may be unable to
reinvest proceeds in comparable securities with similar yields.
Derivative Securities
Each Fund may invest in certain securities referred to as "derivatives",
although there is no clear definition of which instruments constitute
derivatives. In general, derivatives are instruments whose values are based
upon, or derived from, some underlying security or other asset, index or
currency. For example, mortgage and other asset backed securities, options and
futures contracts, and equipment trust certificates may be considered to be
derivatives. The Funds do not invest in derivatives for speculative purposes.
Each Fund may purchase derivatives that are debt securities to the extent
consistent with its investment objectives and policies and may purchase
options and futures contracts and options on futures contracts for hedging
purposes, subject to the limitations set forth below.
Mortgage-Backed and Other Asset-Backed Securities
The Funds may invest in mortgage-backed securities, some of which are also
considered to be U.S. Government securities. Some of these securities, such as
pass-through certificates and participation certificates, represent interests
in pools of mortgage loans and provide holders with payments consisting of
both interest and principal as the mortgages in the underlying mortgage pools
are paid off. Collateralized mortgage obligations ("CMOs") are mortgage-backed
bonds secured by the cash flow of pools of mortgages, with the principal and
interest payments on the underlying mortgages separated into different payment
streams for different classes of bonds.
Mortgage-backed securities include securities guaranteed by the Government
National Mortgage Association ("Ginnie Maes"), securities issued by the
Federal National Mortgage Association ("Fannie Maes"), participation
certificates issued by the Federal Home Loan Mortgage Corporation ("Freddie
Macs") and CMOs issued by a Government instrumentality or agency. The timely
payment of principal and interest is backed by the full faith and credit of
the U.S. Government for Ginnie Maes but not for Fannie Maes, Freddie Macs or
CMOs. The Funds also may invest in mortgage-backed securities of private
corporations or other private issuers.
Unscheduled or early payments on the mortgages underlying a mortgage-backed
security may shorten the effective maturities and impact the yield and price
of the security. A decline in interest rates may lead to increased prepayment
of the underlying mortgages, and a Fund holding mortgage-backed securities may
have to reinvest proceeds received at lower rates of return. An increase in
interest rates usually will cause the price of existing mortgage-backed
securities issues to decline. Characteristics of underlying mortgage pools
will vary, and it is not possible to predict completely accurately the
realized yield or average life of a particular mortgage-backed security
because of the principal prepayment feature.
The Funds also may invest in securities backed by consumer or credit card
loans or other receivables or purchase interests in pools of such assets.
Changes in interest rates may significantly affect the value of these
securities, and prepayment rates will impact the yield and price of the
securities. A decline in interest rates may result in increases in prepayment,
although asset-backed securities generally are not expected to prepay to the
same extent as mortgage-backed securities in such circumstances. The
creditworthiness of an issuer of asset-backed securities also may impact the
value of such securities. Because of these factors, it is not possible to
predict completely accurately the realized yield or average life of a
particular asset-backed security.
No Fund will invest more than 10% of its total assets in mortgage-backed
securities that are not U.S. Government or agency securities, and no Fund will
invest more than 10% of its total assets in other asset-backed securities. In
addition, no Fund will invest in interest-only strips or principal-only strips
("IOs" or "POs") of mortgage or other asset backed issues and will not
purchase the final or most speculative tranche of CMO or other asset-backed
securities issues.
Equipment Trust Certificates
The Bond Fund may invest in equipment trust certificates. The proceeds of
these certificates are used to purchase equipment, such as railroad cars,
airplanes or other equipment, which in turn serve as collateral for the
related issue of certificates. The equipment subject to a trust generally is
leased by a railroad, airline or other business, and rental payments provide
the projected cash flow for the repayment of the equipment trust certificates.
Holders of equipment trust certificates must look to the collateral securing
the certificates, and any guarantee provided by the lessee or any parent
corporation for the payment of lease amounts, in the case of default in the
payment of principal and interest on the certificates. No Fund will invest
more than 5% of its total assets in equipment trust certificates.
Options and Futures
As noted, the Funds may enter into transactions in options, futures contracts
and options on futures contracts. Such transactions will be used for hedging
purposes only and not for speculation, and could include (1) the selling of
call option
11
<PAGE>
contracts on portfolio securities (covered calls), and the buying of call
option contracts on such securities to close out a position acquired through
the sale of such options; (2) the buying of put option contracts on securities
owned by a Fund, and the selling of put option contracts on securities owned
by a Fund to close out a position acquired through the purchase of such
options; (3) purchases and sales of futures contracts, and purchases of
options on futures contracts, on fixed-income securities; and (4) purchases
and sales of options on futures contracts, and purchases of options on futures
contracts, on indexes of securities. If a hedging transaction in any such
instrument is successful, a Fund's losses on portfolio securities, or the
increased cost of securities to be acquired, should be offset, in whole or
part, by corresponding gains on the hedging position. The Funds will only
enter into transactions in options, futures and options on futures which are
traded on securities or commodities exchanges located in the United States.
No Fund will purchase a put or call option, including straddles or spreads, if
the value of its premium, when aggregated with the premiums on all other
options held by the Fund, would exceed 5% of the Fund's total assets. No Fund
will enter into futures contracts or purchase or write related options if the
sum of the aggregate initial margin deposits on futures contracts and premiums
paid for related options exceeds 5% of the market value of the Fund's total
assets, calculated in accordance with Commodity Futures Trading Commission
regulations.
A risk in all options, futures and options on futures transactions is a
possible lack of liquidity, which could make it difficult or impossible to
close out existing positions and realize gains or limit losses. The liquidity
of a secondary market in futures contracts or options on futures contracts may
be adversely affected by "daily price fluctuation limits" established by the
exchanges on which such instruments are traded, which limit the amount of
fluctuation in the price of a contract during a single trading day. Once the
limit in a particular contract has been reached, no further trading in such
contract may occur beyond such limit, thus preventing the liquidation of
positions, and requiring traders to make additional variation margin payments.
Market liquidity in options, futures contracts or options on futures contracts
also may be adversely affected by trading halts, suspensions, exchange or
clearing house equipment failures, government intervention, insolvency of a
brokerage firm or clearing house or other disruptions of normal trading
activity.
The Funds also are subject to the risk of imperfect correlation between
securities held in their portfolios and the security or securities underlying
options, futures contracts or options on futures contracts traded. In the case
of options, futures contracts or options on futures contracts based on an
index of securities, a Fund's portfolio will not duplicate the composition of
the index and, in the case of options, futures contracts and options on
futures contracts on fixed-income securities, the portfolio securities being
hedged may not be the same as the securities underlying such instruments.
Consequently, the Funds bear the risk that the price of the portfolio
securities being hedged will not move in the same amount or direction as the
underlying index or obligation.
A Fund may sell futures contracts on fixed-income securities in anticipation
of a rise in interest rates, which would cause a decline in the value of
fixed-income securities held in the Fund's portfolio. Similarly, a Fund may
sell stock index futures contracts in anticipation of a general market wide
decline which would reduce the value of its portfolio of stocks. In either
case, if the expected decrease in the value of portfolio securities occurs,
the reduction in net asset value may be offset, in whole or in part, by
corresponding gains on the futures position. Conversely, where a Fund projects
an increase in the cost of fixed-income securities or stocks to be acquired in
the future, the Fund may purchase futures contracts on fixed-income securities
or stock indexes. If the hedging transaction is successful, the increased cost
of securities subsequently acquired should be offset, in whole or in part, by
gains on the futures position.
A Fund, instead of purchasing or selling futures contracts, also may purchase
call or put options on futures contracts in order to protect against declines
in the value of portfolio securities or against increases in the cost of
securities to be acquired. Purchases of options on futures contracts may
present less risk in hedging a portfolio than the purchase and sale of the
underlying futures contracts, since the potential loss is limited to the
amount of the premium paid for the option, plus related transaction costs. As
in the case of purchases and sales of futures contracts, a Fund may be able to
offset declines in the value of portfolio securities, or increases in the cost
of securities acquired, through gains realized on its purchases of options on
futures. A Fund may also purchase put options on securities or stock indexes
for the same types of hedging purposes. The purchase of a put option on a
security or stock index permits a Fund to protect against declines in the
value of the underlying security or securities in a manner similar to the sale
of futures contracts. The maximum risk assumed by a Fund in purchasing an
option is the amount of the premium plus related transaction costs, although
this entire amount may be lost.
In addition, the Funds may write call options on portfolio securities or on
stock indexes to protect the value of their portfolios. In particular, when a
Fund writes an option which expires unexercised or is closed out by the Fund
at a profit, it will retain the premium paid for the option, less related
transaction costs, which will increase its gross income and will offset in
part the reduced value of a portfolio security in connection with which the
option may have been written. In contrast, however, if the price of the
security underlying the option moves adversely to the Fund's position, the
option may be exercised and the Fund will be required to sell the security at
a disadvantageous price, resulting in losses which may be only
12
<PAGE>
partially offset by the amount of the premium. A call option on a security
written by a Fund will be covered through ownership of the security underlying
the option or through ownership of an absolute and immediate right to acquire
such security upon conversion or exchange of other securities held in its
portfolio.
The Funds' hedging transactions and options on futures present certain other
risk factors, which are described in the Statement of Additional Information.
INVESTMENT ADVISORY, SUBADVISORY AND ADMINISTRATIVE ARRANGEMENTS
THE ADVISER
Subject to the direction and control of the Board of Directors of the
Investment Company, Mutual of America Capital Management Corporation, 320 Park
Avenue, New York, New York 10022 (the "Adviser"), an indirect wholly-owned
subsidiary of Mutual of America Life Insurance Company ("Mutual of America
Life") that commenced operations in September 1993, manages the investment and
reinvestment of the assets of each Fund pursuant to the Investment Advisory
Agreement (the "Advisory Agreement") between the Investment Company and the
Adviser. The Adviser had total assets under management of approximately $8
billion at December 31, 1997, including assets of $2.0 billion of the Mutual
of America Investment Corporation, a registered management investment company.
The Adviser's duties as investment adviser also include research and placing
orders for the purchase and sale of securities. The Adviser is obligated to
provide all of the office space, facilities, equipment, material and personnel
necessary to perform its duties under the Advisory Agreement. See "The Funds'
Expenses" below.
As compensation for its investment advisory services to each of the Funds of
the Investment Company, the Adviser will receive a fee calculated as a daily
charge at the annual rate of .50% of the value of the net assets in the All
America Fund, .45% of the value of the net assets in the Bond Fund and .20% of
the value of the net assets in the Money Market Fund. See "The Funds'
Expenses" below.
THE SUBADVISERS
Fred Alger Management, Inc., 75 Maiden Lane, New York, New York 10038, serves
as Subadviser for approximately 10% of the assets of the All America Fund.
Alger Management is a wholly-owned subsidiary of Fred Alger & Company,
Incorporated, which is owned by Alger Associates, Inc. Fred M. Alger III and
David D. Alger are the majority shareholders of Alger Associates, Inc. and may
be deemed to control that company and its subsidiaries. Alger Management
provides investment management services to institutional, corporate and
individual clients, including other registered management investment
companies, and serves as subadviser for approximately 10% of the assets of the
All America Fund of the Mutual of America Investment Corporation. At December
31, 1997, Alger Management had approximately $7.7 billion in assets under
management.
Oak Associates, Ltd., 3875 Embassy Parkway, Suite 250, Akron, Ohio 44333,
serves as Subadviser for approximately 10% of the assets of the All America
Fund. Oak Associates is an Ohio limited liability company that prior to 1996
was a sole proprietorship of James Dravo Oelschlager doing business as Oak
Associates. It provides investment management services for individual and
corporate clients, primarily in connection with retirement plans, and serves
as subadviser for approximately 10% of the assets of the All America Fund of
the Mutual of America Investment Corporation. At December 31, 1997, Oak
Associates had assets under management of approximately $6.2 billion.
Palley-Needelman Asset Management, Inc., 800 Newport Center Drive, Suite 450,
Newport Beach, California 92660, serves as Subadviser for approximately 10% of
the assets of the All America Fund. Palley-Needelman is jointly owned by Roger
B. Palley and Chet J. Needelman, both of whom have extensive experience in
investment management. It provides investment management services to
institutional, corporate and individual clients and other registered
investment companies, and serves as subadviser for approximately 10% of the
assets of the All America Fund of the Mutual of America Investment
Corporation. At December 31, 1997, Palley-Needelman managed approximately $4.8
billion in assets.
Under the Subadvisory Agreements, each Subadviser, at its own expense and
subject to the supervision of the Adviser and the Board of Directors of the
Investment Company, renders investment advisory services and assumes the
Adviser's duties including research, making recommendations and regular
reports to the Adviser and the Board of Directors of the Investment Company
and maintenance of certain records. The Subadvisers are also obligated to
provide all of the office space, facilities, equipment, material and personnel
necessary to perform their duties under the Subadvisory Agreements. The
Adviser, and not the All America Fund, will pay to the Subadvisers an amount
calculated daily at the following annual rates: Palley-Needelman, .30%; Oak
Associates, .30%; and Alger Management, .45%, of the value of the net assets
for which the Subadviser is providing investment advisory services.
13
<PAGE>
PORTFOLIO MANAGERS
Set forth below is information about the persons employed by the Adviser or
Subadvisers who are primarily responsible for the day-to-day management of the
Funds' investments. No information is given for the Money Market Fund, based
on the nature of the investments made by that Fund.
ALL AMERICA FUND. The Active Assets of the All America Fund are managed by
three Subadvisers and the Adviser.
David D. Alger, President and Chief Executive Officer of Alger Management, is
primarily responsible for the day-to-day management of the Alger Management
portion of the Fund. He has been employed by Alger Management as Executive
Vice President and Director of Research since 1971 and as President since
1995, and he serves as portfolio manager for other mutual funds and investment
accounts managed by Alger Management.
James D. Oelschlager is the portfolio manager of the Oak Associates portion of
the Fund. Since establishing Oak Associates in 1985, Mr. Oelschlager has
served as its portfolio manager. Previously, he served as the Assistant
Treasurer of Firestone Tire & Rubber Company, where he was directly
responsible for the management of the company's pension assets. Mr.
Oelschlager is assisted with portfolio management responsibilities by Donna
Barton, trading, Margaret Ballinger, new accounts, and Doug MacKay, equity
research. These individuals have combined experience of over seventy years in
the investment business and play a key role in the day-to-day management of
the firm's portfolios.
Chet J. Needelman, Chief Executive Officer and Senior Investment Officer of
Palley-Needelman, is responsible for the day-to-day management of the Palley-
Needelman portion of the Fund. Mr. Needelman has over 30 years of investment
experience as a security analyst, research director and portfolio manager. He
has managed funds for foundations, corporations, endowments and mutual funds.
He is the co-founder of Palley-Needelman Asset Management and its predecessor
company, where he held various positions during the last 24 years. All
investment decisions for Palley-Needelman Asset Management are made by an
investment committee which includes Mr. Needelman, Mr. Palley and three other
senior investment professionals.
Frederick M. Gallagher, Senior Vice President of the Adviser since June 1995,
is responsible for the investments of the Adviser's portion of the Active
Assets of the Fund. He also is responsible for the management of the small
capitalization portion of the All America Fund of the Mutual of America
Investment Corporation. Mr. Gallagher's previous position prior to joining the
Adviser was as Senior Vice President/Equity Investments at Continental Asset
Management Corporation. He has more than 30 years of experience in the
investment management business.
BOND FUND. Andrew L. Heiskell, Executive Vice President of the Adviser, has
responsibility for setting the Fund's fixed income investment strategy and
overseeing the Fund's day-to-day operations. He has been an Executive Vice
President of the Adviser since March 1, 1994 and served as Senior Vice
President of the Adviser from March 1, 1993 to March 1, 1994. Mr. Heiskell has
over 25 years of investment experience. He joined Mutual of America Life in
February of 1991, where he was Senior Vice President until January 1, 1994. He
has been the portfolio manager of the Mutual of America Investment
Corporation's Bond Fund since 1991 and of the Mid-Term Bond and Short-Term
Bond Funds since their inceptions in 1993. Prior to joining Mutual of America
Life, Mr. Heiskell was employed by M. D. Sass, Inc.
ACCOUNTING AND RECORDKEEPING AGENT; TRANSFER AGENT
The Investment Company has entered into an Investment Accounting Agreement
with the Adviser, pursuant to which the Adviser has agreed to serve as
investment accounting and recordkeeping agent for the Funds and to calculate
the net asset values of the Funds, effective January 2, 1997. The Investment
Company has entered into a Transfer Agency and Service Agreement with State
Street Bank and Trust Company ("State Street"), pursuant to which State Street
will serve as the transfer agent and dividend disbursing agent for Fund
shares. The Funds will pay the Adviser and State Street for these services,
and the compensation paid by the Funds is subject to the voluntary expense
reimbursement of the Adviser. See "The Funds' Expenses" below.
THE FUNDS' EXPENSES
Each Fund is charged with brokers' commissions, transfer taxes and other fees
relating to that Fund's portfolio transactions, pursuant to the Advisory
Agreement. In addition, each Fund is responsible for a number of expenses
relating to its operations, including: investment advisory fees; fees and
expenses of independent directors; the fees and expenses of its independent
certified public accountants and of its legal counsel; filing fees and
expenses for the registration of the Investment Company or Fund shares under
federal and state securities laws; printing and mailing costs of semi-annual
reports to shareholders, proxy statements, prospectuses and statements of
additional information and supplements thereto for existing shareholders;
costs of providing to the Distributor camera ready copies of the Investment
Company's prospectuses and statements of additional information and
supplements thereto; costs of meetings of shareholders; costs and fees of
custodians, transfer agents and accounting, recordkeeping and other agents;
any federal, state or local income or other taxes; any membership
14
<PAGE>
fees of the Investment Company Institute and similar organizations; fidelity
bond and directors' and officers' liability insurance premiums; and any
extraordinary expenses, such as indemnification payments or damages awarded in
litigation or settlements made. The Adviser voluntarily limits the expenses of
each Fund, other than for brokers' commissions, transfer taxes and other fees
relating to portfolio transactions and extraordinary expenses, to an annual
rate of .85% of the value of average net assets of the All America Fund, .70%
of the value of average net assets of the Bond Fund and .40% of the value of
average net assets of the Money Market Fund. The Adviser may discontinue such
policy at any time.
PORTFOLIO TRANSACTIONS
The Adviser, and the Subadvisers with respect to their portion of the All
America Fund, are responsible for decisions to buy and sell securities for the
Investment Company as well as for selecting brokers and, where applicable,
negotiating the amount of the commission rate paid. In placing orders, it is
the policy of the Investment Company to obtain the best price and execution.
The Adviser and Subadvisers place orders in connection with the purchase and
sale of approved investments with various brokers, including affiliates. As a
general matter, the Adviser and Subadvisers select broker-dealers which, in
their best judgment, provide prompt and reliable execution at favorable
security prices and reasonable commission rates. The Adviser or a Subadviser
may select broker-dealers which provide it with research services and may
cause a Fund to pay such broker-dealers commissions which exceed those other
broker-dealers may have charged, if in the Adviser's or Subadviser's view, the
commissions are reasonable in relation to the value of the brokerage and/or
research services provided by the broker-dealer. Brokerage arrangements with
affiliates of the Adviser or a Subadviser will be in accordance with the 1940
Act and the rules and regulations promulgated thereunder. No transactions may
be effected by a Fund with an affiliate of the Adviser or a Subadviser acting
as principal for its own account. When purchasing or selling securities
trading on the over-the-counter market, the Adviser or a Subadviser will
generally execute the transaction with a broker engaged in making a market for
such securities.
PURCHASE OF SHARES
Shares of the Funds are purchased without a sales charge. Currently, the
minimum initial required investment is $25,000 and the minimum required for
each subsequent investment is $5,000. The Investment Company reserves the
right to increase or decrease these minimums. The Investment Company
continuously offers shares at prices equal to the respective per share net
asset value of the Funds. Orders are executed at the net asset value per share
next determined after the wire transfer is received by the Investment Company.
Net asset value is determined in the manner set forth below under "Additional
Information--Determination of Net Asset Value." The Investment Company
reserves the right to reject any purchase order, to increase or decrease the
minimum required initial and subsequent investments and to waive the minimum
initial investment for certain institutional investors.
A prospective purchaser of Fund shares must complete an application, including
any required resolutions, attached to this Prospectus. An application also may
be obtained by writing to the Investment Company at the address on the cover
page of the Prospectus. A prospective purchaser should deliver a completed
application to a registered representative of the Distributor. After the
Investment Company and Distributor have approved an application, the
registered representative (or the Investment Company) will notify the
prospective purchaser that the account has been established and that the
purchaser may transmit the initial purchase amount.
All purchase amounts received by the Investment Company prior to 4:00 pm
Eastern Time will be considered received that day. All purchase amounts
received after 4:00 pm Eastern Time will be considered received on the next
business day. The purchase price for a Fund's shares will be the net asset
value of the Fund next determined following receipt by the Fund of the
purchase amount in its account at State Street (normally as of the close of
business that day).
Wire transfers of Federal funds may be made on any day on which the Investment
Company, Federal Reserve Bank of New York, State Street and The Chase
Manhattan Bank, N.A. (the custodian for the Investment Company) are open for
business. It is currently anticipated that wire transfers will not be
available on Saturdays and Sundays, and the holidays of Martin Luther King,
Jr.'s Birthday, Presidents' Day, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day, Christmas Day and New Year's
Day.
All purchases must be made by wire transfer of Federal funds to the account
specified below, accompanied by the identifying information noted below. Your
bank may charge you a fee for the wire transfer. You may contact the
Investment Company
15
<PAGE>
be telephone at 1-800-914-8716 between the hours of 9:00 am and 8:00 p.m.
