Equitable Accumulator(SM)
A combination variable and fixed deferred annuity contract
PROSPECTUS DATED OCTOBER 18, 1999
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Please read and keep this prospectus for future reference. It contains
important information that you should know before purchasing or taking any
other action under your contract. Also, at the end of this prospectus you will
find attached the prospectus for EQ Advisors Trust, which contains important
information about its portfolios.
WHAT IS THE EQUITABLE ACCUMULATOR?
Equitable Accumulator is a deferred annuity contract issued by The Equitable
Life Assurance Society of the United States. It provides for the accumulation
of retirement savings and for income. The contract offers income and death
benefit protection. It also offers a number of payout options. You invest to
accumulate value on a tax-deferred basis in one or more of our variable
investment options, fixed maturity options, or the account for special dollar
cost averaging ("investment options").
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VARIABLE INVESTMENT OPTIONS
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o Alliance Money Market o JPM Core Bond
o Alliance High Yield o Lazard Large Cap Value
o Alliance Common Stock o Lazard Small Cap Value
o Alliance Aggressive Stock o MFS Growth with Income
o Alliance Small Cap Growth o MFS Research
o EQ/Alliance Premier Growth o MFS Emerging Growth
o BT Equity 500 Index Companies
o BT Small Company Index o Morgan Stanley Emerging
o BT International Equity Index Markets Equity
o Capital Guardian U.S. Equity o EQ/Putnam Growth & Income
o Capital Guardian Research Value
o Capital Guardian International o EQ/Putnam Investors Growth
o EQ/Putnam International Equity
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You may allocate amounts to any of the variable investment options. Each
variable investment option is a subaccount of our Separate Account No. 49.
Each variable investment option, in turn, invests in a corresponding
securities portfolio of EQ Advisors Trust. Your investment results in a
variable investment option will depend on the investment performance of the
related portfolio.
FIXED MATURITY OPTIONS. You may allocate amounts to one or more fixed maturity
options. These amounts will receive a fixed rate of interest for a specified
period. Interest is earned at a guaranteed rate set by us. We make a market
value adjustment (up or down) if you make transfers or withdrawals from a
fixed maturity option before its maturity date.
ACCOUNT FOR SPECIAL DOLLAR COST AVERAGING. This account also pays fixed
interest at guaranteed rates.
TYPES OF CONTRACTS. We offer the contracts for use as:
o A nonqualified annuity ("NQ") for after-tax contributions only.
o An individual retirement annuity ("IRA"), either traditional IRA or Roth
IRA.
We offer two versions of the traditional IRA: "Rollover IRA" and "Flexible
Premium IRA." We also offer two versions of the Roth IRA: "Roth Conversion
IRA" and "Flexible Premium Roth IRA."
o An annuity that is an investment vehicle for a qualified defined
contribution or defined benefit plan ("QP").
o An Internal Revenue Code Section 403(b) Tax-Sheltered Annuity ("TSA") -
("Rollover TSA").
A contribution of at least $5,000 is required to purchase an NQ, Rollover IRA,
Roth Conversion IRA, QP, or Rollover TSA contract. For Flexible Premium IRA or
Flexible Premium Roth IRA contracts, we require a contribution of $2,000 to
purchase a contract.
Registration statements relating to this offering have been filed with the
Securities and Exchange Commission ("SEC"). The statement of additional
information ("SAI") dated October 18, 1999 is a part of one of the
registration statements. The SAI is available free of charge. You may request
one by writing to our processing office or calling 1-800-789-7771. The SAI has
been incorporated by reference into this prospectus. This prospectus and the
SAI can also be obtained from the SEC's Web site at http://www.sec.gov. The
table of contents for the SAI appears at the back of this prospectus.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THE CONTRACTS ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT
BANK GUARANTEED. THEY ARE SUBJECT TO INVESTMENT RISKS AND POSSIBLE LOSS OF
PRINCIPAL.