Eastern Time, Monday through Friday on any business day, to advise of an
anticipated wire transfer. Your bank should wire funds according to these
instructions:
State Street Bank and Trust Company
Boston, Massachusetts 02101
ABA #011-000028
BNF= AC-49097181, Mutual Funds F/B/O Mutual of America
OBI= Purchaser: [Name] Acct. No.: [Shareholder's Tax I.D. Number]
$ to the All America Fund; $ to the Bond Fund; and/or $ to the
Money Market Fund
Your funds may be returned to you if the Investment Company does not have
sufficient information to insure the correct processing of such funds or if
your application has not yet been approved.
REDEMPTION AND EXCHANGE OF SHARES
REDEMPTIONS
The redemption price is the net asset value per share next determined after
the receipt of proper notice of redemption. See "Additional Information--
Determination of Net Asset Value" below. The minimum amount for any redemption
currently is $5,000, and the Investment Company reserves the right to increase
or decrease the minimum. Redemption proceeds will be paid by wire transfer of
Federal funds to the account specified in the shareholder's initial
application or to such other account specified in writing to the Investment
Company, in a form acceptable to the Investment Company, by an authorized
person of the shareholder.
Payment upon redemption of Fund shares is normally made within seven days of
receipt of such request (unless redemption is suspended or payment is delayed
as permitted in accordance with SEC regulations). Redemption proceeds for a
redemption order received by 4:00 pm Eastern Time on a business day usually
will be transmitted on a trade date-plus-one basis, so that proceeds are
transmitted on the next business day. Wire transfers for redemptions can be
made on the same days as for purchases, described under "Purchase of Shares"
above.
Redemption requests must be made in the manner specified below. The Investment
Company reserves the right to redeem, upon not less than 30 days' written
notice, all shares in a shareholder's Fund account when the aggregate value of
the shares is less than $5,000. All redemptions will be paid in cash, except
that the Investment Company reserves the right to redeem shares by the
delivery, in whole or in part, of readily marketable securities in lieu of
cash when a Fund redemption request by a shareholder totals more than 10% of
the net asset value of the Fund.
EXCHANGES
A shareholder may exchange shares of one Fund for shares of another Fund. The
minimum amount for an exchange currently is $5,000. Exchange orders are
processed at the Funds' net asset values next determined after the exchange
order is received. The Investment Company may terminate or modify the terms of
the exchange privilege upon 30 days' written notice to shareholders, and the
Investment Company may refuse to implement the purchase side of any exchange
request that it concludes is based on a market timing or asset allocation
strategy if the Investment Company determines such exchange would be
disruptive to a Fund. An exchange is taxable as a sale of a security.
Exchanges are available only in those states where the shares of the Fund to
be purchased are available for sale.
REQUESTS FOR REDEMPTIONS AND EXCHANGES
Redemption and exchange requests may be made by telephone if the shareholder
elects this option on its application or an amendment to the application.
Requests should be made to the Investment Company at 1-800-914-8716 between
the hours of 9:00 am and 8:00 pm Eastern Time, Monday through Friday on any
business day. Requests received after 4:00 pm Eastern Time will be considered
received the next business day.
Neither the Investment Company nor the Transfer Agent will be liable for any
loss, damage or other expense resulting from any telephone exchange effected
upon instructions reasonably believed to be genuine or for the inability of a
shareholder to make a telephone request on any particular day. The Investment
Company has instituted procedures it believes are reasonably designed to
insure that redemption and exchange instructions are genuine, and it could be
liable for losses caused by unauthorized or fraudulent instructions if those
procedures are not followed. Procedures include verification of the
shareholder's name, the personal identification number ("PIN") assigned by the
Investment Company to the authorized person calling for the account, and the
shareholder's account number (normally the tax identification number).
Telephone exchange requests are recorded.
The Investment Company reserves the right to add to or modify its procedures
in the future. If a shareholder for any reason on a particular day is unable
to make a telephone request to the Investment Company, the shareholder may
follow the procedure for written requests described below.
16
<PAGE>
Redemption and exchange requests also may be made in writing and must specify
the account name and number and the dollar amount or number of shares to be
redeemed, and must set forth all necessary signatures. Written requests may be
sent by first class mail to the Investment Company at 320 Park Avenue, New
York, New York 10022, Attn: Mutual of America Institutional Funds, Inc.
The Investment Company may request signature guarantees for any redemption
request that specifies the wiring of redemption proceeds to a shareholder
account other than the account specified in the shareholder's application as
amended.
AUTHORIZED PERSONS
Only authorized persons of a shareholder may make redemption or exchange
requests to the Investment Company on behalf of the shareholder. Authorized
officers or agents of a prospective purchaser of Fund shares must be specified
in the application and any appropriate resolution completed and certified, as
set forth in the application. The list of authorized persons may be amended
only by written notice received by the Investment Company from the
shareholder, certified by the corporate secretary or otherwise in a form
acceptable to the Investment Company.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividend distributions will be declared semi-annually in the case of net
investment income and annually in the case of net realized short or long-term
capital gains. Dividend distributions will be automatically reinvested in full
or fractional shares of the Fund to which they relate unless the shareholder
elects on its application or an amendment to the application to have dividend
distributions paid to it in cash or, in the case of the All America Fund and
the Bond Fund, applied to purchase shares of the Money Market Fund (in which
case the $5,000 minimum is waived). Cash dividend distributions will be paid
by wire transfer of Federal funds. Payment of dividends normally will be made
on the first business day of the following month at the net asset value as of
the last business day of the month in which the dividend distribution is
declared. Dividends and other distributions are taxable to a Fund's
shareholders even though they are reinvested in additional shares of the Fund.
The Investment Company has elected the special tax treatment afforded a
"regulated investment company" under certain provisions of the Internal
Revenue Code (the "Code"). If it so qualifies, the Investment Company will not
be subject to Federal income tax on that part of its ordinary income and net
realized capital gains which it distributes to shareholders, thereby avoiding
any Federal income tax liability on the distributed amounts. Since the
Investment Company has more than one Fund, each Fund will be treated as a
separate corporation for Federal income tax purposes. Therefore, the
investments and results of each Fund must qualify independently. Although the
Investment Company intends to operate each Fund so that it will have no
Federal income tax liability, if any such liability is nevertheless incurred,
the investment performance of that Fund will be adversely affected.
Section 4982 of the Code imposes an excise tax of 4% on each regulated
investment company which does not make a "required distribution" to
shareholders of 98% of its ordinary income for each calendar year and 98% of
its capital gain income for the one year period ending October 31 of each
year. The Investment Company intends to make the "required distributions" and
to thereby avoid the excise tax. If a Fund were to distribute less than the
required amount, then the 4% excise tax would apply to the deficiency.
For dividend purposes, the net investment income of each Fund will consist of
dividends received, interest accrued and certain other income received by such
Fund, plus or minus any amortized discount or premium, less the estimated
expenses of such Fund. To qualify for treatment as a regulated investment
company, a Fund must, among other things, derive in each taxable year at least
90% of its gross income from dividends, interest, gains from the sale or other
disposition of stock or securities, including foreign securities, and other
income derived with respect to the business of investing in stock or
securities. For purposes of this test, gross income is determined without
regard to losses from the sale or other disposition of stock or securities.
The Investment Company intends to distribute all net realized long and short-
term capital gains, if any, to the shareholders of the Fund or Funds to which
such gains are attributable. Realized capital gains and losses of each Fund
are computed separately for the purpose of determining capital gain
distributions. The net capital gain of one Fund will not be reduced by any net
capital losses incurred by any other Fund. Each Fund which has a net capital
gain will be entitled to distribute the full amount of that capital gain as a
capital gain distribution. Each Fund which has a net capital loss will be
entitled to a carryover of that loss which it can apply against its capital
gains in future years.
SHAREHOLDER TAXATION: Each investor should consult its own tax adviser as to
the tax consequences of an investment in Fund shares. "Additional Discussion
of Dividends, Distributions and Taxes" in the Statement of Additional
Information contains further information that may be applicable to certain
investors.
17
<PAGE>
Dividends paid by a Fund out of its ordinary income and distributions of a
Fund's net realized short-term capital gains (jointly, the "ordinary income
dividends") are taxable to its shareholders as ordinary income. Distributions
made from a Fund's net realized long-term capital gains, including long-term
gains from certain transactions in futures and options, (the "capital gain
dividends") are taxable to the Fund's shareholders as long-term capital gain.
A potential investor in a Fund should consider the impact of dividends or
capital gains distributions which are expected to be declared in the near
future or have been declared but not yet paid. It is anticipated that a
portion of the dividends paid by the All America Fund, but not the Bond Fund,
will qualify for the dividends-received deduction available to corporations.
SHAREHOLDER WITHHOLDING AND REPORTING: The Investment Company may be required
to withhold for Federal income tax ("back-up withholding") from distributions
made and the proceeds of redemptions to shareholders who have not provided a
correct taxpayer identification number or made required certifications, or
when the Investment Company or the shareholder has been notified by the
Internal Revenue Service that the shareholder is subject to back-up
withholding. Corporate shareholders and certain other entities named in the
Internal Revenue Code are exempt from back-up withholding under certain
circumstances. Any amount withheld by the Investment Company may be credited
against the U.S. federal income tax liability of the shareholder.
Ordinary income dividends paid by a Fund to a shareholder that is a
nonresident alien or a foreign entity will be subject to a 30% U.S.
withholding tax applicable to foreign persons, unless a reduced rate of
withholding or a withholding exemption is provided under applicable law or an
applicable tax convention between the United States and a particular foreign
country. Foreign shareholders are urged to consult their own tax advisers
concerning the applicability of the U.S. withholding tax.
The Investment Company will provide annual reports to shareholders of the
Federal income tax status of distributions made by the Funds invested in by
the shareholders. Distributions also may be subject to state and local taxes.
Each shareholder should consult its own tax adviser regarding the Federal,
state and local tax consequences of the ownership and sale of Fund shares.
ADDITIONAL INFORMATION
DETERMINATION OF NET ASSET VALUE: The net asset value of each Fund (i.e., the
sum of the value of the securities held by that Fund plus any cash or other
assets including interest and dividends accrued minus all liabilities
including accrued expenses) is determined once daily by the Adviser
immediately after the declaration of dividends, if any, and is determined as
of the time of the close of the regular trading session on the New York Stock
Exchange (currently 4:00 pm Eastern Time) on each day during which such
Exchange is open for trading.
The net asset value per share of a Fund is determined by dividing the Fund's
net asset value by the number of Fund shares outstanding.
The value of the assets held in the Investment Company will be determined in
the following manner. Investments for which market quotations are readily
available are valued at the market value of such investments (except that, as
discussed below, money market securities with a remaining maturity of 60 days
or less may be valued at amortized cost). An equity security will be valued at
the last sale price for such security on the principal exchange on which such
security is traded, or at the last bid price on the principal exchange on
which such security is traded if such bid price is of a more recent day than
the last sale price. For any equity security not traded on an exchange but
traded in the over-the-counter market, the value will be the last sale price,
or if no sale, at the latest bid price available. Securities which are
primarily traded on foreign securities exchanges generally are valued at the
preceding closing values of such securities on their respective exchanges
where primarily traded. Debt securities will be valued at a composite fair
market value, "evaluated bid," which may be the last sale price, by a
valuation service selected by the Adviser. Portfolio securities or assets for
which market quotations are not readily available will be valued at fair value
as determined in good faith by the Adviser under the direction of the Board of
Directors of the Investment Company.
Money market securities held by the Investment Company with a remaining
maturity of 60 days or less will be valued on an amortized cost basis, which
approximates market value; provided, however, that if the value determined
under the amortized cost method is materially different from the actual market
value, then even such short-term money market securities will be valued at
market value. Under the amortized cost method of valuation, the security is
initially valued at cost on the date of purchase (or in the case of securities
initially purchased with more than 60 days remaining to maturity, the market
value on the 61st day prior to maturity), and thereafter the Investment
Company assumes a constant proportionate amortization in value until maturity
of any discount or premium. For purposes of this method of valuation, the
maturity of a variable rate certificate of deposit is deemed to be the next
coupon date on which the interest rate is to be adjusted.
Portfolio investments underlying options are valued as described above. Stock
options written by a Fund are valued at the mean of the last bid and asked
price on the principal exchange where the option is traded, as of the close of
trading on that exchange. The Fund's net value will be increased or decreased
by the difference between the premiums received on writing options and the
costs of liquidating such positions measured by the value, as determined
above, of the option on the exchange where traded.
18
<PAGE>
When a Fund writes a call option, the amount of the premium is included in the
Fund's assets and an amount is included in its liabilities. The liability
thereafter is adjusted to the current market value of the call. For example,
if the current market value of the call exceeds the premium received, the
excess would be unrealized depreciation; conversely, if the premium exceeds
the current market value, such excess would be unrealized appreciation. If a
call expires or if the Fund enters into a closing purchase transaction, it
realizes a gain (or a loss if the cost of the transaction exceeds the premium
received when the call was written) without regard to any unrealized
appreciation or depreciation in the underlying securities, and the liability
related to such call is extinguished. If a call is exercised, the Fund
realizes a gain or loss from the sale of the underlying securities and the
proceeds of the sale increased by the premium originally received.
A premium paid on the purchase of a put will be deducted from a Fund's assets
and an equal amount will be included as an investment and subsequently
adjusted to the current market value of the put. For example, if the current
market value of the put exceeds the premium paid, the excess would be
unrealized appreciation; conversely, if the premium exceeds the current market
value, such excess would be unrealized depreciation.
Futures contracts, and options thereon, which are traded on commodities
exchanges, are valued at their official settlement price as of the close of
such commodities exchanges.
PERFORMANCE INFORMATION: Each Fund may include total return information, and
the Bond Fund may include its yield and the Money Market its current yield, in
advertisements or reports to shareholders. Average total return will be stated
in terms of average annual compounded rate of return on a hypothetical
investment in a Fund over periods of 1, 5 and 10 years (up to the life of the
Fund) and will reflect the deduction of a proportional share of Investment
Company expenses, on an annual basis, and the assumption that all dividends
and distributions are reinvested when paid. Total return may be stated in
terms of the cumulative value of an investment in a Fund over the period.
Yield will be based on the investment income per share during a particular 30
day (or one month) period (including dividends and interest), less expenses
accrued during the period ("net investment income"), and will be computed by
dividing net investment income by the net asset value per share on the last
day of the period. Current yield will refer to the annualized net investment
income (without reinvestment of income) generated by the Money Market Fund
over a specified seven day period. See the Investment Company's Statement of
Additional Information for a description of methods used to calculate total
return and yield for the Funds.
DESCRIPTION OF THE INVESTMENT COMPANY'S SHARES: The authorized capital stock
of the Investment Company consists of one billion shares of common stock, $.01
par value per share. The Investment Company does not issue certificates for
Fund shares purchased. The shares of common stock of the Investment Company
currently are divided into three classes of common stock: All America Fund,
Bond Fund and Money Market Fund. The Investment Company may establish
additional Funds and may allocate its shares either to such new classes or to
one or more of the existing classes. As of the date of this Prospectus,
substantially all of the outstanding shares of the All America and Bond Funds,
and a significant portion of the shares of the Money Market Fund, were owned
by Mutual of America Life Insurance Company, the indirect parent corporation
of the Adviser, which made the initial investment for the Investment Company's
operations.
All shares of common stock, of whatever class, are entitled to one vote, and
the votes of all classes are cast on an aggregate basis, except on matters
where the interests of the Funds differ. In such a case, the voting is on a
Fund-by-Fund basis. Approval or disapproval by the shareholders of one Fund on
such a matter would not generally be a prerequisite of approval or disapproval
in another Fund. Shareholders in a Fund not affected by a matter generally
would not be entitled to vote on that matter. Examples of matters which would
require a Fund- by-Fund vote are changes in the fundamental investment policy
of a particular Fund and approval of the Investment Advisory Agreement for the
Fund. The Investment Company is not required to hold annual meetings. It will
call a special meeting of shareholders when a meeting is requested by
shareholders holding at least 25% of the outstanding shares of the Investment
Company entitled to vote at the meeting except that a meeting to remove one or
more directors shall be called when requested by 10% of the outstanding shares
of the Investment Company entitled to vote at the meeting.
The shares of each Fund, when issued, will be fully paid and nonassessable and
will have no preference, preemptive, conversion, exchange or similar rights.
Shares do not have cumulative voting rights. Each issued and outstanding share
in a Fund is entitled to participate equally in dividends and distributions
declared by such Fund and, upon liquidation or dissolution, in the net assets
of such Fund remaining after satisfaction of outstanding liabilities. Accrued
liabilities which are not allocable to one or more Funds will generally be
allocated among the Funds in proportion to their relative net assets. In the
unlikely event that any Fund incurred liabilities in excess of its assets,
each other Fund could be liable for such excess.
DISTRIBUTOR: Mutual of America Securities Corporation, 320 Park Avenue, New
York, New York 10022 (the "Distributor"), an indirect, wholly-owned subsidiary
of Mutual of America Life, serves as the principal underwriter and distributor
of Fund shares. The Distributor is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Under the Distribution Agreement between the
19
<PAGE>
Distributor and the Investment Company, the Distributor serves without
compensation and is not obligated to distribute any specific amount of Fund
shares. Registered representatives of the Distributor, located in 36 field
offices throughout the United States, participate in the distribution of
shares of the Funds.
INDEPENDENT AUDITOR: Arthur Andersen LLP, Certified Public Accountants, have
been selected as the independent auditor of the Investment Company for its
fiscal year ending December 31, 1998. Arthur Andersen LLP also acts as the
independent auditor of the Adviser.
CUSTODIAN: The Chase Manhattan Bank, New York, New York, acts as Custodian of
the Investment Company's assets.
LEGAL COUNSEL: Shereff, Friedman, Hoffman & Goodman, LLP, New York, New York,
has been selected as counsel for the Investment Company, effective May 1,
1998.
YEAR 2000 COMPLIANCE: Many of the services provided to the Investment Company
by the Adviser and the Distributor depend on the proper functioning of these
companies' computer and computer-based systems, as well as those of their
outside service providers. Many computers cannot distinguish the year 2000
from the year 1900, and this inability could potentially have an adverse
impact on the handling of securities trades, the payment of interest and
dividends, pricing, accounting and other recordkeeping services. The Adviser
and the Distributor have performed a comprehensive review of their computer
systems and are in the process of modifying or replacing any of their systems
that cannot recognize the year 2000. They expect to significantly complete
modifications and replacements by the end of 1998 and to perform appropriate
systems testing during the 1999 calendar year. The Adviser is in the process
of confirming with the Investment Company's outside service providers that
their systems will be similarly modified or replaced to address the year 2000
issue. The Adviser and the Distributor anticipate that their computer systems
and those of their outside providers will be adapted in time for the year
2000.
REPORTS TO SHAREHOLDERS: The fiscal year of the Investment Company ends on
December 31 of each year. The Investment Company will send to its shareholders
at least semiannually reports showing the Funds' portfolio securities and
other information. An annual report containing financial statements, audited
by independent certified public accountants, will be sent to shareholders each
year.
INQUIRIES: All inquiries pertaining to the Investment Company's shares should
be made in writing to Mutual of America Institutional Funds, Inc., 320 Park
Avenue, New York, New York 10022 or to a registered representative of Mutual
of America Securities Corporation at any one of its offices.
ADDITIONAL INFORMATION AVAILABLE: This Prospectus does not contain all the
information included in the Registration Statement filed with the Securities
and Exchange Commission under the Securities Act of 1933 and the 1940 Act with
respect to the securities offered hereby, certain portions of which have been
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The Statement of Additional Information, incorporated by reference
into this Prospectus, may be obtained without charge as provided on the cover
page of this Prospectus. The Registration Statement, including the exhibits
filed therewith, may be examined at the office of the Securities and Exchange
Commission in Washington, D.C.
S&P 500 INDEX: The Indexed Assets of the All America Fund are not sponsored,
endorsed, sold or promoted by Standard & Poor's Corporation ("S&P"). S&P makes
no representation or warranty, express or implied, to the owners of shares of
the All America Fund or any member of the public regarding the advisability of
investing in securities generally or in the Indexed Assets particularly or the
ability of the S&P 500 Index to track general stock market performance. S&P's
only relationship to the Investment Company is the licensing of certain
trademarks and trade names of S&P and of the S&P 500 Index which is
determined, composed and calculated by S&P without regard to the Indexed
Assets. S&P has no obligation to take the needs of the Indexed Assets or the
owners of shares of the All America Fund into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for and
does not participate in the calculation of the net asset value of the Indexed
Assets, nor is S&P a distributor of shares of the All America Fund, and S&P
has no obligation or liability in connection with the administration,
marketing or trading of the All America Fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE INDEXED ASSETS, OWNERS OF SHARES OF THE
ALL AMERICA FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR
ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT
SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
20
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS, INC.
320 PARK AVENUE, NEW YORK, NEW YORK 10022
(800) - 914-8716
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
---------------
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Mutual of America Institutional Funds, Inc.
Prospectus dated May l, 1998 and retained for future reference.
A copy of the Prospectus to which this Statement of Additional Information
relates is available at no charge by writing Mutual of America Institutional
Funds, Inc. at the above address or by calling the telephone number listed
above.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
GENERAL INFORMATION AND HISTORY.......................................... SAI-2
INVESTMENT POLICIES AND LIMITATIONS...................................... SAI-2
INVESTMENT RESTRICTIONS.................................................. SAI-6
MANAGEMENT OF THE INVESTMENT COMPANY..................................... SAI-7
INVESTMENT ADVISORY AND SUBADVISORY ARRANGEMENTS......................... SAI-9
ADMINISTRATIVE AGREEMENTS................................................ SAI-10
PORTFOLIO TRANSACTIONS AND BROKERAGE..................................... SAI-10
PURCHASE AND PRICING OF SECURITIES....................................... SAI-11
YIELD AND PERFORMANCE INFORMATION........................................ SAI-11
DESCRIPTION OF CORPORATE BOND RATINGS.................................... SAI-13
ADDITIONAL DISCUSSION OF DIVIDENDS, DISTRIBUTIONS AND TAXES.............. SAI-14
INDEPENDENT AUDITORS..................................................... SAI-17
CUSTODIAN................................................................ SAI-17
FINANCIAL STATEMENTS..................................................... SAI-17
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
Mutual of America Institutional Funds, Inc. (the "Investment Company") is a
diversified, open-end management investment company--a type of company
commonly known as a "mutual fund". It is registered as such under the
Investment Company Act of 1940 (the "Investment Company Act"). The Investment
Company was formed on October 27, 1994 as a Maryland corporation. As a
"series" type of mutual fund, the Investment Company issues separate classes
(or series) of stock, each of which represents a separate fund of investments.
There are currently three funds: the All America Fund, the Bond Fund and the
Money Market Fund.
INVESTMENT POLICIES AND LIMITATIONS
The following supplements the information contained in the Investment
Company's Prospectus concerning the investment policies and limitations of its
Funds. For information relating to the Funds' investment objectives, see
"Investment Objectives and Policies of the Funds", and for information about
the Adviser, see "Investment Advisory, Subadvisory and Administrative
Arrangements" in the Prospectus and "Investment Advisory Arrangements" in this
Statement of Additional Information.
NON-INVESTMENT GRADE DEBT SECURITIES ("JUNK BONDS")
The Bond Fund may, to a limited extent, invest in fixed-income securities
which are rated in the lower rating categories of the nationally recognized
rating services (Ba or lower by Moody's and BB or lower by Standard & Poor's),
or unrated securities of comparable quality, sometimes referred to as high
yield/high risk securities or as "junk bonds". Non-investment grade bonds are
regarded as being predominantly speculative as to the issuer's ability to make
payments of principal and interest. Investment in such securities involves
substantial risk. Non-investment grade bonds may be issued by less
creditworthy companies or by larger, highly leveraged companies, and are
frequently issued in corporate restructurings such as mergers and leveraged
buy-outs. Such securities are particularly vulnerable to adverse changes in
the issuer's industry and in general economic conditions. Non-investment grade
bonds frequently are junior obligations of their issuers, so that in the event
of the issuer's bankruptcy, claims of the holders of non-investment grade
bonds will be satisfied only after satisfaction of the claims of senior
security holders. While the non-investment grade bonds in which the Bond Fund
may invest normally would not include securities which, at the time of
investment, are in default or the issuers of which are in bankruptcy, there
can be no assurance that such events would not occur after the Bond Fund
purchases a particular security, in which case the Bond Fund may experience
losses and incur costs.
Non-investment grade bonds tend to be more volatile than higher-rated fixed-
income securities, so that adverse economic events may have a greater impact
on the prices of non-investment grade bonds than on higher-rated fixed-income
securities. Like higher-rated fixed-income securities, non-investment grade
bonds generally are purchased and sold through dealers who make a market in
such securities for their own accounts. However, there are fewer dealers in
the non-investment grade bond market, which may be less liquid than the market
for higher-rated fixed-income securities, even under normal economic
conditions. Also, there may be significant disparities in the prices quoted
for non-investment grade bonds by various dealers. Adverse economic conditions
or investor perceptions (whether or not based on economic fundamentals) may
impair the liquidity of this market, and may cause the prices the Bond Fund
may receive for any non-investment grade bonds to be reduced, or might cause
the Bond Fund to experience difficulty in liquidating a portion of its
portfolio. Under such conditions, judgment may play a greater role in valuing
certain of the Bond Fund's portfolio securities than in the case of securities
trading in a more liquid market.
While the Funds other than the All America Fund do not purchase non-investment
grade bonds, these Funds may invest to a limited extent in fixed-income
securities that could subsequently become non-investment grade bonds as a
result of impairment of the issuer's credit. In such instances, the Fund
holding a junk bond will consider disposing of the non-investment grade bonds
if, in management's judgment, it is in the Fund's best interest to do so.
Reference is made to "Investment Objectives and Policies of the Funds" in the
Prospectus for a more complete discussion of the investment objectives and
policies of the Investment Company.
MONEY MARKET INSTRUMENTS
The following is a description of the money market securities the Money Market
Fund may invest in, and that the All America Fund and Bond Fund may invest in
to the extent noted, as referred to in the Prospectus under "Investment
Objectives and Policies of the Funds."
SAI-2
<PAGE>
U.S. Government Obligations. Securities issued or guaranteed as to principal
and interest by the United States Government include a variety of Treasury
securities, which differ only in their interest rates, maturities and times of
issuance. Treasury bills have a maturity of one year or less. Treasury notes
have maturities of one to seven years and Treasury bonds generally have a
maturity of greater than five years.
Agencies of the United States Government which issue or guarantee obligations
include, among others, Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Government National Mortgage
Association, Student Loan Marketing Association, Maritime Administration,
Small Business Administration and the Tennessee Valley Authority. Obligations
of instrumentalities of the United States Government include securities issued
or guaranteed by, among others, Federal Farm Credit Banks, Federal National
Mortgage Association, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Federal Land Banks and Banks
for Cooperatives. Some of these securities are supported by the full faith and
credit of the U.S. Treasury; others are supported by the right of the issuer
to borrow from the Treasury, while still others are supported only by the
credit of the instrumentality.
Shares of the Investment Company are not themselves insured or guaranteed by
the United States Government or any agency thereof.
Certificates of Deposit. Certificates of deposit are generally short-term,
interest-bearing negotiable certificates issued by banks or savings and loan
associations against funds deposited in the issuing institution.
Time Deposits. Time deposits are deposits in a bank or other financial
institution for a specified period of time at a fixed interest rate of which a
negotiable certificate is not received.
Bankers' Acceptance. A bankers' acceptance is a draft drawn on a commercial
bank by a borrower usually in connection with an international commercial
transaction (to finance the import, export, transfer or storage of goods). The
borrower is liable for payment as well as the bank, which unconditionally
guarantees to pay the draft at its face amount on the maturity date. Most
acceptances have maturities of six months or less and are traded in secondary
markets prior to maturity.
Commercial Paper. Commercial paper refers to short-term, unsecured promissory
notes issued by corporations to finance short-term credit needs. Commercial
paper is usually sold on a discount basis and has a maturity at the time of
issuance not exceeding nine months.
Variable Amount Floating Rate Notes. Variable floating rate notes are short-
term, unsecured promissory notes issued by corporations to finance short-term
credit needs. These are interest-bearing notes on which the interest rate
generally fluctuates on a weekly basis.
Corporate Debt Securities. Corporate debt securities with a remaining maturity
of less than one year tend to become extremely liquid and are traded as money
market securities. Such issues with between one and two years remaining to
maturity tend to have greater liquidity and considerably less market value
fluctuations than longer term issues.
REPURCHASE AGREEMENTS
Under a repurchase agreement, underlying debt instruments are acquired for a
relatively short period (usually not more than one week and never more than
one year) subject to an obligation of the seller to repurchase (and the
appropriate Fund to resell) the instrument at a fixed price and time, thereby
determining the yield during the Fund's holding period. This results in a
fixed rate of return insulated from market fluctuation during such period.
Accrued interest on the underlying security will not be included for purposes
of valuing a Fund's assets.
Repurchase agreements have the characteristics of loans by a Fund, and will be
fully collateralized (either with physical securities or evidence of book
entry transfer to the account of the custodian bank) at all times. During the
term of the repurchase agreement the Fund retains the security subject to the
repurchase agreement as collateral securing the seller's repurchase
obligation, continually monitors the market value of the security subject to
the agreement and requires the Fund's seller to deposit with the Fund
additional collateral equal to any amount by which the market value of the
security subject to the repurchase agreement falls below the resale amount
provided under the repurchase agreement. The Funds enter into repurchase
agreements only with member banks of the Federal Reserve System, and with
primary dealers in U.S. Government securities whose creditworthiness has been
reviewed and found satisfactory by the management of the Investment Company,
and who have, therefore, been determined to present minimal credit risk.
SAI-3
<PAGE>
Securities underlying repurchase agreements will be limited to certificates of
deposit, commercial paper, bankers' acceptances, or obligations issued or
guaranteed by the United States Government or its agencies or
instrumentalities, in which the Funds may otherwise invest.
If a seller of a repurchase agreement defaults and does not repurchase the
security subject to the agreement, the Fund would look to the collateral
security underlying the seller's repurchase agreement, including the
securities subject to the repurchase agreement, for satisfaction of the
seller's obligation to the Fund; in such event the Fund might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines.
OPTIONS AND FUTURES
As described in the Prospectus, the Funds noted may enter into transactions in
options, futures contracts and options on futures contracts on securities and
indexes of securities for hedging purposes only. With respect to options and
futures, the Funds may engage in strategies which include buying and selling
covered calls and puts and buying and selling call options on groups of
securities and on the futures of groups of securities.
PUT AND CALL OPTIONS
A call option is a short-term contract (generally having a duration of nine
months or less) which gives the purchaser of the option the right to purchase
the underlying security at a fixed exercise price at any time prior to the
expiration of the option regardless of the market price of the security during
the option period. As consideration for the call option, the purchaser pays a
Fund (the seller) a premium, which the Fund retains whether or not the option
is exercised. The seller of the call option has the obligation, upon the
exercise of the option by the purchaser, to sell the underlying security at
the exercise price at any time during the option period. The selling of a call
option will benefit a Fund if, over the option period, the underlying security
declines in value or does not appreciate above the aggregate of the exercise
price and the premium. However, the Fund risks an "opportunity loss" of
profits if the underlying security appreciates above the aggregate value of
the exercise price and the premium.
A Fund may close out a position acquired through selling a call option by
buying a call option on the same security with the same exercise price and
expiration date as the call option which it had previously sold on that
security. Depending on the premium for the call option purchased by the Fund,
the Fund will realize a profit or loss on the transaction.
A put option is a similar short-term contract that gives the purchaser of the
option the right to sell the underlying security at a fixed exercise price at
any time prior to the expiration of the option regardless of the market price
of the security during the option period. As consideration for the put option
a Fund (the purchaser) pays the seller a premium, which the seller retains
whether or not the option is exercised. The seller of the put option has the
obligation, upon the exercise of the option by the purchaser, to purchase the
underlying security at the exercise price at any time during the option
period. The buying of a covered put contract limits the downside exposure for
the investment in the underlying security to the combination of the exercise
price less the premium paid. The risk of purchasing a put is that the market
price of the underlying stock prevailing on the expiration date may be above
the option's exercise price. In that case the option would expire worthless
and the entire premium would be lost.
A Fund may close out a position acquired through buying a put option by
selling a put option on the same security with the same exercise price and
expiration date as the put option which it had previously bought on the
security. Depending on the premium of the put option sold by the Fund, the
Fund will realize a profit or loss on the transaction.
INDEX OPTIONS, FUTURES AND OPTIONS ON FUTURES
Index options, futures contracts and options on futures contracts can be used
in anticipation of or in a general market or market sector decline that may
adversely affect the market value of a Fund's portfolio of securities. To the
extent that a Fund's portfolio of securities changes in value in correlation
with a given stock index, hedging transactions in options, futures contracts
or options on futures contracts could reduce the risk to the portfolio of a
market decline, and, by so doing, provide an alternative to the liquidation of
securities' positions in the portfolio with resultant transactions costs. The
stock index underlying an option or futures contract assigns weighted values
to the stocks involved in the index, and the value of the index fluctuates
with changes in the market values of the stocks so included.
SAI-4
<PAGE>
Options on stock indexes are based on indexes of securities such as the
Standard & Poor's 100 Index, the Standard & Poor's 500 Stock Index and the New
York Stock Exchange Composite Index. Options on stock indexes, like options on
individuals securities, are traded on national securities exchanges regulated
by the Securities and Exchange Commission such as the Chicago Board Options
Exchange, the American Stock Exchange and the New York Stock Exchange.
A futures contract on fixed income securities requires the seller to deliver,
and the purchaser to accept delivery of, a stated quantity of a given type of
fixed income security for a fixed price at a specified time in the future. A
futures contract or option on a stock index provides for the making and
acceptance of a cash settlement equal to the change in value of a hypothetical
portfolio of stocks between the time the contract is entered into and the time
it is liquidated, times a fixed multiplier. Futures contracts may be traded
domestically only on exchanges which have been designated as "contract
markets" by the Commodity Futures Trading Commission ("CFTC"), such as the
Chicago Board of Trade. All transactions are settled through the clearing
house of the contract market, which acts as the guarantor of the performance
of each party to all futures contracts cleared.
An option on a futures contract provides the purchaser with the right, but not
the obligation, to enter into a "long" position in the underlying futures
contract (in the case of a call option on a futures contract), or a "short"
position in the underlying futures contract (in the case of a put option on a
futures contract), at a fixed price up to a stated expiration date. Upon
exercise of the option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the option, in
the case of a call option, or a corresponding long position, in the case of a
put option. In the event that an option is exercised, the parties are subject
to all of the risks associated with the trading of futures contracts, such as
payment of margin deposits.
Options on futures contracts are traded on the same contract markets as the
underlying futures contracts, subject to the performance guarantee of the
contract market clearing house. A futures contract or an option on a futures
contract may be closed out prior to maturity or expiration by entering into a
liquidating transaction in the same instrument on the contract market on which
the original position was established.
Unlike a Fund purchasing or selling a security, no price is paid or received
by a Fund upon the purchase or sale of a futures contract. Initially, a Fund
will be required to deposit with the Fund's custodian in the broker's name an
amount of cash or U.S. Treasury bills equal to approximately 5% of the
contract amount. This amount is known as "initial margin". The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to a Fund upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called maintenance margin, to and from the broker, will be made on a
daily or intraday basis as the price of the underlying instrument or stock
index fluctuates making the long and short positions in the futures contract
more or less valuable, a process known as mark to market. For example, when a
Fund has purchased a stock index futures contract and the price of the
underlying stock index has risen, that position will have increased in value
and the Fund will receive from the broker a variation margin payment equal to
that increase in value. Conversely, where a Fund has purchased a stock index
futures contract and the price of the underlying stock index has declined, the
position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. At any time prior to expiration of the
futures contract, a Fund may elect to close the position by taking an opposite
position which will operate to terminate the Fund's position in the futures
contract. A final determination of margin is then made, additional cash is
required to be paid by or released to the Fund, and the Fund realizes a loss
or a gain.
RISKS ASSOCIATED WITH OPTIONS AND FUTURES
Transactions in options, futures contracts and options on futures contracts
may increase a Fund's transaction costs and portfolio turnover rate and will
be initiated only when consistent with a Fund's investment objectives.
The trading of options, futures contracts and options on futures contracts
also involves risks, in addition to those set forth in the Prospectus. For
example, the trading of options on futures contracts entails the risk that
changes in the value of the underlying futures contract will not be fully
reflected in the value of the option. Further, the ability to profit from the
purchase of an option and liquidate the underlying futures contract, is
subject to the risks of margin payments and the availability of a liquid
market. With respect to options and options on futures contracts, the Funds
are subject to the risk of market movements between the time that the option
is exercised and the time of performance thereunder. In writing a covered call
option on a security or a stock index, the Funds also incur the risk that
changes in the value of the instruments used to cover the position will not
correlate precisely with changes in the value of the option or underlying the
index or instrument.
SAI-5
<PAGE>
The exchanges on which options, futures contracts and options on futures
contracts are traded may impose limitations governing the maximum number of
positions on the same side of the market and involving the same underlying
instrument which may be held by a single investor, whether acting alone or in
concert with others (regardless of whether such contracts are held on the same
or different exchanges or held or written in one or more accounts or through
one or more brokers).
The opening of a futures position and the writing of an option are
transactions which involve substantial leverage. As a result, relatively small
movements in the price of the contract can result in substantial unrealized
gains or losses. Because the Funds will engage in transactions in options,
futures contracts and options on futures contracts on securities and indexes
of securities for hedging purposes only, any losses incurred in connection
with these transactions should, if the hedging strategy is successful, be
offset by increases in the value of securities or other assets held by the
Funds or decreases in the prices of securities or other assets the Fund
intends to acquire. Were a Fund to write options on securities or options on
stock indexes for other than hedging purposes, the margin requirements
associated with such transactions could expose the Fund to greater risk.
Regulations of the CFTC require that a Fund enter into transactions in futures
contracts and options on futures contracts for hedging purposes only or
otherwise to limit its initial futures margins and related option premiums
paid to an amount not to exceed 5% of the value of the Fund's assets, in order
to assure that the Fund is not deemed to be a "commodity pool" and the
Investment Company is not a "commodity pool operator" as defined in CFTC
regulations.
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental policies and may not be
changed without the approval of a majority of the outstanding voting shares of
the affected Fund. No Fund will:
1. purchase or sell options or futures except those listed on a domestic
exchange;
2. trade in foreign exchange, or invest in securities of foreign issuers if
at the time of acquisition more than 20% of its total assets, taken at
market value at the time of the investment, would be invested in such
securities (see "Foreign Securities" in the Prospectus);
3. make an investment in order to exercise control of management over a
company (either singly or together with any other Fund);
4. underwrite the securities of other companies;
5. make short sales, except when the Fund has, by reason of ownership of
other securities, the right to obtain securities of equivalent kind and
amount that will be held so long as they are in a short position;
6. purchase commodities or commodity contracts, except to the extent
described in the Prospectus and herein with respect to futures and related
options;
7. with respect to at least 75% of the value of its total assets, invest more
than 5% of its total assets in the securities of any one issuer (including
repurchase agreements with any one institution), other than securities
issued or guaranteed by the United States Government or its agencies or
instrumentalities;
8. with respect to at least 75% of the value of its total assets, purchase
more than 10% of the outstanding voting securities of an issuer, except
that such restriction shall not apply to securities issued or guaranteed
by the United States Government or its agencies or instrumentalities;
9. issue senior securities, except that each Fund may borrow as described in
restriction 13 below (the issuance and sale of options and futures not
being considered the issuance of senior securities) and except as
permitted by the rules and regulations of the Investment Company Act or an
exemption thereunder and with any required approval of the shareholders of
the Investment Company;
10. make an investment in an industry if that investment would make the Fund's
holding in that industry exceed 25% of the Fund's total assets, except
that this policy does not apply to obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities;
SAI-6
<PAGE>
11. purchase real estate or mortgages directly, except that the All America
Fund may buy shares of real estate investment trusts listed on stock
exchanges or reported on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system, and the Bond Fund may buy mortgage-
backed debt issues;
12. purchase any securities issued by any other investment company except as
permitted under the Investment Company Act and in accordance with
applicable state law;
13. purchase any security on margin, except for short-term credit necessary
for clearance of portfolio transactions or in connection with permitted
options and futures contracts, or borrow money, except from banks for
temporary purposes, or pledge its assets unless to secure such borrowing.
The Funds may borrow money from or pledge their assets to banks in order
to transfer funds for various purposes, as required, without interfering
with the orderly liquidation of securities in their portfolios, but not
for leveraging purposes. Such borrowings may not exceed 5% of the value of
a Fund's total assets at market value;
14. make loans, except loans of portfolio securities (not exceeding 30% of the
value of its total assets at market value) or loans through entry into
repurchase agreements (the purchase of publicly traded debt obligations
not being considered the making of a loan);
15. invest more than 10% of its total assets in repurchase agreements or time
deposits maturing in more than seven days or in portfolio securities not
readily marketable; or
16. purchase oil, gas or mineral interests, except that the Funds may purchase
securities of issuers that invest in oil, gas or mineral interests.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values of portfolio securities or amount of net assets will not be
considered a violation.
MANAGEMENT OF THE INVESTMENT COMPANY
DIRECTORS AND OFFICERS
The Directors of the Investment Company consist of five individuals, four of
whom are not "interested persons" of the Investment Company as defined in the
Investment Company Act of 1940. The Directors of the Investment Company are
responsible for the overall supervision of the operations of the Investment
Company and perform the various duties imposed on the directors of investment
companies by the Investment Company Act of 1940. The Board of Directors elects
officers of the Investment Company annually.
The Directors and Officers of the Investment Company and their principal
employment are as follows:
<TABLE>
<CAPTION>
POSITION HELD WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE INVESTMENT COMPANY DURING PAST FIVE YEARS
---------------- ---------------------- ----------------------
<C> <C> <S>
Kevin M. Kearney Director Partner, Wingate, Kearney &
Brooklyn, NY Cullen (law firm).
Dolores J. Morrissey* Chairman of the Board, President and Chief Executive
Mutual of America President and Director Officer of Mutual of America
Securities Corporation Securities Corporation
320 Park Avenue ("Distributor") since August
New York, NY 10022 1996; Executive Vice President
and Assistant to the President
of the Adviser from March 1996
to December 1996; President and
Chief Executive Officer of the
Adviser June 1994 - March 1996;
Executive Vice President and
Chief Investment Officer--
General Account of the Adviser
from September 1993 until June
1994. Executive Vice President
of Mutual of America Life
Insurance Company ("Mutual of
America Life") until January
1994.
John T. Sharkey Director Vice President--Corporate
New York, NY National Accounts, MCI
Communications.
John R. Silber Director Chancellor, Boston University.
Boston, MA
Patrick J. Waide, Jr. Director Chief Operating Officer,
New York, New York Sullivan & Company, New York,
New York since September 1996;
Executive Vice President and
Chief Financial Officer of the
Bessemer Group, Inc., and
Senior Vice President and Chief
Financial Officer of Bessemer
Securities, until January 1996.