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2 CONTENTS OF THIS PROSPECTUS
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Contents of this prospectus
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EQUITABLE ACCUMULATOR(SM)
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Index of key words and phrases 4
Who is Equitable Life? 5
How to reach us 6
Equitable Accumulator at a glance - key features 8
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FEE TABLE 11
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Examples 14
Condensed financial information 15
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1
CONTRACT FEATURES AND BENEFITS 16
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How you can purchase and contribute to your contract 16
Owner and annuitant requirements 20
How you can make your contributions 20
What are your investment options under the contract? 20
Allocating your contributions 24
Our baseBUILDER option 25
Guaranteed minimum death benefit 28
Your right to cancel within a certain number of days 29
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2
DETERMINING YOUR CONTRACT'S VALUE 30
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Your account value 30
Your contract's value in the variable investment options 30
Your contract's value in the fixed maturity options 30
Your contract's value in the account for special dollar
cost averaging 30
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"We," "our," and "us" refer to Equitable Life.
When we address the reader of this prospectus with words such as "you" and
"your," we mean the person who has the right or responsibility that the
prospectus is discussing at that point. This is usually the contract owner.
When we use the word "contract" it also includes certificates that are issued
under group contracts in some states.
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CONTENTS OF THIS PROSPECTUS 3
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3
TRANSFERRING YOUR MONEY AMONG
INVESTMENT OPTIONS 31
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Transferring your account value 31
Rebalancing your account value 31
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4
ACCESSING YOUR MONEY 32
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Withdrawing your account value 32
How withdrawals are taken from your account value 33
How withdrawals affect your guaranteed minimum
income benefit and guaranteed minimum death
benefit 33
Loans under Rollover TSA contracts 34
Surrendering your contract to receive its cash value 35
When to expect payments 35
Choosing your annuity payout options 36
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5
CHARGES AND EXPENSES 39
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Charges that Equitable Life deducts 39
Charges that EQ Advisors Trust deducts 41
Group or sponsored arrangements 41
Other distribution arrangements 42
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6
PAYMENT OF DEATH BENEFIT 43
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Your beneficiary and payment of benefit 43
How death benefit payment is made 44
Beneficiary continuation option for Rollover IRA and
Flexible Premium IRA contracts 44
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7
TAX INFORMATION 46
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Overview 46
Transfers among investment options 46
Taxation of nonqualified annuities 46
Special rules for NQ contracts issued in Puerto Rico 47
Individual retirement arrangements (IRAs) 48
Special rules for nonqualified contracts in qualified
plans 58
Tax-Sheltered Annuity contracts (TSAs) 58
Federal and state income tax withholding and
information reporting 62
Impact of taxes to Equitable Life 64
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8
MORE INFORMATION 65
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About our Separate Account No. 49 65
About EQ Advisors Trust 65
About our fixed maturity options 66
About the general account 67
About other methods of payment 67
Dates and prices at which contract events occur 68
About your voting rights 69
About our year 2000 progress 70
About legal proceedings 70
About our independent accountants 70
Transfers of ownership, collateral assignments, loans,
and borrowing 70
Distribution of the contracts 71
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9
INVESTMENT PERFORMANCE 72
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Benchmarks 72
Communicating performance data 81
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10
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE 83
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APPENDICES
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I - Condensed financial information A-1
II - Purchase considerations for QP
contracts B-1
III - Market value adjustment example C-1
IV - Guaranteed minimum
death benefit example D-1
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
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4 INDEX OF KEY WORDS AND PHRASES
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Index of key words and phrases
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This index should help you locate more information on the terms used in this
prospectus.
Page
account for special dollar cost
averaging 23
account value 30
annuitant 16
annuity payout options 36
baseBUILDER 25
beneficiary 43
benefit base 26
business day 68
cash value 30
conduit IRA 52
contract date 9
contract date anniversary 9
contract year 9
contributions to Roth IRAs 55
regular contributions 55
rollover contributions 56
conversion contributions 56
direct custodian-to-custodian
transfers 56
contributions to traditional IRAs 48
regular contributions 49
rollover contributions 51
direct custodian-to-custodian
transfers 51
ERISA 34
fixed maturity amount 22
fixed maturity options 22
Flexible Premium IRA cover
Page
Flexible Premium Roth IRA cover
guaranteed minimum death benefit 28
guaranteed minimum income benefit 26
IRA 48
IRS 46
investment options 20
loan reserve account 35
market adjusted amount 22
market value adjustment 23
maturity value 22
NQ 46
participant 20
portfolio cover
processing office 6
QP 58
rate to maturity 22
Required Beginning Date 52
Rollover IRA cover
Rollover TSA cover
Roth Conversion IRA cover
Roth IRA 55
SAI cover
SEC cover
TOPS 6
TSA 58
traditional IRA 48
unit 30
variable investment options 20
To make this prospectus easier to read, we sometimes use different words than in
the contract or supplemental materials. This is illustrated below. Although we
use different words, they have the same meaning in this prospectus as in the
contract or supplemental materials. Your registered representative can provide
further explanation about your contract.