</TABLE>
SAI-7
<PAGE>
<TABLE>
<CAPTION>
POSITION HELD WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE INVESTMENT COMPANY DURING PAST FIVE YEARS
---------------- ---------------------- ----------------------
<C> <C> <S>
Manfred Altstadt Senior Executive Vice President Senior Executive Vice
Mutual of America and Treasurer President and Chief
Life Insurance Company Financial Officer since
320 Park Avenue September 1993 of the
New York, NY 10022 Adviser. Senior
Executive Vice President
and Chief Financial
Officer of Mutual of
America Life and The
American Life Insurance
Company of New York
("American Life").
Patrick A. Burns Senior Executive Vice President, Senior Executive Vice
Mutual of America General Counsel President and General
Life Insurance Company Counsel since September
320 Park Avenue 1993 of the Adviser.
New York, NY 10022 Senior Executive Vice
President and General
Counsel of Mutual of
America Life and
American Life since
February 1994. Prior
thereto, Executive Vice
President and General
Counsel of Mutual of
America Life and
American Life.
Amir Lear Senior Vice President and Senior Vice President,
Mutual of America Life Chief Financial Officer Office of the President
Insurance Company of Mutual of America
320 Park Avenue since February 1994;
New York, NY 10022 prior thereto, Vice
President of Mutual of
America; Senior Vice
President and Chief
Financial Officer of
Distributor.
Stanley M. Lenkowicz Senior Vice President, Senior Vice President
Mutual of America Life Deputy General Counsel and Deputy General
Insurance Company and Secretary Counsel since March 1995
320 Park Avenue of Mutual of America
New York, NY 10022 Life; prior thereto,
Senior Vice President
and Associate General
Counsel.
</TABLE>
- -------
* Ms. Morrissey is an "interested person" within the meaning of the Investment
Company Act.
The officers and directors of the Investment Company own none of its
outstanding shares. The Investment Company has no Audit Committee.
Pursuant to the terms of the Investment Advisory Agreement described under the
caption "Investment Advisory Arrangements", Mutual of America Capital
Management Corporation, as investment adviser (the "Adviser"), pays all
compensation of officers and employees, if any, of the Investment Company. All
directors of the Investment Company who are affiliated persons of the Adviser
or its affiliates serve without compensation. Set forth below is a table
showing the compensation to be paid to the directors of the Investment Company
during 1997.
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION FROM
RETIREMENT BENEFITS ESTIMATED ANNUAL INVESTMENT COMPANY AND
AGGREGATE COMPENSATION ACCRUED AS PART OF BENEFITS UPON OTHER INVESTMENT
NAME OF DIRECTOR FROM INVESTMENT COMPANY FUND EXPENSES RETIREMENT COMPANIES IN COMPLEX
---------------- ----------------------- ------------------- ---------------- -----------------------
<S> <C> <C> <C> <C>
Kevin M. Kearney........ $13,601(2) None None $13,601(2)
Dolores J. Morrissey.... None (1) None None None (1)
*Fioravante G. Perrotta. None (2) None None None (2)
John T. Sharkey......... $14,102(2) None None $14,102(2)
John R. Silber.......... $17,003(2) None None $17,003(2)
Patrick J. Waide, Jr.... $14,735(2) None None $14,735(2)
</TABLE>
- -------
* Mr. Perrotta resigned as a director of the Investment Company in September,
1997.
(1) As an employee of the Adviser and an "interested person" of the Investment
Company, Ms. Morrissey serves as director of the Investment Company and of
Mutual of America Investment Corporation without compensation.
(2) Directors who are not "interested persons" of the Investment Company
receive from the Investment Company an annual retainer of $10,000, a fee
of $1,000 for each Board or Committee meeting attended and business travel
and accident insurance and life insurance. Mr. Perrotta, who is not an
officer or employee of the Adviser or Mutual of America Life, received
such retainer, meeting fee and insurance coverage (for total compensation
of $12,360 in 1997) from the Adviser.
As of the date of this Prospectus, the Adviser owned approximately 90% of the
outstanding shares of the Investment Company. The Adviser has the right to
vote its shares at any meeting of shareholders.
SAI-8
<PAGE>
INVESTMENT ADVISORY AND SUBADVISORY ARRANGEMENTS
Investment Adviser. The Investment Company's investment adviser is Mutual of
America Capital Management Corporation (the "Adviser"), an indirect wholly-
owned subsidiary of Mutual of America Life, 320 Park Avenue, New York, New
York 10022, a New York corporation.
Subject at all times to the supervision and approval of the Investment
Company's Board of Directors and except as discussed below under
"Subadvisers", the Adviser renders investment advisory services with respect
to the All America Fund and Bond Fund in a manner consistent with the stated
investment policies, objectives and restrictions of the Funds. In connection
therewith, the Adviser advises the Investment Company as to what investments
should be purchased and sold and places orders for all such purchases and
sales on behalf of the Investment Company. The Adviser is a registered
investment adviser under the Investment Advisers Act of 1940.
Advisory Fees. As compensation for its investment advisory services to each of
the Funds of the Investment Company, the Adviser will receive a fee calculated
as a daily charge at the annual rates of .50% of the value of the net assets
of the All America Fund; and .45% of the value of the net assets of the Bond
Fund; and .20% of the value of the net assets of the Money Market Fund. The
total amount of advisory fees paid by the Investment Company to the Advisor in
1997 was $389,920, of which $291,620 was paid by the All America Fund, $94,370
was paid by the Bond Fund and $3,930 was paid by the Money Market Fund, and in
1996 was $232,287, of which $171,293 was paid by the All America Fund and
$60,994 was paid by the Bond Fund.
Advisory Agreement. The Investment Advisory Agreement (the "Advisory
Agreement") was approved by a majority of the non-interested members of the
Investment Company's Board of Directors (the "non-interested directors") on
February 8, 1996 with respect to the Bond Fund on March 12, 1996 with respect
to the All America Fund and on February 24, 1997 with respect to the Money
Market Fund. The Advisory Agreement was approved by a vote of the Adviser, as
the Fund's sole shareholder, on April 23, 1996. The Advisory Agreement will be
submitted to a vote of the Investment Company's shareholders at the first
meeting of shareholders following the effectiveness of the Registration
Statement.
The Advisory Agreement terminates automatically in the event of its assignment
or, with respect to any Fund, upon 60 days' notice given by the Investment
Company's Board of Directors, by the Adviser or by majority vote (as defined
in the Investment Company Act of 1940 and the rules thereunder) of the Fund's
shares. Otherwise, the Advisory Agreement will continue in force with respect
to any Fund for two years from its execution and thereafter so long as its
continuance is approved at least annually by (i) a majority of the members of
the Investment Company's Board of Directors, or (ii) a majority vote (as
defined in the Investment Company Act of 1940 and the rules thereunder) of the
Fund's shareholders; provided that in either event such continuance will also
be approved by the vote of a majority of directors who are not interested
persons (as defined in the Investment Company Act of 1940).
Under the Advisory Agreement, the Adviser agrees to provide investment
management services to the Investment Company. Such services include
performing investment research and evaluating pertinent economic, statistical
and financial data; consultation with the Investment Company's Board of
Directors and furnishing to the Investment Company's Board of Directors
recommendations with respect to the overall investment plan; implementation of
the overall investment plan, including carrying out decisions to acquire or
dispose of investments; management of investments; reporting to the Investment
Company's Board of Directors on a regular basis on the implementation of the
investment plan and the management of investments; maintaining all required
records; making arrangements for the safekeeping of assets; and providing
office space facilities, equipment, material and personnel necessary to
fulfill its obligations. The Adviser is responsible for all expenses incurred
in performing the investment advisory services, including compensation of
officers and payment of office expenses.
Each Fund will pay all other expenses incurred in its operation, including
brokers' commissions, transfer taxes and other fees relating to the Fund's
portfolio transactions, independent directors' fees and expenses, fees and
expenses of its independent certified public accountants and of its legal
counsel, filing fees and expenses for the registration of the Investment
Company or Fund shares under federal or state securities laws, the cost of the
printing and mailing of semi-annual reports to shareholders, proxy statements,
prospectuses, prospectus supplements and statements of additional information
for existing shareholders and the costs of providing to the Distributor camera
ready copies of such documents, the costs of meetings of shareholders, costs
and fees of custodians, transfer agents, recordkeeping and other agents, any
federal, state or local income or other taxes, any membership fees of the
Investment Company Institute and similar organizations, fidelity bond and
directors' and officers' liability insurance premiums, as well as any
extraordinary expenses, such as indemnification payments or damages awarded in
litigation or settlements made. The Adviser voluntarily limits the expenses of
each Fund, other than for brokers' commissions, transfer taxes and other fees
relating to portfolio transactions and extraordinary
SAI-9
<PAGE>
expenses, to an annual rate of .85% of the value of net assets of the All
America Fund and .70% of the value of net assets of the Bond Fund and .40% of
the value of the net assets of the Money Market Fund. The Adviser may
discontinue such policy at any time.
The Subadvisers. With respect to the management of approximately 30% of the
assets of the All America Fund (the "Active Assets"), the Adviser engages
subadvisory services of three subadvisers--Palley-Needelman Asset Management,
Inc. ("Palley-Needelman"), Oak Associates, Ltd., and Fred Alger Management,
Inc. ("Alger Management"). Each Subadviser is registered as an investment
adviser under the Investment Advisers Act of 1940.
Each of the Subadvisers, with respect to the assets for which it acts as
subadviser, shall, subject to the supervision of the Adviser and the Board of
Directors of the Investment Company, render investment advisory services and
assume the obligations including research, making recommendations and regular
reports to the Board of Directors of the Investment Company, maintenance of
records, and providing all the office space, facilities, equipment, material
and personnel necessary to fulfill its obligations under the Subadvisory
Agreement.
Subadvisory Fees. Each of the Subadvisory Agreements provides that the Adviser
will pay to the Subadviser an amount calculated daily at the following annual
rates: Palley-Needelman, .30%; Oak Associates, .30%; and Alger Management,
.45%; of the value of the net assets for which the Subadviser is providing
investment advisory services. The fees paid by the Adviser to the Subadvisers
during 1996 totaled $35,107, with $9,910 to Palley-Needelman, $10,835 to Oak
Associates and $14,362 to Alger Management and during 1997 totaled $58,400,
with $17,131 to Palley-Needelman, $17,285 to Oak Associates and $23,984 to
Alger Management.
Subadvisory Agreements. The Subadvisory Agreements were approved by a majority
of the non-interested directors on March 12, 1996. The Subadvisory Agreements
with the Subadvisers for the All America Fund were approved by the Adviser, as
the Fund's sole shareholder on April 23, 1996.
ADMINISTRATIVE AGREEMENTS
ACCOUNTING AND RECORDKEEPING AGENT
The Adviser serves as accounting and recordkeeping agent for the Funds. Under
its Investment Accounting Agreement with the Investment Company, the Adviser
performs accounting and recordkeeping functions related to portfolio
transactions as required by the Investment Company Act, provides the
Investment Company with accounting and related reports on a periodic basis,
and calculates the net asset value of each Fund in the manner described in the
Prospectus. As compensation for its services, the Adviser receives from each
Fund a monthly base fee of $500 plus a monthly minimum fee of $2,000, or if an
asset-based fee of .0225% of the Investment Company net assets would result in
a fee greater than the aggregate of the Fund minimums, the Fund's proportion
of the asset-based fee, and is reimbursed for out-of-pocket expenses it incurs
in performing its services to the Investment Company.
TRANSFER AGENT
State Street Bank and Trust Company, Boston, Massachusetts ("State Street")
serves as transfer agent and dividend disbursing agent for Fund shares. Under
its Transfer Agency and Service Agreement with the Investment Company, State
Street is obligated to maintain shareholder accounts to reflect purchases and
redemptions of Fund shares; prepare and transmit payments for dividends and
distributions declared by the Investment Company; mail proxy materials,
shareholder reports and prospectuses to current shareholders; and prepare and
mail account and confirmation statements for shareholders. For its services,
State Street receives from each Fund a monthly maintenance fee based on the
number of holders of Fund shares, ranging from a minimum of $1,000 per month
for 0-15 shareholders to $2,500 per month for 51-200 shareholders, and a trade
processing fee for each trade and is reimbursed for out-of-pocket expenses.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser and the Subadvisers are responsible for decisions to buy and sell
securities for the Funds of the Investment Company for which they provide
advisory services as well as for selecting brokers and, where applicable,
negotiating the amount of the commission rate paid. As a general matter, the
Adviser and the Subadvisers select broker-dealers which, in their best
judgment, provide prompt and reliable execution at favorable security prices
and reasonable commission rates. The Adviser and the Subadvisers may place
certain orders with affiliates, subject to the requirements of the Investment
Company Act of 1940. When purchasing or selling securities trading on the
over-the-counter market, the Adviser and the Subadvisers will generally
execute the transaction with a broker engaged in making a market for such
securities.
SAI-10
<PAGE>
During 1997, Mutual of America Securities Corporation, an affiliate of the
Adviser, received brokerage commissions of $2,070, which represented 4.15% of
the total brokerage commissions paid by the Investment Company and 4.0% of the
aggregate dollars of transactions effected by the Investment Company.
During 1997, Fred Alger & Co., Inc., an affiliate of Alger Management,
received brokerage commissions of $18,793, which represented 37.65% of the
total brokerage commissions paid by the Investment Company and 30.8% of the
aggregate dollars of transactions effected by the Investment Company. During
1996, Fred Alger & Co., Inc. received brokerage commissions of $5,490, which
represented approximately 10.7% of the total brokerage commissions paid by the
Investment Company and approximately 5.8% of the aggregate dollars of
transactions effected by the Investment Company.
Brokerage commissions are negotiated, as there are no standard rates. All
brokerage firms provide the service of execution of the order made; some
brokerage firms also provide research and statistical data, and research
reports on particular companies and industries are customarily provided by
brokerage firms to large investors. In negotiating commissions, consideration
is given by the Adviser to the use and value of the data and to the quality of
execution provided. The valuation of such data may be judged with reference to
a particular order or, alternatively, may be judged in terms of its value to
the overall management of the Investment Company.
The Adviser, and each Subadviser, will place orders with brokers providing
useful research and statistical data services if reasonable commissions can be
negotiated for the total services furnished even though lower commissions may
be available from brokers not providing such services. The Adviser, and each
Subadviser, uses these services in connection with all of its investment
activities, and some of the data or services obtained in connection with the
execution of transactions for the Investment Company may be used in managing
other investment accounts. Conversely, data or services obtained in connection
with transactions in other accounts may be used by the Adviser or a Subadviser
in providing investment advice to the Investment Company. To the extent that
the Adviser or a Subadviser uses research and statistical data services so
obtained, its expenses may be reduced and or Subadviser such data has
therefore been and is one of the factors considered by the Adviser, in
determining its fee for investment advisory services.
At times, transactions for the Investment Company may be executed together
with purchases or sales of the same security for other accounts of the
Adviser. When making concurrent transactions for several accounts, an effort
is made to allocate executions fairly among them. Transactions of this type
are executed only when the Adviser or Subadviser believes it to be in the best
interests of the affected Fund(s), as well as any other accounts involved.
However, the possibility exists that concurrent executions may work out to the
disadvantage of the Fund(s) involved.
PORTFOLIO TURNOVER
Rate of portfolio turnover will not be a limiting factor when the Adviser or a
Subadviser deems it appropriate to purchase or sell securities for a Fund. The
portfolio turnover rate in any year will depend on market conditions.
The Bond Fund may realize short-term gains to the extent the Adviser considers
such realizations to be advantageous in light of existing market conditions,
which will increase portfolio turnover.
The Money Market Fund will seek maximum return on its assets by trading to
take advantage of short-term market variations. For this reason, and because
of the short-term nature of the money market instruments that will be
purchased by the Fund, the Money Market Fund will probably have a high annual
rate of portfolio turnover that cannot be predicted (although the Money Market
Fund may be deemed not to have a calculable turnover rate for reporting
purposes because all or most of its portfolio securities are excluded under
the method of calculation of turnover rate prescribed by the Securities and
Exchange Commission).
For the Active Assets of the All America Fund, the Adviser and Subadvisers
generally will not hold all of the investments for an extended period. Since
the Indexed Assets of the All America Fund will attempt to duplicate the
investment results of the S&P 500 Index, it is expected that investments will
be held generally for longer periods.
PURCHASE AND PRICING OF SECURITIES
The Investment Company will offer and sell its shares at each Fund's per share
net asset value, determined in the manner set forth in the Prospectus. The
methods used to value the assets of each Fund also are set forth in the
Prospectus.
YIELD AND PERFORMANCE INFORMATION
Performance information is computed separately for each Fund in accordance
with the formulas described below. At any time in the future, total return and
yields may be higher or lower than in the past and there can be no assurance
that any historical results will continue.
SAI-11
<PAGE>
Yield of the Money Market Fund. The Money Market Fund calculates a seven-day
"current yield" (eight days when the seventh prior day has no net asset value
because the Investment Company is closed on that day) based on a hypothetical
shareholder account containing one share at the beginning of the seven-day
period. The return is calculated for the period by determining the net change
in the hypothetical account's value for the period, excluding capital changes.
The net change is divided by the share value at the beginning of the period to
give the base period return. This base period return is then multiplied by
365/7 to annualize the yield figure, which is carried to the nearest one-
hundredth of one percent.
Realized capital gains or losses and unrealized appreciation or depreciation
of the assets of the Money Market Fund are included in the hypothetical
account for the beginning of the period but changes during the period are not
included in the value for the end of the period. Values also reflect asset
charges (for advisory fees) as well as brokerage fees and other expenses.
Current yields will fluctuate daily. Accordingly, yields for any given seven-
day period do not necessarily represent future results. It should be
remembered that yield depends on the type, quality, maturities and rates of
return of the Money Market Fund's investments, among other factors. The Money
Market Fund yield does not reflect the cost of insurance and other insurance
company separate account charges. It also should not be compared to the yield
of money market funds made available to the general public because they may
use a different method to calculate yield. In addition, their yields are
usually calculated on the basis of a constant one dollar price per share and
they pay out earnings and dividends which accrue on a daily basis.
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
FUND ONE YEAR LIFE OF FUND
---- -------- ------------
<S> <C> <C>
All America 26.0% 21.9%
Bond 8.9% 8.4%
</TABLE>
CUMULATIVE TOTAL RETURN FOR
PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
FUND ONE YEAR LIFE OF FUND
---- -------- ------------
<S> <C> <C>
All America 26.0% 39.1%
Bond 8.9% 14.3%
</TABLE>
Calculation of Total Return and Average Annual Total Return. Total Return with
respect to the shares of a Fund is a measure of the change in value of an
investment in a Fund over the period covered, which assumes that any dividends
or capital gains distributions are reinvested in that Fund's shares
immediately rather than paid to the investor in cash. The formula for Total
Return with respect to a Fund's shares used herein includes four steps: (1)
adding to the total number of shares purchased by a hypothetical $1,000
investment to the number of shares which would have been purchased if all
dividends and distributions paid or distributed during the period had been
immediately reinvested; (2) calculating the value of the hypothetical initial
investment of $1,000 as of the end of the period by multiplying the total
number of shares on the last trading day of the period by the net asset value
per share on the last trading day of the period; (3) assuming redemption at
the end of the period; and (4) dividing this account value for the
hypothetical investor by the initial $1,000 investment. Average Annual Total
Return is measured by annualizing Total Return over the period.
Calculation of Yield. Yield of the shares of the Bond Fund will be computed by
annualizing net investment income, as determined by the SEC's formula,
calculated on a per share basis, for a recent 30-day (or one month) period and
dividing that amount by the net asset value per share of the Fund on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed income securities (except for
obligations backed by mortgages or other assets) over such period and may
include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The Yield of the Fund will vary from
time to time depending upon market conditions, the composition of the
portfolio and operating expenses allocated to the Fund.
Performance Comparisons. As noted above, each Fund may from time to time
include the Total Return, the Average Annual Total Return and Yield of its
shares in advertisements or in information furnished to shareholders. The
Money Market Fund may from time to time include the Yield and Effective Yield
of its shares in information to shareholders.
SAI-12
<PAGE>
Each Fund may from time to time also include the ranking of its performance
figures relative to such figures for groups of mutual funds categorized by
Lipper Analytical Services ("Lipper") as having the same or similar investment
objectives or by similar services that monitor the performance of mutual
funds. Each Fund may also from time to time compare its performance to average
mutual fund performance figures compiled by Lipper in Lipper Performance
Analysis. Advertisements or information furnished to present shareholders or
prospective investors may also include evaluations of a Fund published by
nationally recognized ranking services and by financial publications that are
nationally recognized such as Barron's, Business Week, CDA Technologies, Inc.,
Changing Times, Dow Jones Industrial Average, Financial Planning, Financial
World, Forbes, Fortune, Hulbert's Financial Digest, Institutional Investor,
Investors Daily, Money, Morningstar Mutual Funds, The New York Times,
Stanger's Investment Adviser, Value Line, The Wall Street Journal,
Wiesenberger Investment Company Service and USA Today.
The performance figures described above may also be used to compare the
performance of a Fund's shares against certain widely recognized standards or
indices for stock and bond market performance, as described below.
The All America Fund will be compared to the Standard & Poor's Composite Index
of 500 Stocks (the "S&P 500 Index"). The S&P 500 Index is a market value-
weighted and unmanaged index showing the changes in the aggregate market value
of 500 stocks relative to the base period 1941-43. The S&P 500 Index is
composed almost entirely of common stocks of companies listed on the NYSE,
although the common stocks of a few companies listed on the American Stock
Exchange or traded OTC are included. The 500 companies represented at any one
time are from a group that includes approximately 400 industrial concerns, as
well as financial services, utility and transportation concerns. The S&P 500
Index represents about 80% of the market value of all issues traded on the
NYSE.