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Prospectus Contract or Supplemental Materials
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fixed maturity options Guarantee Periods (Guaranteed Fixed
Interest Accounts in supplemental materials)
variable investment options Investment Funds
account value Annuity Account Value
rate to maturity Guaranteed Rates
unit Accumulation Unit
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WHO IS EQUITABLE LIFE? 5
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Who is Equitable Life?
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We are The Equitable Life Assurance Society of the United States ("Equitable
Life"), a New York stock life insurance corporation. We have been doing business
since 1859. Equitable Life is a subsidiary of AXA Financial, Inc. (previously,
The Equitable Companies Incorporated). The majority shareholder of AXA
Financial, Inc. is AXA, a French holding company for an international group of
insurance and related financial services companies. As a majority shareholder,
and under its other arrangements with Equitable Life and Equitable Life's
parent, AXA exercises significant influence over the operations and capital
structure of Equitable Life and its parent. No company other than Equitable
Life, however, has any legal responsibility to pay amounts that Equitable Life
owes under the contract.
AXA Financial, Inc. and its consolidated subsidiaries managed approximately
$390.8 billion in assets as of June 30, 1999. For over 100 years Equitable Life
has been among the largest insurance companies in the United States. We are
licensed to sell life insurance and annuities in all fifty states, the District
of Columbia, Puerto Rico, and the U.S. Virgin Islands. Our home office is
located at 1290 Avenue of the Americas, New York, N.Y. 10104.
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WHO IS EQUITABLE LIFE? 6
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HOW TO REACH US
You may communicate with our processing office as listed below for any of the
following purposes:
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FOR CONTRIBUTIONS SENT BY REGULAR MAIL:
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Equitable Accumulator
P.O. Box 13014
Newark, NJ 07188-0014
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FOR CONTRIBUTIONS SENT BY EXPRESS DELIVERY:
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Equitable Accumulator
c/o Bank One, N.A.
300 Harmon Meadow Boulevard, 3rd Floor
Attn: Box 13014
Secaucus, NJ 07094
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FOR ALL OTHER COMMUNICATIONS (E.G.,
REQUESTS FOR TRANSFERS, WITHDRAWALS, OR
REQUIRED NOTICES) SENT BY REGULAR MAIL:
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Equitable Accumulator
P.O. Box 1547
Secaucus, NJ 07096-1547
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FOR ALL OTHER COMMUNICATIONS (E.G.,
REQUESTS FOR TRANSFERS, WITHDRAWALS, OR
REQUIRED NOTICES) SENT BY EXPRESS DELIVERY:
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Equitable Accumulator
200 Plaza Drive, 4th Floor
Secaucus, NJ 07094
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REPORTS WE PROVIDE:
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o written confirmation of financial transactions;
o statement of your contract values at the close of each calendar quarter
(four per year); and
o annual statement of your contract values as of the close of the contract
year.
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TELEPHONE OPERATED PROGRAM SUPPORT
("TOPS") SYSTEM:
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TOPS is designed to provide you with up-to-date information via touch-tone
telephone. You can obtain information on:
o your current account value;
o your current allocation percentages;
o the number of units you have in the variable investment options;
o rates to maturity for the fixed maturity options; and
o the daily unit values for the variable investment options.
You can also:
o change your allocation percentages and/or transfer among the investment
options; and
o obtain or change your personal identification number (PIN).
TOPS is normally available seven days a week, 24 hours a day, by calling toll
free 1-888-909-7770. Of course, for reasons beyond our control, the service may
sometimes be unavailable.
We have established procedures to reasonably confirm that the instructions
communicated by telephone are genuine. For example, we will require certain
personal identification information before we will act on telephone instructions
and we will provide written confirmation of your transfers. We will not be
liable for following telephone instructions we reasonably believe to be genuine.
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BY INTERNET:
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You can also access information about your contract on the Internet. Please
visit our Web site at http://www.equitable.com, and click on EQAccess.
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7 WHO IS EQUITABLE LIFE?
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CUSTOMER SERVICE REPRESENTATIVE:
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You may also use our toll-free number (1-800-789-7771) to speak with one of our
customer service representatives. Our customer service representatives are
available on any business day from 8:30 a.m. until 5:30 p.m., Eastern time.
You should send all contributions, notices, and requests to our processing
office at the address above.
WE REQUIRE THAT THE FOLLOWING TYPES OF COMMUNICATIONS BE ON SPECIFIC FORMS WE
PROVIDE FOR THAT PURPOSE:
(1) authorization for telephone transfers by your registered representative;
(2) conversion of a traditional IRA contract to a Roth Conversion IRA or
Flexible Premium Roth IRA contract;
(3) election of the automatic investment program;
(4) election of the rebalancing program;
(5) requests for loans under Rollover TSA contracts;
(6) spousal consent for loans under Rollover TSA contracts;
(7) contract surrender and withdrawal requests;
(8) tax withholding election; and
(9) election of the beneficiary continuation option.
WE ALSO HAVE SPECIFIC FORMS THAT WE RECOMMEND YOU USE FOR THE FOLLOWING TYPES OF
REQUESTS:
(1) address changes;
(2) beneficiary changes;
(3) transfers between investment options; and
(4) requests to exercise your guaranteed minimum income benefit.
TO CANCEL OR CHANGE ANY OF THE FOLLOWING WE REQUIRE WRITTEN NOTIFICATION
GENERALLY AT LEAST SEVEN CALENDAR DAYS BEFORE THE NEXT SCHEDULED TRANSACTION:
(1) automatic investment program;
(2) general dollar cost averaging;
(3) rebalancing;
(4) special dollar cost averaging;
(5) substantially equal withdrawals;
(6) systematic withdrawals; and
(7) the date annuity payments are to begin.
You must sign and date all these requests. Any written request that is not on
one of our forms must include your name and your contract number along with
adequate details about the notice you wish to give or the action you wish us to
take.
SIGNATURES:
The proper person to sign forms, notices and requests would normally be the
owner. If there are joint owners both must sign.
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8 EQUITABLE ACCUMULATOR AT A GLANCE - KEY FEATURES
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Equitable Accumulator at a glance - key features
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PROFESSIONAL Equitable Accumulator's variable investment options invest in 22 different portfolios
INVESTMENT managed by professional investment advisers.
MANAGEMENT
FIXED MATURITY o 10 fixed maturity options with maturities ranging from approximately 1 to 10 years. options
o Each fixed maturity option offers a guarantee of principal and interest rate if you hold
it to maturity.
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If you make withdrawals or transfers from a fixed maturity option before maturity,
there will be a market value adjustment due to differences in interest rates. This may increase
or decrease any value that you have left in that fixed maturity option. If you surrender your
contract, a market value adjustment may also apply.
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ACCOUNT FOR SPECIAL DOLLAR Available for dollar cost averaging all or a portion of your initial contribution.
COST AVERAGING
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TAX ADVANTAGES o On earnings inside the No tax on any dividends, interest or capital gains until you
contract make withdrawals from your contract or receive annuity payments.
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o On transfers inside the No tax on transfers among investment options.
contract
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If you are buying a contract to fund a retirement plan that already provides tax deferral under
sections of the Internal Revenue Code (IRA, QP, and Rollover TSA), you should do so for the
contract's features and benefits other than tax deferral. In such situations, the tax deferral of
the contract does not provide additional benefits.
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BASEBUILDER(R) baseBUILDER combines a guaranteed minimum income benefit with a guaranteed minimum death benefit.
PROTECTION This optional feature provides income protection for you while the annuitant lives, as well as a
death benefit for the beneficiary should the annuitant die.