The Bond Fund will be compared to the Lehman Brothers Government/Corporate
Bond Index (the "Lehman Government/Corporate Index"), which is a measure of
the market value of approximately 5,300 bonds each with a face value currently
in excess of $1 million, which have at least one year to maturity and are
rated "Baa" or higher ("investment grade") by a nationally recognized
statistical rating agency.
In reports or other communications to shareholders, the Investment Company may
also describe general economic and market conditions affecting the Funds and
may compare the performance of the Funds with (1) that of mutual funds
included in the rankings prepared by Lipper or similar investment services
that monitor the performance of mutual funds, (2) IBC/Donoghue's Money Fund
Report, (3) other appropriate indices of investment securities and averages
for a peer universe of funds which are described in this Statement of
Additional Information, or (3) data developed by the Adviser derived from such
indices or averages.
DESCRIPTION OF CORPORATE BOND RATINGS
Description of Corporate bond ratings of Moody's Investors Services, Inc.:
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
SAI-13
<PAGE>
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Description of corporate bond ratings of Standard & Poor's Corporation:
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is very strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB--B--CCC--CC--Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C--The rating C is reserved for income bonds on which no interest is being
paid.
D--Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
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.
ADDITIONAL DISCUSSION OF DIVIDENDS, DISTRIBUTIONS AND TAXES
The discussion below supplements the discussion in the Prospectus under
"Dividends, Distributions and Taxes", which an investor should also read. No
attempt has been made to present a detailed explanation of the federal, state
or local income tax treatment of a Fund or its shareholders, and the tax
discussion contained in the Prospectus and this Statement of Additional
Information is not intended as a substitute for careful tax planning.
Potential purchasers of shares of a Fund are urged to consult their tax
advisers regarding specific questions as to federal, foreign state or local
taxes. Foreign investors should consider applicable foreign taxes in their
evaluation of an investment in a Fund as well.
Due to investment laws in certain foreign countries, it is anticipated that a
Fund's investments in equity securities in such countries may consist of
shares of investment companies (or similar investment entities) organized
under foreign law or of
SAI-14
<PAGE>
ownership interests in special accounts, trusts or partnerships. If the Fund
purchases shares of an investment company (or similar investment entity)
organized under foreign law, the Fund will be treated as owning shares in a
passive foreign investment company ("PFIC") for U.S. federal income tax
purposes. The Fund may be subject to U.S. federal income tax, and an
additional tax in the nature of interest, on a portion of distributions from
such company and on gain from the disposition of such shares (collectively
referred to as "excess distributions"), even if such excess distributions are
paid by the Fund as a dividend to its shareholders. The Fund may be eligible
to make an election with respect to certain PFICs in which it owns shares that
will allow it to avoid the taxes on excess distributions. However, such
election may cause the Fund to recognize income in a particular year in excess
of the distributions received from such PFICs. Alternatively, under proposed
regulations the Fund would be able to elect to "mark to market" at the end of
each taxable year all shares that it holds in PFICs. If it made this election,
the Fund would recognize as ordinary income any increase in the value of such
shares. Unrealized losses, however, would not be recognized. By making the
mark-to-market election, the Fund could avoid imposition of the interest
charge with respect to its distributions from PFICs, but in any particular
year might be required to recognize income in excess of the distributions it
received from PFICs and its proceeds from dispositions of PFIC stock.
Foreign currency gains or losses from certain debt instruments are generally
treated as ordinary income or loss. These gains or losses will generally
increase or decrease the amount of a Fund's investment company taxable income
available to be distributed to shareholders as ordinary income. Additionally,
if losses of this nature exceed a Fund's other investment company taxable
income during a taxable year, a Fund would not be able to make any ordinary
income dividend distributions. Any such distribution made before the losses
were realized (but in the same taxable year) would be recharacterized as a
return of capital to a Fund's shareholders, thereby reducing the shareholders'
basis in the Fund's shares, and resulting in a capital gain for any
shareholder who received a distribution greater than that shareholder's basis
in the Fund's shares (assuming the shares were held as capital assets).
The Funds may purchase debt securities that contain original issue discount.
Original issue discount that accrues in a taxable year is treated as income
earned by a Fund and is subject to the distribution requirements of the
Internal Revenue Code. A Fund, however, generally will not receive any cash
income for the original issue discount income it earns in a taxable year. Debt
securities that a Fund acquires also may be subject to the market discount
rules.
Individuals are subject to graduated federal tax rates of up to 39.6% of their
taxable incomes. The marginal tax rate may be in excess of 39.6% due to
adjustments that reduce or eliminate the benefit of the personal exemption and
itemized deductions for individuals with gross income in excess of certain
threshold amounts.
Capital gains to individuals from the sale of assets held for not more than 12
months are subject to tax at the same rates applicable to ordinary income. The
maximum tax rate on capital gains of individuals from the sale of assets held
for more than 12 months but less than 18 months is 28% and is 20% for capital
gains on assets held for more than 18 months. Capital losses may be used to
offset capital gains. In addition, individuals may deduct up to $3,000 of net
capital loss each year to offset ordinary income. Excess net capital loss may
be carried forward to future years.
Capital gains of corporations are subject to tax at the same rates applicable
to ordinary income. Capital losses may be used only to offset capital gains
and excess net capital loss may be carried back three years and forward five
years.
Certain corporations are entitled to a 70% dividends received deduction for
distributions from certain domestic corporations. The All America Fund will
designate the portion of any distributions which qualify for the 70% dividends
received deduction. The amount so designated may not exceed the amount
received by the All America Fund for its taxable year that qualifies for the
dividends received deduction. (Since none of the income of the Bond Fund or
the Money Market Fund is expected to be derived from dividends from domestic
corporations, it is not anticipated that any portion of the ordinary income
dividends of the Bond Fund or the Money Market Fund will qualify for the
dividends received deduction.)
Ordinary income dividends paid by a Fund to a shareholder that is nonresident
alien or a foreign entity will be subject to a 30% U.S. withholding tax
applicable to foreign persons, unless a reduced rate of withholding or a
withholding exemption is provided under applicable law or an applicable tax
convention between the United States and a particular foreign country.
Dividends and interest received by a Fund may be subject to withholding and
other taxes imposed by foreign countries. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes.
These foreign taxes will reduce the amount of funds available for
distributions by a Fund, but are included in the taxable income reported by
the Fund's shareholders. Since stock and securities of foreign issuers will
account for less than 50% of the assets of each Fund, the Fund's shareholders
will not be able to claim a credit or deduction for these foreign taxes paid
by a Fund.
SAI-15
<PAGE>
A Fund may be required to withhold a 31% tax on ordinary income dividends,
capital gains dividends and redemption payments made to certain shareholders
("backup withholding"). Generally, backup withholding will apply to a
shareholder that has not furnished the Fund with a certified taxpayer
identification number, that has furnished an incorrect taxpayer identification
number, or in respect of which the Internal Revenue Service has notified the
Fund that backup withholding is required.
Information set forth in the Prospectus and this Statement of Additional
Information which relates to federal taxation is only a summary of some of the
important federal tax considerations generally affecting purchasers of shares
of a Fund. In addition, the tax discussion in the Prospectus and this
Statement of Additional Information is based on tax laws and regulations which
are in effect on the date of the Prospectus and this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action.
In addition, ordinary income and capital gain dividends, along with gain from
the sale of Fund shares, may be subject to state and local taxes. State law
varies as to whether dividend income paid by a Fund attributable to U.S.
Government obligations is exempt from state income tax, and a shareholder
should consult its tax adviser with respect to this issue.
Private Foundations: Private foundations and their managers are subject to
excise taxes under the Code if they invest "any amount in such a manner as to
jeopardize the carrying out of any of the foundation's exempt purposes." This
rule requires a foundation manager, in making an investment, to exercise
"ordinary business care and prudence" under the facts and circumstances
prevailing at the time of making the investment, in providing for the short-
term and long-term needs of the foundation in carrying out its exempt
purposes. The factors which a foundation manager may take into account in
assessing an investment under this standard include the expected rate of
return (both income and capital appreciation), the risks of rising and falling
price levels, and the need for diversification within the foundation's
portfolio.
A substantial percentage of investments of certain "private operating
foundations", as defined in the Code, may be restricted to assets directly
devoted to their tax-exempt purposes. Otherwise, generally, rules similar to
those discussed above govern their operations.
Each manager of a private foundation should consult the manager's and the
foundation's tax advisers regarding the foregoing considerations.
Endowment Funds: Investment managers of endowment funds should consider
whether the acquisition by such funds of shares in the Funds is legally
permissible. This is not a matter of federal law, but is determined under
applicable state statutes. It should be noted, however, that under the Uniform
Management of Institutional Funds Act, which has been adopted in various forms
by a large number of states, participation in mutual funds or similar
organizations, in which funds are commingled and investment determinations are
made by persons other than the governing board of the endowment fund, is
permitted.
Each investment manager of an endowment fund should consult the endowment
fund's counsel regarding the foregoing considerations.
RETIREMENT TRUSTS
General: The Funds may accept investments from tax-qualified pension, profit-
sharing or stock bonus plans, governmental plans and units, and Taft-Hartley
plans (all such entities hereinafter being referred to as "Retirement
Trusts"). A fiduciary of a Retirement Trust other than a governmental plan or
unit (a "Qualified Plan") is subject to certain requirements under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including the discharge of duties solely in the interest of, and for the
exclusive purpose of providing benefits to, the Qualified Plan's participants
and beneficiaries. A fiduciary of a Qualified Plan is required to perform the
fiduciary's duties with the care, skill, prudence and diligence under the then
prevailing circumstances of a prudent person acting in a like capacity and
familiar with such matters, to diversify investments so as to minimize the
risk of large losses and to act in accordance with the Qualified Plan's
governing documents where not inconsistent with ERISA. ERISA permits the
Department of Labor to assess a civil penalty against a fiduciary of a
Qualified Plan involved in a breach of fiduciary responsibility of up to 20%
of the amount received by the Qualified Plan in connection therewith.
Prohibited Transactions: ERISA also prohibits certain transactions between an
employee benefit plan and the parties in interest with respect to such plan
(including fiduciaries). Under the Code, similar prohibitions apply all
Qualified Plans. Furthermore, ERISA and the Code prohibit parties in interest
(including fiduciaries) of a Qualified Plan from engaging in various acts of
self-dealing such as dealing with assets of a Qualified Plan for their own
account or interest.
SAI-16
<PAGE>
Investment Considerations: In considering an investment in the Funds of a
portion of the assets of any Qualified Plan, a fiduciary should consider,
among other factors: (a) whether the investment is permitted by the documents
and instruments governing the Qualified Plan; (b) whether the investment
satisfies the diversification requirements of Section 404(a)(1)(C) of ERISA,
if applicable; (c) whether the investment provides sufficient liquidity to
permit benefit payments to be made as they become due; (d) whether the
investment is for the exclusive purpose of providing benefits to participants
and their beneficiaries; and (e) whether the investment may constitute a
"prohibited transaction" (within the meaning of Section 406 of ERISA and
Section 4975(c) of the Code).
Each fiduciary of a Qualified Plan (and any other person subject to ERISA)
should consult such person's tax or other advisers regarding the foregoing
considerations.
INDEPENDENT AUDITORS
The financial statements included in this Statement of Additional Information
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
CUSTODIAN
The Chase Manhattan Bank, N.A., New York, New York, acts as Custodian of the
Investment Company's assets.
FINANCIAL STATEMENTS
Financial statements of the Investment Company for the year ended December 31,
1997 are included as follows:
<TABLE>
<S> <C>
Portfolio Management Discussions...................................... 1
Portfolio of Investments in Securities:
All America Fund.................................................... 4
Bond Fund........................................................... 17
Money Market Fund................................................... 18
Statement of Assets and Liabilities................................... 19
Statement of Operations............................................... 20
Statements of Changes in Net Assets................................... 21
Financial Highlights.................................................. 22
Notes to Financial Statements......................................... 23
Report of Independent Public Accountants.............................. 26
</TABLE>
SAI-17
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS, INC.
We are pleased to provide Mutual of America Institutional Funds' annual
report to shareholders. The All America Fund and the Bond Fund commenced
operations on May 1, 1996 and the Money Market Fund commenced on May 1, 1997.
These funds are designed principally as investment vehicles for endowments,
foundations and other institutional investors. The investment philosophy of
the funds is modeled after similarly named funds available under annuity
contracts and variable universal life insurance policies issued by Mutual of
America Life Insurance Company and The American Life Insurance Company of New
York.
The U.S. economy grew briskly in 1997 fueled by the good profit growth which
is anticipated to slow in 1998. The markets responded with another good year
buoyed by the lowest unemployment rate in 25 years coupled with low inflation.
Strong Corporate earnings and cash flows into the equity market have propelled
the S&P 500 up 33.4% for the year. The Dow Jones Industrial Average rose
nearly 25% for the same period. In the debt markets, rates have responded to
the market pressures with the long treasury average yield at its lowest since
1993.
For 1998 we expect some disinflation with prices for goods coming down. The
market place does not feel any Federal Reserve action will be needed to raise
rates and indeed there may be some inclination to lower rates.
The annual total return performance of each fund for the year ended December
31, 1997 was as follows. For the Money Market Fund, the return shown is
cumulative from its May 1, 1997 inception.
<TABLE>
<S> <C>
All America Fund.................................................. +26.0%
Bond Fund......................................................... + 8.9%
Money Market Fund................................................. + 3.5%
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return and
principal value will fluctuate, so shares, when redeemed, may be worth more or
less than when purchased.
On the pages which immediately follow are brief presentations and graphs for
each fund (except the Money Market Fund) which illustrate each fund's
respective:
. Historical total return achieved over specified periods, expressed as an
average annual rate and as a cumulative rate;
. Equivalent in dollars of a $10,000 hypothetical investment at the
beginning of each specified period; and
. Historical performance compared with appropriate indexes.
The portfolios of each fund and financial statements are presented in the
pages which then follow.
We look forward to participating productively in the equity, fixed income
and money markets throughout 1998.
Sincerely,
/s/ Dolores J. Morrissey
Dolores J. Morrissey
Chairman of the Board and President,
Mutual of America Institutional Funds, Inc.
1
<PAGE>
ALL AMERICA FUND
The All America Fund's investment objective is to outperform the S&P 500 by
providing a diversified portfolio of assets with diversified management and a
broad exposure to the market. It is comprised of several distinct segments
which have specifically defined roles. The largest segment (approximately 60%)
attempts to reflect the performance of the S&P 500. Four actively managed
segments, managed by three subadvisors and Mutual of America Capital
Management Corporation each consisting of approximately 10% of the portfolio's
total assets, comprise the remainder of the Fund. These segments concentrate
in the following areas: small cap value, small cap growth, large cap value and
mid to large cap growth.
For the year ended December 31, 1997, the Fund's total return of 26.0% was
below that of its respective index, the Standard & Poor's Composite 500 Index
(S&P 500) which returned 33.4%. The performance of the All America Fund, in
relation to the index was hindered by the overall laggard performance
experienced by smaller capitalized companies which comprised approximately
half of the actively managed assets of this fund.
All America Fund S&P 500 Index
- -------------------------------------------------------------------------------
5/96* 10,000 10,000
- -------------------------------------------------------------------------------
12/96 11,043 11,515
- -------------------------------------------------------------------------------
12/97 13,909 15,356
- -------------------------------------------------------------------------------
All America Fund S & P 500 Index
---------------- ----------------------
Period Growth Total Return Period Growth Total Return
Ended of Cumu- Annual Ended of Cumu- Annual
12/31/97 $10,000 lative Average 12/31/97 $10,000 lative Average
- ---------------------------------- ------------------------------------
1 year $12,595 26.0% 26.0% 1 year $13,336 33.4% 33.4%
Since Since
Inception* $13,909 39.1% 21.9% Inception* $15,356 53.6% 29.4%
- ---------------------------------- ------------------------------------
The line representing the performance return of the All America Fund
includes expenses (such as transaction costs, management fees and net
operating expense) that reduce returns, while the performance return line of
the index does not.
2
<PAGE>
MONEY MARKET FUND
The Money Market's total return since its May 1, 1997 inception was 3.5%,
which when expressed as an annualized rate was 5.2%, matching the Salomon
Brothers three-month Treasury Bill Index which returned 5.2% for the year. The
seven day annualized effective yield as of 2/17/98 is 5.52%. As with all past
performance reportings, this yield is not necessarily indicative of future
actual yields.
BOND FUND
The Bond Fund seeks a high level of return consistent with preservation of
capital through investment in publicly traded investment grade debt
securities. The performance of the Bond Fund for the year ended December 31,
1997 was 8.9% versus its index, the Lehman Brothers Government/Corporate Index
which returned 9.8%.
Bond Fund Lehman Bros. Gov't./Corp. Bond Index
--------- ----------------------------------------
Period Growth Total Return Period Growth Total Return
Ended of Cum- Annual Ended of Cumu- Annual
12/31/97 $10,000 lative Average 12/31/97 $10,000 lative Average
- ---------------------------------- ----------------------------------------
1 year $10,890 8.9% 8.9% 1 year $10,976 9.8% 9.8%
Since 5/1/96 Since 5/1/96
(Inception) $11,435 14.3% 8.4% (Inception) $11,646 16.5% 9.6%
- --------------------------------- ----------------------------------------
The line representing the performance return of the Bond Fund includes
expenses (such as transaction costs, management fees and net operating
expense) that reduce returns, while the performance return line of the index
does not.