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CONTRIBUTION AMOUNTS o NQ, Rollover IRA, Roth Conversion IRA, QP, and Rollover TSA contracts
o Initial minimum: $5,000
o Additional minimum: $1,000
$100 monthly and $300 quarterly under our automatic
investment program (NQ contracts)
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o Flexible Premium IRA and Flexible Premium Roth IRA contracts
o Initial minimum: $2,000
o Additional minimum: $50 ($50 under our automatic investment program)
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Maximum contribution limitations may apply.
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EQUITABLE ACCUMULATOR AT A GLANCE - KEY FEATURES 9
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Equitable Accumulator at a glance - key features
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ACCESS TO YOUR MONEY o Lump sum withdrawals
o Several withdrawal options on a periodic basis
o Loans under Rollover TSA contracts
o Contract surrender
You may incur a withdrawal
charge for certain withdrawals or if you surrender
your contract. You may also incur income tax and a
tax penalty.
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PAYOUT ALTERNATIVES o Annuity payout options
o Income Manager payout options
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ADDITIONAL FEATURES o Dollar cost averaging
o Automatic investment program
o Account value rebalancing (quarterly, semiannually,
and annually)
o Unlimited free transfers
o Waiver of withdrawal charge for disability,
terminal illness, or confinement to a nursing home
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FEES AND CHARGES o Daily charges on amounts invested in variable
investment options for mortality and expense
risks and administrative charges at an annual
rate of 1.35%.
o Annual 0.30% benefit base charge for the optional
baseBUILDER benefit. The benefit base is described
under "Contract features and benefits - Your
guaranteed minimum income benefit under
baseBUILDER." No additional charge if you want a
guaranteed minimum death benefit only.
o Under Flexible Premium IRA and Flexible Premium
Roth IRA contracts, if your account value at the
end of the contract year is less than $25,000, we
deduct an annual administrative charge equal to $30
or during the first two contract years 2% of your
account value, if less. If your account value is
$25,000 or more, we will not deduct the charge.
o No sales charge deducted at the time you make
contributions.
o During the first seven contract years following a
contribution, a charge will be deducted from
amounts that you withdraw that exceed 15% of your
account value. We use the account value on the most
recent contract date anniversary to calculate the
15% amount available. The charge begins at 7% in
the first contract year following a contribution.
It declines by 1% each year to 1% in the seventh
contract year. There is no withdrawal charge in the
eighth and later contract years following a
contribution.
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The "contract date" is the effective date of a
contract. This usually is the business day we
receive your initial contribution. Your contract
date will be shown in your contract. The 12-month
period beginning on your contract date and each
12-month period after that date is a "contract
year." The end of each 12-month period is your
"contract date anniversary."
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10 EQUITABLE ACCUMULATOR AT A GLANCE - KEY FEATURES
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Equitable Accumulator at a glance - key features
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FEES AND o We deduct a charge for taxes such as premium taxes
CHARGES (CONTINUED) that may be imposed in your state. This charge is
generally deducted from the amount applied to
an annuity payout option.
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o We generally deduct a $350 annuity administrative
fee from amounts applied to purchase certain life
annuity payout options.
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o Annual expenses of EQ Advisors Trust portfolios are
calculated as a percentage of the average daily net
assets invested in each portfolio. These expenses
include management fees ranging from 0.25% to 1.15%
annually, 12b-1 fees of 0.25% annually, and other
expenses.
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ANNUITANT ISSUE AGES NQ: 0-83
Rollover IRA, Roth Conversion IRA, Flexible Premium
Roth IRA, and Rollover TSA: 20-83 Flexible Premium
IRA: 20-70 QP: 20-75
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THE ABOVE IS NOT A COMPLETE DESCRIPTION OF ALL MATERIAL PROVISIONS OF THE
CONTRACT. IN SOME CASES RESTRICTIONS OR EXCEPTIONS APPLY. ALSO, ALL FEATURES OF
THE CONTRACT ARE NOT NECESSARILY AVAILABLE IN YOUR STATE OR AT CERTAIN AGES.
For more detailed information we urge you to read the contents of this
prospectus, as well as your contract. Please feel free to speak with your
registered representative, or call us, if you have any questions.
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FEE TABLE 11
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Fee table
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The fee table below will help you understand the various charges and expenses
that apply to your contract. The table reflects charges you will directly incur
under the contract, as well as charges and expenses of the portfolios that you
will bear indirectly. Charges for taxes, such as premium taxes, may also apply.
Also, an annuity administrative fee may apply when your annuity payments are to
begin. Each of the charges and expenses is more fully described under "Charges
and expenses" later in this prospectus. For a complete description of portfolio
charges and expenses, please see the attached prospectus for EQ Advisors Trust.
The fixed maturity options and the account for special dollar cost averaging are
not covered by the fee table and examples. However, the annual administrative
charge and the withdrawal charge do apply to the fixed maturity options and the
account for special dollar cost averaging. A market value adjustment (up or
down) may apply as a result of a withdrawal, transfer, or surrender of amounts
from a fixed maturity option.
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CHARGES WE DEDUCT FROM YOUR VARIABLE INVESTMENT OPTIONS EXPRESSED AS AN ANNUAL
PERCENTAGE OF DAILY NET ASSETS
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<S> <C> <C>
Mortality and expense risks (1) 1.10%
Administrative (2) 0.25%
Total annual expenses 1.35%
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FLEXIBLE PREMIUM IRA AND FLEXIBLE PREMIUM ROTH IRA CONTRACTS ONLY: CHARGES WE
DEDUCT FROM YOUR ACCOUNT VALUE ON EACH CONTRACT DATE ANNIVERSARY
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Maximum annual administrative charge (3)
If your account value on a contract date anniversary is less than $25,000 $30
If your account value on a contract date anniversary is $25,000 or more $0
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CHARGES WE DEDUCT FROM YOUR ACCOUNT VALUE AT THE TIME YOU REQUEST CERTAIN
TRANSACTIONS
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WITHDRAWAL CHARGE AS A PERCENTAGE OF CONTRIBUTIONS (deducted if you surrender
your contract or make certain withdrawals. The withdrawal charge Contract
percentage we use is determined by the contract year in which you make year
the withdrawal or surrender your contract. For each contribution, we 1 ..............7.00%
we consider the contract year in which we receive that contribution 2 ..............6.00%
to be "contract year 1")(4) 3 ..............5.00%
4 ..............4.00%
5 ..............3.00%
6 ..............2.00%
7 ..............1.00%
8+..............0.00%
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CHARGES WE DEDUCT FROM YOUR ACCOUNT VALUE EACH YEAR IF YOU ELECT THE OPTIONAL BENEFIT
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baseBUILDER benefits charge (calculated as a percentage of the benefit base.
Deducted annually on each contract date anniversary)(5) 0.30%
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12 FEE TABLE
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EQ ADVISORS TRUST ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS IN EACH PORTFOLIO)
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TOTAL
OTHER ANNUAL
EXPENSES EXPENSES
MANAGEMENT (AFTER EXPENSE (AFTER EXPENSE
FEES(6) 12B-1 FEES(7) LIMITATION)(8) LIMITATION)(9)
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<S> <C> <C> <C> <C>
Alliance Money Market 0.35% 0.25% 0.03% 0.63%
Alliance High Yield 0.60% 0.25% 0.04% 0.89%
Alliance Common Stock 0.36% 0.25% 0.04% 0.65%
Alliance Aggressive Stock 0.54% 0.25% 0.04% 0.83%
Alliance Small Cap Growth 0.90% 0.25% 0.06% 1.21%
EQ/Alliance Premier Growth 0.90% 0.25% 0.00% 1.15%
BT Equity 500 Index 0.25% 0.25% 0.05% 0.55%
BT Small Company Index 0.25% 0.25% 0.25% 0.75%
BT International Equity Index 0.35% 0.25% 0.40% 1.00%
Capital Guardian U.S. Equity 0.65% 0.25% 0.05% 0.95%
Capital Guardian Research 0.65% 0.25% 0.05% 0.95%
Capital Guardian International 0.75% 0.25% 0.20% 1.20%
JPM Core Bond 0.45% 0.25% 0.10% 0.80%
Lazard Large Cap Value 0.55% 0.25% 0.15% 0.95%
Lazard Small Cap Value 0.80% 0.25% 0.15% 1.20%
MFS Growth with Income 0.55% 0.25% 0.05% 0.85%
MFS Research 0.55% 0.25% 0.05% 0.85%
MFS Emerging Growth Companies 0.55% 0.25% 0.05% 0.85%
Morgan Stanley Emerging Markets Equity 1.15% 0.25% 0.35% 1.75%
EQ/Putnam Growth & Income Value 0.55% 0.25% 0.05% 0.85%
EQ/Putnam Investors Growth 0.55% 0.25% 0.15% 0.95%
EQ/Putnam International Equity 0.70% 0.25% 0.25% 1.20%
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Notes:
(1) A portion of this charge is for providing the guaranteed minimum death
benefit.