3
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
INDEXED ASSETS:
<S> <C> <C>
Common Stocks
3Com Corp. ................................................. 1,544 $ 53,943
Abbott Laboratories......................................... 3,429 224,813
Adobe Systems, Inc. ........................................ 327 13,488
Advanced Micro Devices, Inc. ............................... 631 11,318
Aeroquip-Vickers, Inc. ..................................... 126 6,181
Aetna, Inc. ................................................ 671 47,347
Ahmanson (H.F.) & Co. ...................................... 423 28,314
Air Products & Chemicals Corp. ............................. 491 40,384
Airtouch Communications, Inc. .............................. 2,257 93,806
Alberto Culver Co. Cl B..................................... 251 8,047
Albertson's, Inc. .......................................... 1,101 52,159
Alcan Aluminum Ltd. ........................................ 1,017 28,094
Allegheny Teledyne Inc. .................................... 788 20,389
Allergan, Inc. ............................................. 291 9,766
AlliedSignal, Inc. ......................................... 2,536 98,745
Allstate Corp. ............................................. 1,922 174,661
Alltel Corp. ............................................... 837 34,369
Aluminum Co. of America..................................... 779 54,822
Alza Corp. ................................................. 381 12,120
Amerada Hess Corp. ......................................... 411 22,553
American Electric Power Co. ................................ 848 43,778
American Express Co. ....................................... 2,084 185,997
American General Corp. ..................................... 1,092 59,056
American Greetings Corp. Cl A............................... 337 13,185
American Home Products Corp. ............................... 2,906 222,309
American Int'l. Group, Inc. ................................ 3,142 341,692
American Stores Co. ........................................ 1,220 25,086
Ameritech Corp. ............................................ 2,453 197,466
Amgen, Inc. ................................................ 1,188 64,300
Amoco Corp. ................................................ 2,183 185,827
Amp, Inc. .................................................. 984 41,328
AMR Corp. .................................................. 412 52,942
Anadarko Petroleum Corp. ................................... 267 16,203
Andrew Corp. ............................................... 404 9,696
Anheuser Busch Cos., Inc. .................................. 2,204 96,976
Aon Corp. .................................................. 749 43,910
Apache Corp. ............................................... 405 14,200
Apple Computer, Inc. ....................................... 571 7,494
Applied Materials, Inc. .................................... 1,634 49,224
Archer Daniels Midland Co. ................................. 2,510 54,435
Armco, Inc. ................................................ 480 2,370
Armstrong World Inds., Inc. ................................ 183 13,679
Asarco, Inc. ............................................... 189 4,240
Ashland, Inc. .............................................. 335 17,985
AT&T Corp. ................................................. 7,279 445,838
Atlantic Richfield Co. ..................................... 1,437 115,139
Autodesk, Inc. ............................................. 215 7,955
Automatic Data Processing, Inc. ............................ 1,312 80,524
AutoZone, Inc. ............................................. 677 19,633
Avery Dennison Corp. ....................................... 462 20,674
Avon Products, Inc. ........................................ 593 36,395
Baker Hughes, Inc. ......................................... 756 32,980
Ball Corp. ................................................. 135 4,767
Baltimore Gas & Electric Co. ............................... 662 22,549
Banc One Corp. ............................................. 2,631 142,896
Bank of New York, Inc. ..................................... 1,689 97,645
BankAmerica Corp. .......................................... 3,109 226,957
BankBoston Corp. ........................................... 653 61,341
Bankers Trust New York Corp. ............................... 449 50,484
Bard (C.R.), Inc. .......................................... 257 8,047
Barnett Banks, Inc. ........................................ 865 62,171
Barrick Gold Corp. ......................................... 1,670 31,103
Battle Mountain Gold Co. ................................... 1,029 6,045
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
INDEXED ASSETS (CONTINUED):
<S> <C> <C>
Common Stocks (Continued)
Bausch & Lomb, Inc. ........................................ 248 $ 9,827
Baxter International, Inc. ................................. 1,252 63,147
Bay Networks, Inc. ......................................... 941 24,054
BB&T Corp. ................................................. 613 39,270
Becton Dickinson & Co. ..................................... 547 27,350
Bell Atlantic Corp. ........................................ 3,479 316,589
BellSouth Corp. ............................................ 4,442 250,140
Bemis Co. .................................................. 238 10,486
Beneficial Corp. ........................................... 238 19,783
Bethlehem Steel Corp. ...................................... 505 4,355
Biomet, Inc. ............................................... 499 12,786
Black & Decker Corp. ....................................... 423 16,523
Block (H & R), Inc. ........................................ 466 20,882
Boeing Co. ................................................. 4,487 219,582
Boise Cascade Corp. ........................................ 249 7,532
Boston Scientific Corp. .................................... 870 39,911
Briggs & Stratton Corp. .................................... 114 5,536
Bristol-Myers Squibb Co. ................................... 4,457 421,743
Brown-Forman Corp. Cl B .................................... 309 17,072
Browning Ferris Inds., Inc. ................................ 854 31,598
Brunswick Corp. ............................................ 445 13,489
Burlington Northern Santa Fe Corp. ......................... 697 64,777
Burlington Resources, Inc. ................................. 1,039 46,560
Cabletron Systems, Inc. .................................... 707 10,605
Caliber System, Inc. ....................................... 174 8,471
Campbell Soup Co. .......................................... 2,051 119,214
Cardinal Health, Inc. ...................................... 486 36,510
Carolina Power & Light Co. ................................. 678 28,772
Case Corp. ................................................. 334 20,186
Caterpillar, Inc. .......................................... 1,669 81,050
CBS Corp. .................................................. 3,156 92,904
Cendant Corporation ........................................ 3,544 121,811
Centex Corp. ............................................... 130 8,181
Central & South West Corp. ................................. 951 25,736
Ceridian Corp. ............................................. 362 16,584
Champion International Corp. ............................... 430 19,484
Charles Schwab Corp. ....................................... 1,186 49,737
Charming Shoppes, Inc. ..................................... 474 2,221
Chase Manhattan Corp. ...................................... 1,898 207,831
Chevron Corp. .............................................. 2,934 225,918
Chrysler Corp. ............................................. 2,970 104,506
Chubb Corp. ................................................ 763 57,701
CIGNA Corp. ................................................ 332 57,456
Cincinnati Financial Corp. ................................. 246 34,624
Cincinnati Milacron, Inc. .................................. 179 4,642
Cinergy Corp. .............................................. 707 27,086
Circuit City Group, Inc. ................................... 441 15,683
Cisco Systems, Inc. ........................................ 4,511 251,488
Citicorp ................................................... 2,053 259,576
Clear Channel Communications, Inc. ......................... 439 34,873
Clorox Co. ................................................. 463 36,605
Coastal Corp. .............................................. 475 29,420
Coca-Cola Co. .............................................. 11,087 738,671
Cognizant Corp. ............................................ 736 32,798
Colgate-Palmolive Co. ...................................... 1,326 97,461
Columbia Energy Group ...................................... 248 19,483
Columbia HCA Healthcare Corp. .............................. 2,903 86,001
Comcast Corp. Cl A ......................................... 1,563 49,332
Comerica, Inc. ............................................. 473 42,688
Compaq Computer Corp. ...................................... 3,388 191,210
Computer Associates Intl., Inc. ............................ 2,446 129,332
Computer Sciences Corp. .................................... 346 28,891
Conagra, Inc. .............................................. 2,120 69,562
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
INDEXED ASSETS (CONTINUED):
<S> <C> <C>
Common Stocks (Continued)
Conseco, Inc. .............................................. 842 $ 38,258
Consolidated Edison Inc. ................................... 1,053 43,173
Consolidated Natural Gas Co. ............................... 427 25,833
Cooper Industries, Inc. .................................... 547 26,803
Cooper Tire & Rubber Co. ................................... 353 8,604
Coors (Adolph) Co. Cl B .................................... 166 5,519
CoreStates Financial Corp. ................................. 887 71,015
Corning, Inc. .............................................. 1,034 38,387
Costco Co. ................................................. 952 42,483
Countrywide Credit Industries .............................. 480 20,580
CPC International, Inc. .................................... 643 69,444
Crane Co. .................................................. 206 8,935
Crown Cork & Seal Co., Inc. ................................ 575 28,821
CSX Corp. .................................................. 976 52,704
Cummins Engine, Inc. ....................................... 171 10,099
CVS Corp. .................................................. 771 49,392
Cyprus Amax Minerals Co. ................................... 419 6,442
Dana Corp. ................................................. 468 22,230
Darden Restaurants, Inc. ................................... 686 8,575
Data General Corp. ......................................... 214 3,731
Dayton Hudson Corp. ........................................ 975 65,812
Deere & Co. ................................................ 1,130 65,893
Dell Computer Corp. ........................................ 1,463 122,892
Delta Air Lines, Inc. ...................................... 329 39,151
Deluxe Corp. ............................................... 369 12,730
Digital Equipment Corp. .................................... 663 24,531
Dillard's Inc. ............................................. 501 17,660
Disney (Walt) Co. .......................................... 3,025 299,664
Dominion Resources, Inc. ................................... 833 35,454
Donnelley (R.R.) & Sons Co. ................................ 656 24,436
Dover Corp. ................................................ 996 35,980
Dow Chemical Co. ........................................... 1,022 103,733
Dow Jones & Co., Inc. ...................................... 430 23,085
Dresser Industries, Inc. ................................... 785 32,920
DSC Communications Corp. ................................... 526 12,624
DTE Energy Co. ............................................. 650 22,546
Du Pont (E.I.) De Nemours & Co. ............................ 5,067 304,336
Duke Energy Corp. .......................................... 1,613 89,319
Dun & Bradstreet Corp. ..................................... 764 23,636
Eastern Enterprises ........................................ 91 4,095
Eastman Chemical Co. ....................................... 351 20,906
Eastman Kodak Co. .......................................... 1,460 88,786
Eaton Corp. ................................................ 346 30,880
Echlin, Inc. ............................................... 283 10,241
Echo Bay Mines, Ltd. ....................................... 625 1,523
Ecolab, Inc. ............................................... 290 16,076
Edison International ....................................... 1,710 46,490
EG&G, Inc. ................................................. 205 4,266
EMC Corp. .................................................. 2,212 60,691
Emerson Electric Co. ....................................... 1,987 112,141
Engelhard Corp. ............................................ 647 11,241
Enron Corp. ................................................ 1,426 59,268
Entergy Corp. .............................................. 1,081 32,362
Equifax, Inc. .............................................. 676 23,955
Exxon Corp. ................................................ 11,055 676,427
Fannie Mae ................................................. 4,754 271,275
Federal Express Corp. ...................................... 515 31,447
Federated Department Stores, Inc. .......................... 937 40,349
Fifth Third Bancorp ........................................ 691 56,489
First Chicago NBD Corp. .................................... 1,304 108,884
First Data Corp. ........................................... 1,919 56,130
First Union Corp. .......................................... 2,816 144,320
FirstEnergy Corp. .......................................... 984 28,536
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
INDEXED ASSETS (CONTINUED):
<S> <C> <C>
Common Stocks (Continued)
Fleet Financial Group, Inc. ................................ 1,120 $ 83,930
Fleetwood Enterprises, Inc. ............................... 161 6,832
Fluor Corp. ................................................ 376 14,053
FMC Corp. .................................................. 167 11,241
Ford Motor Co. ............................................. 5,380 261,938
Fort James Corp. of Virginia ............................... 936 35,802
Fortune Brands, Inc. ....................................... 768 28,464
Foster Wheeler Corp. ....................................... 182 4,925
FPL Group, Inc. ............................................ 816 48,297
Freddie Mac ................................................ 3,114 130,593
Freeport-McMoran Copper & Gold, Inc. Cl B .................. 891 14,033
Frontier Corp. ............................................. 736 17,710
Fruit of the Loom, Inc. .................................... 328 8,405
Gannett, Inc. .............................................. 1,270 78,501
Gap, Inc. .................................................. 1,802 63,840
General Dynamics Corp. ..................................... 280 24,202
General Electric Co. ....................................... 14,679 1,076,565
General Mills, Inc. ........................................ 717 51,355
General Motors Corp. ....................................... 3,171 192,241
General Re Corp. ........................................... 357 75,684
General Signal Corp. ....................................... 226 9,534
Genuine Parts Co. .......................................... 807 27,387
Georgia-Pacific (Timber Group) ............................. 410 24,907
Giant Food, Inc. ........................................... 269 9,061
Gillette Co. ............................................... 2,508 251,897
Golden West Financial Corp. ................................ 254 24,844
Goodrich (B.F.) Co. ........................................ 242 10,027
Goodyear Tire & Rubber Co. ................................. 699 44,473
GPU Inc. ................................................... 541 22,789
Grainger (W.W.), Inc. ...................................... 223 21,672
Great Atl. & Pac. Tea Co. .................................. 171 5,076
Great Lakes Chemical Corp. ................................. 268 12,026
Green Tree Financial Corp. ................................. 609 15,948
GTE Corp. .................................................. 4,285 223,891
Guidant Corp. .............................................. 664 41,334
Halliburton Co. ............................................ 1,174 60,974
Harcourt General, Inc. ..................................... 317 17,355
Harland (John H.) Co. ...................................... 139 2,919
Harnischfeger Industries, Inc. ............................. 221 7,804
Harrah's Entertainment, Inc. ............................... 452 8,531
Harris Corp. ............................................... 356 16,331
Hartford Financial Svs Grp, Inc. ........................... 529 49,494
Hasbro, Inc. ............................................... 569 17,923
HBO & Co. .................................................. 887 42,576
HealthSouth Corp. .......................................... 1,765 48,978
Heinz (H.J.) Co. ........................................... 1,655 84,094
Helmerich & Payne, Inc. .................................... 112 7,602
Hercules, Inc. ............................................. 433 21,677
Hershey Foods Corp. ........................................ 640 39,640
Hewlett-Packard Co. ........................................ 4,661 291,312
Hilton Hotels Corp. ........................................ 1,120 33,320
Home Depot, Inc. ........................................... 3,271 192,580
Homestake Mining Co. ....................................... 658 5,839
Honeywell, Inc. ............................................ 571 39,113
Household International, Inc. .............................. 479 61,102
Houston Industries, Inc. ................................... 1,278 34,106
Humana, Inc. ............................................... 734 15,230
Huntington Bancshares, Inc. ................................ 813 29,268
Ikon Office Solutions, Inc. ................................ 595 16,734
Illinois Tool Works, Inc. .................................. 1,118 67,219
Inco Ltd. .................................................. 748 12,716
Ingersoll Rand Co. ......................................... 743 30,091
Inland Steel Industries, Inc. .............................. 219 3,750
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
INDEXED ASSETS (CONTINUED):
<S> <C> <C>
Common Stocks (Continued)
Intel Corp. ................................................ 7,334 $ 515,213
International Paper Co. .................................... 1,355 58,434
Interpublic Group of Cos., Inc. ............................ 558 27,795
Intl. Business Machines Corp. .............................. 4,358 455,683
Intl. Flavors & Fragrances.................................. 490 25,235
ITT Corp. .................................................. 522 43,260
ITT Industries, Inc. ....................................... 531 16,660
Jefferson-Pilot Corp. ...................................... 317 24,686
Johnson & Johnson .......................................... 6,029 397,160
Johnson Controls, Inc. ..................................... 375 17,906
Jostens, Inc. .............................................. 176 4,059
Kaufman & Broad Home Corp. ................................. 174 3,904
Kellogg Co. ................................................ 1,849 91,756
Kerr-McGee Corp. ........................................... 214 13,548
KeyCorp .................................................... 973 68,900
Kimberly Clark Corp. ....................................... 2,454 121,012
King World Productions, Inc. ............................... 165 9,528
KLA Tencor Corporation ..................................... 375 14,484
Kmart Corp. ................................................ 2,182 25,229
Knight-Ridder, Inc. ........................................ 379 19,708
Kroger Corp. ............................................... 1,140 42,108
Laidlaw, Inc. .............................................. 1,473 20,069
Lilly (Eli) & Co. .......................................... 4,973 346,245
Limited (The), Inc. ........................................ 1,217 31,033
Lincoln National Corp. ..................................... 457 35,703
Liz Claiborne, Inc. ........................................ 300 12,543
Lockheed Martin Corp. ...................................... 869 85,596
Loews Corp. ................................................ 515 54,654
Longs Drug Stores, Inc. .................................... 176 5,654
Louisiana-Pacific Corp. .................................... 490 9,310
Lowe's Companies, Inc. ..................................... 779 37,148
LSI Logic Corp. ............................................ 636 12,561
Lucent Technologies, Inc. .................................. 2,875 229,640
Mallinckrodt, Inc. ......................................... 329 12,502
Manor Care, Inc. ........................................... 285 9,975
Marriott International, Inc. ............................... 570 39,472
Marsh & McLennan Cos., Inc. ................................ 755 56,294
Masco Corp. ................................................ 739 37,596
Mattel, Inc. ............................................... 1,302 48,499
May Department Stores Co. .................................. 1,042 54,900
Maytag Corp. ............................................... 426 15,895
MBIA Inc. .................................................. 400 26,725
MBNA Corp. ................................................. 2,245 61,316
McDermott International Inc. ............................... 249 9,119
McDonald's Corp. ........................................... 3,083 147,213
McGraw-Hill Cos., Inc. ..................................... 443 32,782
MCI Communications Corp. ................................... 3,122 133,660
Mead Corp. ................................................. 468 13,104
Medtronic, Inc. ............................................ 2,095 109,594
Mellon Bank Corp. .......................................... 1,141 69,173
Mercantile Stores, Inc. .................................... 165 10,044
Merck & Co., Inc. .......................................... 5,372 570,775
Meredith Corp. ............................................. 240 8,565
Merrill Lynch & Co., Inc. .................................. 1,485 108,312
MGIC Investment Corp. ...................................... 511 33,981
Micron Technology, Inc. .................................... 944 24,544
Microsoft Corp. ............................................ 5,410 699,242
Millipore Corp. ............................................ 195 6,617
Minnesota Mining & Mfg. Co. ................................ 1,832 150,338
Mirage Resorts, Inc. ....................................... 801 18,222
Mobil Corp. ................................................ 3,522 254,244
Monsanto Co. ............................................... 2,658 111,636
Moore Corp., Ltd. .......................................... 398 6,019
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
INDEXED ASSETS (CONTINUED):
<S> <C> <C>
Common Stocks (Continued)
Morgan (J.P.) & Co., Inc. .................................. 802 $ 90,525
Morgan Stanley Dean Witter Discover and Co. ................ 2,656 157,036
Morton International, Inc. ................................. 628 21,587
Motorola, Inc. ............................................ 2,668 152,242
NACCO Industries, Inc. Cl A................................. 37 3,965
Nalco Chemical Co. ......................................... 299 11,829
National City Corp. ........................................ 964 63,383
National Semiconductor Corp. ............................... 751 19,479
National Service Industries................................. 202 10,011
NationsBank Corp. .......................................... 3,190 193,991
Navistar International Corp. ............................... 327 8,113
New York Times Co. Cl A..................................... 430 28,433
Newell Co. ................................................. 713 30,302
Newmont Mining Corp. ....................................... 700 20,562
NextLevel Systems, Inc. .................................... 660 11,797
Niagara Mohawk Power Corp. ................................. 647 6,793
Nicor, Inc. ................................................ 218 9,196
Nike, Inc. Cl B............................................. 1,294 50,789
Nordstrom, Inc. ............................................ 346 20,889
Norfolk Southern Corp. ..................................... 1,689 52,042
Northern States Power Co. .................................. 311 18,115
Northern Telecom, Ltd. ..................................... 1,175 104,575
Northrop Grumman Corp. ..................................... 299 34,385
Norwest Corp. .............................................. 3,386 130,784
Novell, Inc. ............................................... 1,564 11,730
Nucor Corp. ................................................ 394 19,035
Occidental Petroleum Corp. ................................. 1,519 44,525
Omnicom Group, Inc. ........................................ 726 30,764
Oneok, Inc. ................................................ 139 5,612
Oracle Corp. ............................................... 4,391 97,974
Oryx Energy Co. ............................................ 472 12,036
Owens Corning .............................................. 239 8,155
Owens Illinois.............................................. 629 23,862
Paccar, Inc. ............................................... 349 18,322