(2) We reserve the right to increase this charge to a maximum annual rate of
0.35%.
(3) For Flexible Premium IRA and Flexible Premium Roth IRA contracts, during the
first two contract years this charge is equal to the lesser of $30 or 2% of
your account value if it applies. Thereafter, the charge is $30 for each
contract year.
(4) Deducted upon a withdrawal of amounts in excess of the 15% free withdrawal
amount and upon surrender of a contract.
(5) The benefit base is described under "Contract features and benefits - Your
guaranteed minimum income benefit under baseBUILDER."
(6) The management fees or the maximum management fees, if a maximum applies,
for each portfolio cannot be increased without a vote of that portfolio's
shareholders.
(7) Portfolio shares are all subject to fees imposed under the distribution plan
(the "Rule 12b-1 Plan") adopted by EQ Advisors Trust pursuant to Rule 12b-1
under the Investment Company Act of 1940. The 12b-1 fee will not be
increased for the life of the contracts. Prior to October 18, 1999, the
total annual expenses for the Alliance Small Cap Growth portfolio were
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FEE TABLE 13
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limited to 1.20% under an expense limitation arrangement related to that
portfolio's Rule 12b-1 Plan. The arrangement is no longer in effect. The
amounts shown have been restated to reflect the expenses that would have
been incurred in 1998, absent the expense limitation arrangement.
(8) The amounts shown as "Other Expenses" will fluctuate from year to year
depending on actual expenses. See footnote (9) for any expense limitation
agreements.
On October 18, 1999, the Alliance portfolios (other than EQ/Alliance
Premier Growth) became part of the portfolios of EQ Advisors Trust. The
"Other Expenses" for these portfolios have been restated to reflect the
estimated expenses that would have been incurred had these portfolios been
portfolios of EQ Advisors Trust for the year ended December 31, 1998. The
restated expenses reflect an increase of 0.01%.
(9) Equitable Life, EQ Advisors Trust's manager, has entered into an expense
limitation agreement with respect to certain portfolios. Under this
agreement Equitable Life has agreed to waive or limit its fees and assume
other expenses. Under the expense limitation agreement, total annual
operating expenses of certain portfolios (other than interest, taxes,
brokerage commissions, capitalized expenditures, extraordinary expenses, and
12b-1 fees) are limited as a percentage of the average daily net assets of
the following portfolios: 0.90% for EQ/Alliance Premier Growth; 0.30% for BT
Equity 500 Index; 0.50% for BT Small Company Index; 0.75% for BT
International Equity Index; 0.70% for Capital Guardian U.S. Equity and
Capital Guardian Research; 0.95% for Capital Guardian International; 0.55%
for JPM Core Bond; 0.70% for Lazard Large Cap Value; 0.95% for Lazard Small
Cap Value; 0.60% for MFS Growth with Income, MFS Research, and MFS Emerging
Growth Companies; 1.50% for Morgan Stanley Emerging Markets Equity; 0.60%
for EQ/Putnam Growth & Income Value; 0.70% for EQ/Putnam Investors Growth;
0.95% for EQ/Putnam International Equity. The expenses shown for the BT
International Equity Index, BT Small Company Index, EQ/Putnam Investors
Growth, and Lazard Large Cap Value portfolios reflect an increase effective
on May 1, 1999.