Pacific Enterprises......................................... 373 14,034
PacifiCorp. ................................................ 1,327 36,243
Pall Corp. ................................................. 570 11,791
Parametric Technology Co. .................................. 571 27,051
Parker Hannifin Corp. ...................................... 500 22,937
Peco Energy Co. ............................................ 997 24,177
Penney (J.C.) Co., Inc. .................................... 1,115 67,248
Pennzoil Co. ............................................... 215 14,364
Peoples Energy Corp. ....................................... 157 6,181
Pep Boys-Manny, Moe & Jack.................................. 283 6,756
Pepsico, Inc. .............................................. 6,801 247,811
Perkin-Elmer Corp. ......................................... 196 13,928
Pfizer, Inc. ............................................... 5,792 431,866
PG & E Corp. ............................................... 1,965 59,809
Pharmacia & Upjohn, Inc. ................................... 2,275 83,321
Phelps Dodge Corp. ......................................... 271 16,869
Philip Morris Cos., Inc. ................................... 10,857 491,957
Phillips Petroleum Co. ..................................... 1,180 57,377
Pioneer Hi-Bred Intl., Inc. ................................ 268 28,743
Pitney Bowes, Inc. ......................................... 647 58,189
Placer Dome, Inc. .......................................... 1,073 13,613
PNC Bank Corp. ............................................. 1,376 78,518
Polaroid Corp. ............................................. 204 9,932
Potlatch Corp. ............................................. 130 5,590
PP&L Resources, Inc. ....................................... 740 17,713
PPG Industries, Inc. ....................................... 803 45,871
Praxair, Inc. .............................................. 708 31,860
Proctor & Gamble Co. ....................................... 6,025 480,870
Progressive Corp. of Ohio................................... 323 38,719
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
INDEXED ASSETS (CONTINUED):
<S> <C> <C>
Common Stocks (Continued)
Providian Financial Corp. .................................. 420 $ 18,978
Public Svc. Enterprise Group, Inc. ......................... 1,039 32,923
Pulte Corp. ................................................ 95 3,972
Quaker Oats Co. ............................................ 616 32,494
Ralston Purina Co. ......................................... 477 44,331
Raychem Corp. .............................................. 390 16,794
Raytheon Co. ............................................... 208 10,286
Raytheon Co. ............................................... 1,559 78,729
Reebok International Ltd. .................................. 252 7,260
Republic New York Corp. .................................... 246 28,090
Reynolds Metals Co. ........................................ 330 19,800
Rite-Aid Corp. ............................................. 551 32,336
Rockwell Intl., Corp. ...................................... 936 48,906
Rohm & Haas Co. ............................................ 276 26,427
Rowan Cos., Inc. ........................................... 388 11,834
Royal Dutch Petro Co.--NY Shr............................... 9,609 520,687
Rubbermaid, Inc. ........................................... 672 16,800
Russell Corp. .............................................. 163 4,329
Ryder System, Inc. ......................................... 348 11,397
Safeco Corp. ............................................... 633 30,858
Safety-Kleen Corp. ......................................... 261 7,161
Sara Lee Corp. ............................................. 2,152 121,184
SBC Communications, Inc. ................................... 4,109 300,984
Schering-Plough Corp. ...................................... 3,283 203,956
Schlumberger, Ltd. ......................................... 2,218 178,549
Scientific-Atlanta, Inc. ................................... 347 5,812
Seagate Technology, Inc. ................................... 1,096 21,098
Seagram, Ltd. .............................................. 1,598 51,635
Sears Roebuck & Co. ........................................ 1,755 79,413
Service Corp. International ................................ 1,127 41,628
Shared Medical Systems Corp. ............................... 112 7,392
Sherwin-Williams Co. ....................................... 774 21,478
Sigma-Aldrich Corp. ........................................ 449 17,847
Silicon Graphics, Inc. ..................................... 839 10,435
Snap-On, Inc. .............................................. 274 11,953
Sonat, Inc. ................................................ 384 17,568
Southern Co. ............................................... 3,094 80,057
Southwest Airlines Co. ..................................... 981 24,157
Springs Industries, Inc. Cl A............................... 90 4,680
Sprint Corp. ............................................... 1,929 113,087
St. Jude Medical, Inc. ..................................... 411 12,535
St. Paul Companies (The).................................... 376 30,855
Stanley Works .............................................. 399 18,827
State Street Corp .......................................... 720 41,895
Stone Container Corp. ...................................... 445 4,644
Sun America, Inc. .......................................... 874 37,363
Sun Co., Inc. .............................................. 325 13,670
Sun Microsystems, Inc. ..................................... 1,679 66,950
Suntrust Banks, Inc. ....................................... 945 67,449
Supervalu, Inc. ............................................ 272 11,390
Synovus Financial Corp. .................................... 800 26,200
Sysco Corp. ................................................ 767 34,946
Tandy Corp. ................................................ 474 18,278
Tektronix, Inc. ............................................ 225 8,929
Tele-Communications Inc.--Cl A.............................. 2,269 63,390
Tellabs, Inc. .............................................. 811 42,881
Temple-Inland, Inc. ........................................ 255 13,339
Tenet Healthcare Corp. ..................................... 1,357 44,950
Tenneco, Inc. .............................................. 763 30,138
Texaco, Inc. ............................................... 2,457 133,599
Texas Instruments, Inc. .................................... 1,750 78,750
Texas Utilities Co. ........................................ 1,105 45,926
Textron, Inc. .............................................. 739 46,187
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
INDEXED ASSETS (CONTINUED):
<S> <C> <C>
Common Stocks (Continued)
Thermo Electron Corp. ...................................... 673 $ 29,948
Thomas & Betts Corp. ....................................... 246 11,623
Time Warner, Inc. .......................................... 2,509 155,558
Times Mirror Co. Cl A....................................... 429 26,383
Timken Co. ................................................. 282 9,693
TJX Cos., Inc. ............................................. 732 25,162
Torchmark Corp. ............................................ 620 26,078
Toys R Us, Inc. ............................................ 1,278 40,177
Transamerica Corp. ......................................... 284 30,246
Travelers Group, Inc. ...................................... 5,141 276,971
Tribune Co. ................................................ 550 34,237
Tricon Global Restaurants, Inc. ............................ 685 19,907
TRW, Inc. .................................................. 552 29,463
Tupperware Corp. ........................................... 274 7,637
Tyco International Ltd. .................................... 2,388 107,609
U.S. Bancorp ............................................... 1,097 122,795
U.S. Surgical Corp. ........................................ 329 9,643
U.S. West Media Group ...................................... 2,717 78,453
U.S. West Communications Group ............................. 2,166 97,740
Unicom Corp. ............................................... 969 29,796
Unilever N.V. .............................................. 2,868 179,070
Union Camp Corp. ........................................... 311 16,696
Union Carbide Corp. ........................................ 557 23,916
Union Electric Co. ......................................... 458 19,808
Union Pacific Corp. ........................................ 1,107 69,118
Union Pacific Resources Grp., Inc. ......................... 1,137 27,572
Unisys Corp. ............................................... 783 10,864
United Healthcare Corp. .................................... 840 41,737
United Technologies Corp. .................................. 1,044 76,016
Unocal Corp. ............................................... 1,107 42,965
UNUM Corp. ................................................. 625 33,984
US Airways Group Inc. ...................................... 452 28,250
USF&G Corp. ................................................ 497 10,965
UST, Inc. .................................................. 824 30,436
USX-Marathon Group ......................................... 1,291 43,571
USX-U.S. Steel Group, Inc. ................................. 384 12,000
V F Corp. .................................................. 829 38,082
Viacom, Inc. ............................................... 1,581 65,512
W.R. Grace & Co. ........................................... 333 26,785
Wachovia Corp. ............................................. 915 74,229
Wal-Mart Stores, Inc. ...................................... 10,102 398,397
Walgreen Co. ............................................... 2,206 69,213
Warner-Lambert Co. ......................................... 1,216 150,784
Washington Mutual, Inc. .................................... 1,154 73,639
Waste Management Inc. ...................................... 2,032 55,880
Wells Fargo & Co. .......................................... 394 133,738
Wendy's International, Inc. ................................ 590 14,196
Western Atlas, Inc. ........................................ 242 17,908
Westvaco Corp. ............................................. 457 14,366
Weyerhaeuser Co. ........................................... 894 43,861
Whirlpool Corp. ............................................ 334 18,370
Whitman Corp. .............................................. 455 11,858
Willamette Industries, Inc. ................................ 498 16,029
Williams Cos., Inc. ........................................ 1,424 40,406
Winn-Dixie Stores, Inc. .................................... 667 29,139
Woolworth Corp. ............................................ 605 12,326
WorldCom, Inc. ............................................. 4,042 122,270
Worthington Industries, Inc. ............................... 433 7,144
Wrigley (Wm.) Jr. Co. ...................................... 521 41,452
Xerox Corp. ................................................ 1,457 107,663
-----------
Total Indexed Assets--Common Stocks (Cost: $23,282,051) 60.3%....... 33,887,787
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
FACE
RATE MATURITY AMOUNT VALUE
---- -------- -------- ----------
<S> <C> <C> <C> <C>
INDEXED ASSETS (CONTINUED):
Short-Term Debt Securities
U.S. Government (.1%)
U.S. Treasury Bill......................... 4.97% 3/12/98 $ 20,000 $ 19,796
U.S. Treasury Bill......................... 5.14 1/22/98 40,000 39,879
----------
59,675
----------
Commercial Paper (1.5%)
Duke Power Co.............................. 6.72 1/2/98 829,000 828,845
----------
Total Short-Term Debt Securities (Cost: $888,529) 1.6%............. 888,520
----------
Total Indexed Assets--Common Stocks & Short-Term Debt Securities
(Cost: $24,170,580) 61.9%......................................... 34,776,307
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
ACTIVE ASSETS:
Common Stocks
Basic Materials (1.3%)
Atchison Casting Corp.*..................................... 4,000 $ 65,000
DEKALB Genetics Corp. Cl B.................................. 2,200 86,350
Essex International Inc.*................................... 700 20,825
Lone Star Technologies, Inc.*............................... 6,600 187,275
Morton International, Inc. ................................. 3,900 134,062
Oregon Steel Mills, Inc. ................................... 5,500 117,218
Praxair, Inc. .............................................. 2,700 121,500
-----------
732,230
-----------
Consumer, Cyclical (9.2%)
American Greetings Corp. Cl A............................... 4,500 176,062
Avis Rent A Car, Inc.*...................................... 3,200 102,200
Bed Bath & Beyond, Inc.*.................................... 2,500 96,250
Borg-Warner Automotive, Inc. ............................... 1,600 83,200
Brylane, Inc.* ............................................. 2,100 103,425
Callaway Golf Co. .......................................... 7,300 208,506
Central Garden & Pet Co.* .................................. 3,000 78,750
Cinar Films, Inc. Cl B*..................................... 2,000 77,750
CKE Restaurants, Inc. ...................................... 1,400 58,975
Coach USA, Inc.*............................................ 2,990 100,165
Consolidation Capital Corp.*................................ 1,400 28,437
Dan River, Inc.* ........................................... 3,700 60,818
Dress Barn, Inc.* .......................................... 2,200 62,425
Earthgrains Co. ............................................ 1,900 89,300
Fairfield Communities, Inc.*................................ 3,850 170,362
Family Golf Centers, Inc.*.................................. 1,900 59,612
Finlay Enterprises, Inc.*................................... 6,700 152,425
Flowers Industries, Inc. ................................... 1,400 28,787
Fred Meyer, Inc.*........................................... 2,000 72,750
Gannett, Inc. .............................................. 2,400 148,350
General Motors Corp......................................... 1,700 103,062
Golden Bear Golf, Inc.*..................................... 5,300 42,400
Interstate Bakeries Corp. .................................. 1,200 44,850
Jacor Communications, Inc.*................................. 1,300 69,062
Linens 'n Things, Inc.*..................................... 800 34,900
Masco Corp.................................................. 3,000 152,625
May Department Stores Co.................................... 2,400 126,450
Michaels Stores, Inc.* ..................................... 2,800 81,900
Midwest Express Holdings, Inc.* ............................ 5,000 194,062
Nautica Enterprises, Inc.* ................................. 1,000 23,250
Outdoor Systems, Inc.* ..................................... 2,900 111,650
Pillowtex Corp. ............................................ 900 31,387
Polo Ralph Lauren Corp.*.................................... 1,000 24,312
Ryanair Holdings PLC--ADR*.................................. 4,600 115,575
Ryder System, Inc. ......................................... 3,500 114,625
St. John Knits, Inc......................................... 10,800 432,000
Stage Stores, Inc.* ........................................ 1,400 52,325
Suiza Foods Corp.* ......................................... 5,590 332,954
Sunbeam, Corp............................................... 2,200 92,675
The Men's Wearhouse, Inc.*.................................. 1,600 55,600
Tiffany & Co. .............................................. 3,500 126,218
Tower Automotive, Inc.*..................................... 5,800 243,962
Universal Foods Corp. ...................................... 4,500 190,125
Universal Outdoor Holdings, Inc.* .......................... 1,400 72,800
Wendy's International, Inc. ................................ 5,700 137,156
Xerox Corp.................................................. 2,500 184,531
-----------
5,149,005
-----------
Consumer, Non-Cyclical (3.2%)
Advanced Lighting Techs., Inc.*............................. 3,400 64,600
American Home Products Corp................................. 1,700 130,050
American Stores Co.......................................... 7,700 158,331
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
ACTIVE ASSETS (CONTINUED):
Common Stocks (Continued)
Consumer, Non-Cyclical (Continued)
AmeriSource Health Corp--Cl A*.............................. 900 $ 52,425
Bergen Brunswig............................................. 2,800 117,950
BioChem Pharma, Inc.* ...................................... 1,000 20,875
Biomet, Inc................................................. 2,400 61,500
Dura Pharmaceuticals, Inc.*................................. 1,000 45,875
Elan Corp Plc*.............................................. 500 25,593
ESC Medical Systems Ltd.* .................................. 2,200 85,250
Express Scripts, Inc--Cl A*................................. 1,400 84,000
I-STAT Corporation*......................................... 3,500 55,343
IDEC Pharmaceuticals Corp.*................................. 1,600 55,000
JP Foodservice, Inc.* ...................................... 1,500 55,406
Keystone Automotive Inds*................................... 1,400 33,250
Lincare Holdings, Inc.* .................................... 1,600 91,200
Medimmune, Inc.* ........................................... 800 34,300
Mentor Corp................................................. 2,000 73,000
Omnicare, Inc............................................... 1,800 55,800
Pediatrix Medical Group, Inc.*.............................. 1,200 51,300
Phillip Morris Cos., Inc.................................... 4,500 203,906
Safeskin Corp.*............................................. 700 39,725
Warnaco Group, Inc. Cl A.................................... 5,000 156,875
Whole Foods Market, Inc.*................................... 1,200 61,350
-----------
1,812,904
-----------
Energy (3.1%)
Elf Aquitaine--ADR.......................................... 3,300 193,462
EVI, Inc.*.................................................. 1,000 51,750
Global Industries Ltd.*..................................... 2,200 37,400
Kerr-McGee Corp. ........................................... 2,800 177,275
Mobil Corp.................................................. 1,700 122,718
Newpark Resources Inc.* .................................... 9,800 171,500
Oceaneering Int'l, Inc.* ................................... 10,400 205,400
Precision Drilling Corp.* .................................. 8,600 209,625
St. Mary Land Exploration Co. .............................. 3,500 122,500
Texaco, Inc................................................. 2,000 108,750
Union Pacific Resources Grp., Inc. ......................... 7,500 181,875
Varco International, Inc.*.................................. 2,840 60,882
Veritas DGC, Inc.*.......................................... 2,800 110,600
-----------
1,753,737
-----------
Financial (6.2%)
Ahmanson (H.F.) & Co........................................ 2,500 167,343
American Int'l. Group, Inc.................................. 2,550 277,312
Aon Corp. .................................................. 2,100 123,112
Associated Banc-Corp........................................ 500 27,562
Beneficial Corp............................................. 1,200 99,750
Checkfree Holdings Corp.* .................................. 4,900 132,300
Citicorp.................................................... 3,200 404,600
CMAC Investment Corporation................................. 2,100 126,787
Enhance Financial Svcs Group................................ 2,000 119,000
Executive Risk, Inc.* ...................................... 1,700 118,681
First Union Corp. .......................................... 4,000 205,000
Fleet Financial Group, Inc. ................................ 1,900 142,381
INMC Mortgage Holdings, Inc. ............................... 4,200 98,437
Keystone Financial, Inc..................................... 5,300 213,325
Loews Corp. ................................................ 1,200 127,350
National Golf Properties, Inc. ............................. 3,100 101,718
NationsBank Corp............................................ 4,400 267,575
Oriental Financial Group.................................... 5,000 147,812
Patriot American Hospitality................................ 2,112 60,852
Providian Financial Corp. .................................. 2,700 122,006
The Money Store, Inc. ...................................... 2,750 57,750
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ ------------
<S> <C> <C>
ACTIVE ASSETS (CONTINUED):
Common Stocks (Continued)
Financial (Continued)
U.S. Bancorp............................................... 2,000 $ 223,875
Vesta Insurance Group, Inc................................. 1,900 112,812
------------
3,477,340
------------
Industrial (3.9%)
AGCO Corp.................................................. 9,000 263,250
American Disposal Serv., Inc.*............................. 1,100 40,150
Applied Materials, Inc.*................................... 10,400 313,300
Aviall, Inc.*.............................................. 4,300 64,231
Burlington Northern Santa Fe Corp. ........................ 1,400 130,112
Cambridge Tech. Partners, Inc.*............................ 800 33,300
Chart Industries, Inc...................................... 4,300 98,093
Expeditors Int'l Wash., Inc................................ 800 30,800
First Data Corp............................................ 5,000 146,250
Foster Wheeler Corp........................................ 2,900 78,481
Hardinge, Inc.............................................. 5,900 219,775
Hooper Holmes, Inc......................................... 5,400 78,637
Hvide Marine, Inc.*........................................ 1,100 28,325
Keane, Inc.*............................................... 780 31,687
Knightsbridge Tankers Ltd.................................. 3,000 84,937
Knoll, Inc.*............................................... 1,100 35,337
QuickResponse Services, Inc.*.............................. 2,400 88,800
Union Pacific Corp......................................... 3,100 193,556
USA Waste Services, Inc.*.................................. 2,597 101,932
York International Corp.................................... 3,100 122,643
------------
2,183,596
------------
Technology (9.7%)
3Com Corp.*................................................ 11,700 408,768
Advanced Fibre Communication*.............................. 2,300 66,987
America Online, Inc.*...................................... 700 62,431
Atmel Corp.*............................................... 11,900 220,893
Ballard Medical Products................................... 4,000 97,000
Boeing Co.................................................. 2,400 117,450
Boston Technology Inc*..................................... 5,500 138,187
CBT Group PLC*............................................. 1,900 156,037
CIENA Corp.*............................................... 1,100 67,237
Cisco Systems, Inc.*....................................... 13,050 727,537
Citrix Systems, Inc.*...................................... 700 53,200
Compaq Computer Corp.*..................................... 9,200 519,225
Cytyc Corporation*......................................... 3,500 87,062
INCYTE Pharmaceuticals, Inc.*.............................. 2,800 126,000
Intel Corp................................................. 7,800 547,950
Intl. Business Machines Corp............................... 1,800 188,212
Linear Technology Corp..................................... 6,100 351,512
Maxim Integrated Products, Inc*............................ 7,600 262,200
Parametric Technology Co.*................................. 4,900 232,137
Raytheon Co.-Cl B.......................................... 3,800 191,900
Raytheon Co.-Cl A*......................................... 108 5,352
Sun Microsystems, Inc.*.................................... 10,200 406,725
Technology Solutions Company*.............................. 2,115 55,783
Tellabs, Inc.*............................................. 1,100 58,162
Transaction Network Services, Inc.*........................ 1,700 29,325
Xilinx, Inc.*.............................................. 7,500 262,968
------------
5,440,240
------------
Utilities (1.0%)
Duke Energy Corp........................................... 2,700 149,512
Edison International....................................... 2,600 70,687
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (ALL AMERICA FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
------ -----------
<S> <C> <C>
ACTIVE ASSETS (CONTINUED):
Common Stocks (Continued)
Utilities (Continued)
MCI Communications Corp..................................... 4,500 $ 192,690
SBC Communications, Inc..................................... 2,100 153,825
-----------
566,714
-----------
Total Active Portion--Common Stocks (Cost: $17,457,664) 37.6%....... 21,115,766
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
RATE MATURITY AMOUNT VALUE
---- -------- -------- -----------
<S> <C> <C> <C> <C>
Short-Term Debt Securities
U.S. Government (**)
U.S. Treasury Bill........................ 5.20% 2/26/98 $ 10,000 $ 9,919
-----------
Commercial Paper (0.5%)
Duke Power Co............................. 6.72 1/2/98 207,000 206,962
ReliaStar Mortgage Corp................... 6.00 1/5/98 100,000 99,933
-----------
306,895
-----------
Total Short-Term Debt Securities (Cost: $316,814) 0.5%............ 316,814
-----------
Total Active Securities (Cost: $17,774,478) 38.1%................. 21,432,580
-----------
Total Investments (Cost: $41,945,058) 100.0%...................... $56,208,887
===========
</TABLE>
- -------
* Non-income producing security.
** Less than .1%.
FUTURES CONTRACTS OUTSTANDING AS OF DECEMBER 31, 1997:
<TABLE>
<CAPTION>
UNDERLYING FACE UNREALIZED
EXPIRATION DATE AMOUNT AT VALUE (LOSS)
--------------- ---------------- ----------
<S> <C> <C> <C>
Purchased
4 SP 500 Stock Index Futures
Contracts........................ March 1998 $979,100 $(200)
======== =====
</TABLE>
The face value of futures purchased and outstanding as percentage of total
investment in securities: 1.7%.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (BOND FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
FACE
RATE MATURITY AMOUNT VALUE
---- -------- ---------- -----------
<S> <C> <C> <C> <C>
LONG-TERM DEBT SECURITIES:
U.S. Government (40.0%)
U.S. Treasury Bond...................... 7.13% 2/15/23 $1,750,000 $ 1,997,730
U.S. Treasury Note...................... 6.38 3/31/01 2,000,000 2,037,500
U.S. Treasury Note...................... 6.50 5/15/05 4,000,000 4,170,000
U.S. Treasury Note...................... 6.63 4/30/02 500,000 516,405
-----------
8,721,635
-----------
Agencies/Other (35.8%)
Federal Home Loan Bank.................. 0.00 7/2/12 5,000,000 1,619,550
Federal Home Loan Bank.................. 0.00 8/18/17 5,000,000 1,081,250
FHLMC................................... 6.50 10/15/06 400,000 400,500
FHLMC................................... 8.00 7/15/06 380,116 396,624
FHLMC................................... 7.00 4/15/17 456,497 459,920
FHLMC................................... 7.50 5/15/18 241,388 242,896
FNMA.................................... 6.80 6/25/05 500,864 502,116
FNMA.................................... 7.75 10/25/18 468,836 471,911
FNMA.................................... 7.00 11/25/07 1,000,000 1,026,871
FNMA.................................... 7.00 11/25/05 600,000 608,808
Republic of Iceland..................... 6.13 2/1/04 1,000,000 998,130
-----------
7,808,576
-----------
Consumer, Cyclical (4.5%)
Fruit of the Loom, Inc.................. 7.38 11/15/23 250,000 237,535
Fruit of the Loom, Inc.................. 7.00 3/15/11 250,000 239,735
Woolworth Corp.......................... 7.00 10/15/02 500,000 509,995
-----------
987,265
-----------
Financial (11.7%)
Bear Stearns Cos., Inc.................. 6.63 10/1/04 1,000,000 1,003,240
Rank Group Financial PLC................ 6.75 11/30/04 500,000 500,525
Rodamco NV.............................. 7.30 5/15/05 1,000,000 1,040,550
-----------
2,544,315
-----------
Industrial (7.3%)
Clark Equipment Co...................... 8.35 5/15/23 500,000 584,455
Williams Cos., Inc...................... 6.50 11/15/02 1,000,000 1,004,450
1,588,905
-----------
Total Long-Term Debt Securities (Cost: $21,014,691) 99.3%......... 21,650,696
-----------
SHORT-TERM DEBT SECURITIES:
U.S. Government (*)
U.S. Treasury Bill...................... 4.87 2/5/98 10,000 9,952
-----------
Commercial Paper (0.7%)
CIT Group Holdings, Inc. ............... 5.80 1/7/98 147,000 146,858
-----------
Total Short-Term Debt Securities (Cost: $156,810) 0.7%............ 156,810
-----------
Total Investments (Cost: $21,171,501) 100.0% ..................... $21,807,506
===========
</TABLE>
- -------
* Less than .1%
Abbreviations:FHLMC = Federal Home Loan Bank
FNMA= Federal National Mortgage Association
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS (MONEY MARKET FUND)
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
DISCOUNT FACE AMORTIZED
RATING* RATE MATURITY AMOUNT COST
------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
SHORT-TERM DEBT SECURITIES:
U.S. Government (0.2%)
U.S. Treasury Bill.............. 5.00% 02/05/98 $ 15,000 $ 14,926
----------
14,926
----------
Commercial Paper (99.8%)
Abbott Laboratories............. A1+/P1 5.75 01/07/98 155,000 154,851
American Express Credit Corp. .. A1/P1 5.49 01/30/98 150,000 149,321
American Express Credit Corp. .. A1/P1 6.10 01/09/98 150,000 149,796
Anheuser Busch Cos., Inc........ A1+/P1 5.64 01/20/98 130,000 129,611
AT&T Credit Corp. .............. A1+/P1 5.52 01/02/98 167,000 166,974
Baltimore Gas & Electric Co..... A1/P1 5.95 01/13/98 151,000 150,700
Bell Atlantic Financial
Services, Inc. ................ A1/P1 5.80 01/05/98 190,000 189,877
Bellsouth Telecommunication
Corp. ......................... A1+/P1 5.73 01/13/98 100,000 99,808
Bellsouth Telecommunication
Corp. ......................... A1+/P1 5.75 02/05/98 100,000 99,440
Bemis Co........................ A1/P1 5.95 01/23/98 300,000 298,908
Central Illinois Light.......... A1/P1 5.91 01/15/98 148,000 147,659
CIT Group Holdings, Inc. ....... A1+/P1 5.80 01/07/98 230,000 229,777
Coca-Cola Co. .................. A1+/P1 5.56 01/09/98 220,000 219,726
Daimler Benz North Amer. Corp. . A1/P1 5.69 01/12/98 200,000 199,650
Disney (Walt) Enterprises Inc. . A1/P1 5.58 01/12/98 220,000 219,622
Duke Power Co................... A1+/P1 6.72 01/02/98 149,000 148,972
DuPont EI Nemour (Res).......... A1+/P1 5.66 02/23/98 300,000 297,497
Eaton Corp...................... A1/P1 5.95 02/09/98 300,000 298,064
Ford Motor Credit Co. .......... A1/P1 5.74 02/02/98 100,000 99,487
General Electric Capital Corp. . A1+/P1 5.50 01/05/98 150,000 149,906
General Electric Capital Corp. . A1+/P1 6.10 01/13/98 150,000 149,695
General Mills, Inc.............. A1/P1 6.69 01/05/98 100,000 99,926
GTE Funding Inc................. A1/P1 6.35 01/28/98 100,000 99,523
GTE Funding Inc................. A1/P1 5.98 01/22/98 200,000 199,299
Hewlett Packard Co. ............ A1+/P1 5.80 01/08/98 146,000 145,835
IBM Credit Corp................. A1/P1 5.59 01/06/98 220,000 219,828
International Lease Fin Corp. .. A1/P1 6.30 01/12/98 130,000 129,749
Interstate Power Corp........... A1/P1 5.83 01/23/98 230,000 229,178
Interstate Power Corp........... A1/P1 6.05 01/27/98 100,000 99,563
Kimberly-Clark Corp. ........... A1+/P1 6.20 01/13/98 300,000 299,379
Lucent Technology, Inc. ........ A1/P1 5.50 01/16/98 130,000 129,699
Merrill Lynch & Co. ............ A1+/P1 6.10 01/15/98 125,000 124,703
Merrill Lynch & Co. ............ A1+/P1 5.54 02/02/98 150,000 149,244
National Rural Utilities........ A1+/P1 5.72 02/05/98 102,000 101,431
Northern Illinois Gas Corp. .... A1+/P1 5.97 01/22/98 208,000 207,275
Novartis Finance Corp. ......... A1+/P1 5.79 01/08/98 200,000 199,774
PHH Corp. ...................... A1/P1 6.10 01/12/98 201,000 200,625
Pitney Bowes Credit Corp. ...... A1+/P1 6.00 01/14/98 180,000 179,609
Procter & Gamble Co............. A1+/P1 5.80 02/05/98 300,000 298,306
Toyota Motor Credit Corp........ A1+/P1 5.65 01/12/98 108,000 107,812
Toyota Motor Credit Corp........ A1+/P1 5.88 01/23/98 120,000 119,568
Wisconsin Electric Fuel......... A1+/P1 5.75 01/27/98 127,000 126,470
Xerox Credit Corp. ............. A1/P1 5.75 01/07/98 202,000 201,806
----------
7,417,943
----------
Total Short-Term Debt Securities (Cost: $7,432,869) 100%............ $7,432,869
==========
</TABLE>
- -------
* The ratings are provided by Standard & Poor's Corporation/Moody's Investor
Services, Inc.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
ALL AMERICA BOND MONEY MARKET
FUND FUND FUND
----------- ----------- ------------
<S> <C> <C> <C>
Assets:
Investments at market value (Notes 1 and
3)
(Cost:
All America Fund--$41,945,058
Bond Fund--$21,171,501
Money Market--$7,432,869)............. $56,208,887 $21,807,506 $7,432,869
Cash..................................... 319,628 17,848 507
Interest and dividends receivable........ 59,318 242,484 --
Shareholders subscriptions receivable.... 81,000 81,000 80,899
Receivable for securities sold........... 21,871 -- --
----------- ----------- ----------
Total Assets............................. 56,690,704 22,148,838 7,514,275
Payable for securities purchased......... 200 -- --
Dividend payable to shareholders......... 14,401 1,227 2,269
Accrued expenses......................... 2,940 622 310
----------- ----------- ----------
Net Assets............................... $56,673,163 $22,146,989 $7,511,696
=========== =========== ==========
Shares Outstanding (Note 4).............. 4,481,109 2,127,410 740,224
=========== =========== ==========
Net Asset Value Per Share................ $ 12.65 $ 10. 41 $ 10.15
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
ALL AMERICA BOND MONEY MARKET
FUND FUND FUND
---------------- ---------------- -----------------
FOR THE PERIOD
MAY 1, 1997
FOR THE YEAR FOR THE YEAR (COMMENCEMENT
ENDED ENDED OF OPERATIONS) TO
DECEMBER 31,1997 DECEMBER 31,1997 DECEMBER 31, 1997
---------------- ---------------- -----------------
<S> <C> <C> <C>
Investment Income: (Note
1)
Dividends............... $ 773,877 $ -- $ --
Interest................ 40,062 1,343,822 110,804
----------- ----------- --------
Total Investment Income... 813,939 1,343,822 110,804
----------- ----------- --------
Expenses: (Note 2)
Investment management
fees................... 291,620 94,370 3,930
Directors' (independent)
fees and expenses...... 22,369 22,369 15,323
Custodian expenses...... 44,624 1,945 1,909
Accounting expenses..... 26,600 26,600 12,000
Transfer agent fees..... 12,060 12,060 8,060
Legal................... 38,175 38,115 1,342
Audit................... 15,600 7,600 3,800
Printing and Other...... 38,915 8,290 2,650
----------- ----------- --------
Total Expenses before
reimbursement............ 489,963 211,349 49,014
Expense reimbursement..... (20,310) (64,153) (41,154)
----------- ----------- --------
Net Expenses.............. 469,653 147,196 7,860
----------- ----------- --------
Net Investment Income..... 344,286 1,196,626 102,944
----------- ----------- --------
Net Realized and
Unrealized Gain (Loss) on
Investments (Note 1):
Net realized gain (loss)
on investments:
Net proceeds from sale.. 34,036,469 11,097,306 --
Cost of securities sold. 28,780,474 10,871,749 --
----------- ----------- --------
Net realized gain (loss).. 5,255,995 225,557 --
Realized gain (loss) on
short-term securities.... (72) (904) (43)
----------- ----------- --------
Net realized gain (loss)
on investments........... 5,255,923 224,653 (43)
Net unrealized
appreciation
(depreciation) of
investments.............. 8,744,059 373,683 --
----------- ----------- --------
Net Realized and
Unrealized Gain (Loss) on
Investments.............. 13,999,982 598,336 (43)
----------- ----------- --------
Net Increase in Net Assets
Resulting from
Operations............... $14,344,268 $ 1,794,962 $102,901
=========== =========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET
ALL AMERICA FUND BOND FUND FUND
----------------------------------- ------------------------------------ -----------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
MAY 1, 1996 MAY 1, 1996 MAY 1, 1997
FOR THE YEAR (COMMENCEMENT FOR THE YEAR (COMMENCEMENT (COMMENCEMENT
ENDED OF OPERATIONS) TO ENDED OF OPERATIONS) TO OF OPERATIONS) TO
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- ----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
From Operations:
Net investment income. $ 344,286 $ 328,237 $ 1,196,626 $ 763,822 $ 102,944
Net realized gain
(loss) on
investments.......... 5,255,923 (447,954) 224,653 (8,766) (43)
Net unrealized
appreciation
(depreciation) of
investments.......... 8,744,059 5,519,770 373,683 262,322 --
------------ ----------- ----------- ----------- ----------
Net Increase (Decrease)
in Net Assets Resulting
From Operations........ 14,344,268 5,400,053 1,794,962 1,017,378 102,901
------------ ----------- ----------- ----------- ----------
Dividend Distributions
(Note 5):
From net investment
income............... (342,956) (325,235) (1,195,133) (758,821) (102,362)
From capital gains.... (4,524,483) -- (25,567) -- --
------------ ----------- ----------- ----------- ----------
Total Distributions..... (4,867,439) (325,235) (1,220,700) (758,821) (102,362)
------------ ----------- ----------- ----------- ----------
Capital Share
Transactions (Note 4):
Net proceeds from sale
of shares............ 2,120,648 50,137,638 1,388,091 20,123,533 7,907,064
Dividend
reinvestments........ 4,852,995 325,235 1,219,471 758,821 100,093
Cost of shares
redeemed............. (15,290,000) (25,000) (2,051,357) (124,389) (496,000)
------------ ----------- ----------- ----------- ----------
Net Increase (Decrease)
in Net Assets From
Capital Share
Transactions........... (8,316,357) 50,437,873 556,205 20,757,965 7,511,157
------------ ----------- ----------- ----------- ----------
Net Increase (Decrease)
in Net Assets.......... 1,160,472 55,512,691 1,130,467 21,016,522 7,511,696
Net Assets, Beginning of
Year/Period............ 55,512,691 -- 21,016,522 -- --
------------ ----------- ----------- ----------- ----------
Net Assets, End of
Year/Period............ $ 56,673,163 $55,512,691 $22,146,989 $21,016,522 $7,511,696
============ =========== =========== =========== ==========
Components of Net
Assets:
Paid-in capital....... $ 42,121,516 $50,437,873 $21,314,170 $20,757,965 $7,511,157
Accumulated
undistributed net
investment income.... 4,332 3,002 6,495 5,001 582
Accumulated
undistributed net
realized gain (loss)
on investments....... 283,486 (447,954) 190,319 (8,766) (43)
Unrealized
appreciation
(depreciation) of
investments.......... 14,263,829 5,519,770 636,005 262,322 --
------------ ----------- ----------- ----------- ----------
Net Assets, End of
Year/Period............ $ 56,673,163 $55,512,691 $22,146,989 $21,016,522 $7,511,696
============ =========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET
ALL AMERICA FUND BOND FUND FUND
------------------------- ------------------------- ------------
FOR THE YEAR
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996(F) 1997 1996(F) 1997 (E)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $10.98 $10.00 $10.13 $10.01 $10.00
------ ------ ------ ------ ------
Income from investment
operations:
Net investment income. 0.08 0.06 0.59 0.38 0.35
Net gains or losses on
securities (realized
and unrealized)...... 2.77 0.98 0.29 0.12 --
------ ------ ------ ------ ------
Total from Investment
Operations............. 2.85 1.04 0.88 0.50 0.35
------ ------ ------ ------ ------
Less dividend
distributions:
From net investment
income............... (0.08) (0.06) (0.59) (0.38) (0.20)
From capital gains.... (1.10) -- (0.01) -- --
------ ------ ------ ------ ------
Total Distributions..... (1.18) (0.06) (0.60) (0.38) (0.20)
------ ------ ------ ------ ------
Net Asset Value, End of
Period................. $12.65 $10.98 $10.41 $10.13 $10.15
====== ====== ====== ====== ======
Total return (%) (b).... 26.0 10.4 8.9 5.0 3.5
Net assets, end of
period ($ millions).... 56.7 55.5 22.1 21.0 7.5
Ratio of net investment
income to average net
assets (%) (a)......... 0.59 0.95 5.69 5.63 5.17
Ratio of expenses to
average net assets (%)
(a).................... 0.84 0.87 1.00 0.90 2.47
Ratio of expenses to
average net assets
after expense
reimbursement (%) (Note
2) (a)................. 0.81 0.85 0.70 0.70 0.40
Portfolio turnover rate
(%) (c)................ 35.96 9.33 56.18 17.85 N/A
Average commission rate
paid ($) (d)........... .0321 .0483 N/A N/A N/A
</TABLE>
- -------
(a) Annualized.
(b)Total return would have been lower had certain expenses not been reduced
through expense reimbursement (Note 2)
(c)Portfolio turnover rate excludes all short-term securities.
(d)Average commission rate paid per share of stock.
(e)Commenced operations May 1, 1997.
(f)Commenced operations May 1, 1996.
N/A = Not Applicable.
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT POLICIES AND ORGANIZATION
Mutual of America Institutional Funds, Inc. (the "Investment Company") was
incorporated on October 27, 1994 under the laws of Maryland and is registered
under the Investment Company Act of 1940 as a diversified, open-end management
investment company (a mutual fund) currently issuing three series of common
stock representing shares of the All America Fund, Bond Fund and Money Market
Fund. Each fund has its own investment objective and policies. Shares of the
funds of the Investment Company are offered on a no-load basis through its
distributor, Mutual of America Securities Corporation, a registered broker-
dealer and affiliate of the Investment Company's investment management
adviser, Mutual of America Capital Management Corporation (the "Adviser").
The Investment Company is designed primarily as an investment vehicle for
endowments, foundations, corporations, municipalities and other public
entities and other institutional investors.
The Investment Company commenced operations on May 1, 1996, (the effective
date of its registration) although the Bond Fund was initially seeded with a
$100,000 cash investment on April 23, 1996 by its sponsor, Mutual of America
Capital Management Corporation. The Money Market Fund commenced operations on
May 1, 1997.
Security Valuation--Investment securities are valued as follows:
Equity securities are valued at the last sales price on the principal
exchange on which the security is traded. If there is no trading volume for
a particular valuation day, the last bid price on the principal exchange is
used. For any equity securities traded in the over-the-counter market
(OTC), the security is valued at the last sale price, or if no sale, at the
latest bid price available.
Short-term securities with a maturity of 60 days or less are valued at
amortized cost, which approximates market for such securities. Short-term
debt securities maturing in excess of 60 days are stated at market value.
Debt securities are valued at a composite fair market value "evaluated
bid," which may be the last sale price. Securities for which market
quotations are not readily available will be valued at fair value as
determined in good faith by the Adviser under the direction of the Board of
Directors of the Investment Company.
Security Transactions--Security transactions are recorded on the trade date.
Interest income is accrued as earned. Dividend income is recorded on the ex-
dividend date. Dividend income from foreign corporations is reflected net of
imposed source tax withholding.
Realized gain and loss on the sale of short and long-term debt securities is
computed on the basis of amortized cost at the time of sale. Realized gain and
loss on the sale of common stock is based on the identified cost basis of the
security determined on a first-in, first-out ("FIFO") basis.
The All America Fund may purchase stock index futures contracts for cash
management purposes to remain more fully invested in the equity markets while
minimizing transaction costs. Initial cash margin deposits (represented by
cash or Treasury bills) are made upon entering into futures contracts. (This
initial margin, equal to approximately 4% of the contract amount, does not
involve the borrowing of funds to finance the transaction). During the period
the futures contract is outstanding, changes in the value of the contract are
recognized as unrealized gains or losses from futures transactions by
"marking-to-market"on a daily basis to reflect the market value of the
contract at the end of each trading day. Depending upon whether unrealized
gains or losses are incurred, variation margin payments are received or made.
When the contract is closed, a realized gain or loss from futures transactions
is recorded, equal to the net variation margin received or paid over the
period of the contract. The "Underlying Face Amount at Value" representing the
aggregate of outstanding contractual amounts under futures contracts reflects
the extent of a fund's exposure to off-balance sheet risk.
Federal Income Taxes--The Investment Company intends to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to
shareholders. Therefore, no federal income tax provision is required.
2. EXPENSES AND OTHER TRANSACTIONS WITH AFFILIATES
Organizational expenses of the Investment Company were borne by its sponsor,
Mutual of America Capital Management Corporation, the investment management
adviser of the Company.
23
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Investment Company has entered into an Investment Advisory Agreement
with the Adviser. For providing investment management services to the
Investment Company each fund accrues a fee, calculated as a daily charge at
the annual rate of .50% of the value of the net assets for the All America
Fund, .45% of the value of the net assets for the Bond Fund, and .20% of the
value of the net assets for the Money Market Fund.
Under Sub-Advisory Agreements for the All America Fund, the Adviser has
delegated investment advisory responsibilities to subadvisors responsible for
providing management services for a portion of the fund's assets. The Adviser
is responsible for compensation payable under such Sub-Advisory Agreements.
The Adviser voluntarily limits the expenses of each fund, other than
brokers' commissions, transfer taxes and fees relating to portfolio
transactions, investment management expenses and extraordinary expenses to an
annual rate of .35% of the value of the net assets of the All America Fund,
.25% of the net assets of the Bond Fund, and .20% of the net assets of the
Money Market Fund. Accrual of these other operating expenses at their
respective specified annual rates is calculated as a daily charge. Settlement
of fees accrued (both investment management and other operating expenses) is
paid by each fund to the Adviser on or about month-end.
The rate established for the All America Fund was reduced to .30% in early
August, 1997 and was further reduced to .20% on October 1, 1997 so as to
maintain as close a relationship as possible between the established rate
(charged daily) and the fund's actual expenses, but not to exceed the
respective rates under the Adviser's existing expense limitation agreement
with each fund. In January, 1998 this charge was adjusted to .35% in
recognition of the fund's actual expenses.
The Adviser's voluntary agreement to limit each fund's total expenses
(excluding brokerage commissions, transfer taxes/fees and extraordinary
expenses) to an annual rate of .85% of the net assets of the All America Fund,
.70% of the net assets of the Bond Fund, and .40% of the net assets of the
Money Market Fund may be discontinued at any time.
The Investment Company has entered into an Investment Accounting Agreement
with the Adviser, pursuant to which the Adviser has agreed to serve as
investment accounting and recordkeeping agent for the Funds and to calculate
the net asset values of the Funds, effective January 2, 1997. Previous
thereto, such services were provided by an unaffiliated entity. The
compensation paid by the Funds for these services prior to and subsequent to
January 2, 1997 is subject to the voluntary expense reimbursement of the
Adviser.
The All America Fund placed a portion of its portfolio transactions with an
affiliated broker-dealer of the Adviser. Total commissions paid to this
affiliate was $2,070 or 4% of total commissions for the year. In addition, a
Sub-Advisor placed a portion of its portfolio transactions with its affiliated
broker-dealer; such commissions amounted to $18,793 or 38% of the fund's total
commissions.
3. PURCHASES AND SALES
The cost of investment purchases and proceeds from sales of investments,
excluding short-term investments and U.S. Government securities for the year
ended December 31, 1997 was as follows:
<TABLE>
<CAPTION>
ALL AMERICA BOND MONEY MARKET
FUND FUND FUND
----------- ----------- ------------
<S> <C> <C> <C>
Cost of investment purchases......... $19,937,009 $ 6,059,850 $ --
=========== =========== ==========
Proceeds from sales of investments... $34,036,469 $ 1,005,259 $ --
=========== =========== ==========
The cost of investment purchases and
proceeds from sales of U.S.
Government (excluding short-term)
securities was as follows:
Cost of investment purchases....... $ -- $ 6,088,142 $ --
=========== =========== ==========
Proceeds from sales of investments. $ -- $10,092,047 $ --
=========== =========== ==========
For the Money Market Fund, the cost of short-term securities purchases for
the year was $21,892,723. Net proceeds from sales and redemptions was
$14,570,617.
At December 31, 1997, the net unrealized appreciation (depreciation) of
investments, based on cost for Federal income tax purposes, was as follows:
<CAPTION>
ALL AMERICA BOND MONEY MARKET
FUND FUND FUND
----------- ----------- ------------
<S> <C> <C> <C>
Unrealized appreciation.............. $15,671,181 $ 636,278 $ --
Unrealized depreciation.............. 1,407,352 273 --
----------- ----------- ----------
Net unrealized appreciation
(depreciation)...................... $14,263,829 $ 636,005 $ --
=========== =========== ==========
Aggregate cost of investments for
Federal income tax purposes......... $41,945,058 $21,171,501 $7,432,869
=========== =========== ==========
</TABLE>
24
<PAGE>
MUTUAL OF AMERICA INSTITUTIONAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. CAPITAL SHARE ACTIVITY AND OWNERSHIP
At December 31, 1997 one billion shares of $.01 par value common stock have
been authorized for the Investment Company. The Board of Directors has
allocated 25 million shares to the All America Fund and 15 million shares each
to the Bond and Money Market Funds.
Transactions in shares during the year ending December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
--------------------------------------------
ALL AMERICA BOND MONEY MARKET
FUND FUND FUND
-------------- ----------- ---------------
<S> <C> <C> <C>
Shares sold.......................... 156,660 136,473 778,779
Shares issued as reinvestment of
dividends (Note 5).................. 383,559 118,985 9,874
Shares redeemed...................... (1,116,180) (202,267) (48,429)
------------- ----------- ----------
Net increase (decrease).............. (575,961) 53,191 740,224
============= =========== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1996
---------------------
ALL AMERICA BOND
FUND FUND
----------- ---------
<S> <C> <C>
Shares sold.............................................. 5,029,363 2,011,622
Shares issued as reinvestment of dividends (Note 5)...... 30,167 75,089
Shares redeemed.......................................... (2,461) (12,492)
--------- ---------
Net increase (decrease).................................. 5,057,069 2,074,219
========= =========
</TABLE>
As at December 31, 1997, Mutual of America Life Insurance Company and its
subsidiaries, affiliates of the Adviser, were shareholders of each fund's
outstanding shares as follows:
<TABLE>
<S> <C>
All America Fund.............................. 96%
Bond Fund..................................... 98%
Money Market fund............................. 14%
</TABLE>
In addition, one unaffiliated shareholder was owner of 54% of the Money
Market Fund's outstanding shares.
5. DIVIDENDS
On June 30, 1997 and September 15, 1997 dividend distributions were declared
and paid from accumulated net investment income to shareholders of record on
June 27, 1997, and September 14, 1997. On December 31, 1997, a dividend
distribution consisting of net investment income and capital gains was
declared and paid to shareholders of record on December 30, 1997. Pursuant to
shareholders' instructions, substantially all dividend distributions were
immediately reinvested in additional shares of each fund (see Note 4 above).
<TABLE>
<CAPTION>
ALL AMERICA BOND MONEY MARKET
FUND FUND FUND
----------- ----------- ------------
<S> <C> <C> <C>
Distributions from:
Net investment income................ $ 342,956 $ 1,195,133 $ 102,362
Net realized capital gains........... 4,524,483 25,567 --
----------- ----------- ---------
Total dividend distributions........... $ 4,867,439 $ 1,220,700 $ 102,362
=========== =========== =========
Dividend amounts per share............. $ 1.18 $ .60 $ .20
=========== =========== =========
</TABLE>
25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Mutual of America Institutional Funds, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments in securities, of Mutual of America
Institutional Funds, Inc. (a Maryland Corporation) comprising the All America,
Bond and Money Market Funds as of December 31, 1997, and the related statement
of operations for the year then ended and the statements of changes in net
assets for each period in the two years then ended, and the financial
highlights for each period in the two years then ended. These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmations of securities
owned as of December 31, 1997 by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
the All America, Bond and Money Market Funds of Mutual of America
Institutional Funds, Inc. as of December 31, 1997, the results of their
operations for the year then ended and the changes in their net assets for
each period in the two years then ended and their financial highlights for
each period in the two years then ended in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
New York, New York
February 20, 1998
26