Absent the expense limitation, the "Other Expenses" for 1998 on an
annualized basis for each of the portfolios would have been as follows:
0.33% for BT Equity 500 Index; 1.31% for BT Small Company Index; 0.89% for
BT International Equity Index; 0.33% for JPM Core Bond; 0.40% for Lazard
Large Cap Value; 0.49% for Lazard Small Cap Value; 0.25% for MFS Research;
0.24% for MFS Emerging Growth Companies; 1.23% for Morgan Stanley Emerging
Markets Equity; 0.24% for EQ/Putnam Growth & Income Value; 0.29% for
EQ/Putnam Investors Growth; 0.51% for EQ/Putnam International Equity. For
the following portfolios, the "Other Expenses" for 1999, absent the expense
limitation, are estimated to be as follows: 0.74% for EQ/Alliance Premier
Growth; 0.74% for Capital Guardian U.S. Equity and Capital Guardian
Research; 1.03% for Capital Guardian International; and 0.59% for MFS Growth
with Income. Initial seed capital was invested on December 31, 1998 for the
MFS Growth with Income portfolio and April 30, 1999 for the EQ/Alliance
Premier Growth, Capital Guardian U.S. Equity, Capital Guardian Research, and
Capital Guardian International portfolios and therefore expenses have been
estimated.
Each portfolio may at a later date make a reimbursement to Equitable Life
for any of the management fees waived or limited and other expenses assumed
and paid by Equitable Life pursuant to the expense limitation agreement
provided that, among other things, such portfolio has reached sufficient
size to permit such reimbursement to be made and provided that the
portfolio's current annual operating expenses do not exceed the operating
expense limit determined for such portfolio. For more information see the
prospectus for EQ Advisors Trust.
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE 14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES
The examples below show the expenses that a hypothetical contract owner (who has
purchased a Flexible Premium IRA or Flexible Premium Roth IRA contract and
elected baseBUILDER) would pay in the situations illustrated. We assume that a
$1,000 contribution is invested in one of the variable investment options listed
and a 5% annual return is earned on the assets in that option.(1) Since the
annual administrative charge only applies under Flexible Premium IRA and
Flexible Premium Roth IRA contracts, the charges shown in the examples would be
lower for NQ, Rollover IRA, Roth Conversion IRA, QP, and Rollover TSA contracts.
These examples should not be considered a representation of past or future
expenses for each option. Actual expenses may be greater or less than those
shown. Similarly, the annual rate of return assumed in the examples is not an
estimate or guarantee of future investment performance.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
IF YOU SURRENDER YOUR CONTRACT AT THE END
OF EACH PERIOD SHOWN, THE EXPENSES
WOULD BE:
---------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Money Market $93.10 $127.18 $163.89 $288.24
Alliance High Yield $95.68 $134.92 $176.80 $313.95
Alliance Common Stock $93.29 $127.77 $164.88 $290.23
Alliance Aggressive Stock $95.08 $133.14 $173.83 $308.07
Alliance Small Cap Growth $98.86 $144.42 $192.53 $344.77
EQ/Alliance Premier Growth $98.26 $142.63 - -
BT Equity 500 Index $92.30 $124.78 $159.88 $280.19
BT Small Company Index $94.29 $130.75 $169.85 $300.17
BT International Equity Index $96.77 $138.19 $182.22 $324.65
Capital Guardian U.S. Equity $96.27 $136.71 - -
Capital Guardian Research $96.27 $136.71 - -
Capital Guardian International $98.76 $144.12 - -
JPM Core Bond $94.78 $132.24 $172.34 $305.12
Lazard Large Cap Value $96.27 $136.71 $179.76 $319.80
Lazard Small Cap Value $98.76 $144.12 $192.03 $343.81
MFS Growth with Income $95.28 $133.74 - -
MFS Research $95.28 $133.74 $174.83 $310.05
MFS Emerging Growth Companies $95.28 $133.74 $174.83 $310.05
Morgan Stanley Emerging Markets Equity $104.22 $160.29 $218.58 $394.59
EQ/Putnam Growth & Income Value $95.28 $133.74 $174.83 $310.05
EQ/Putnam Investors Growth $96.27 $136.71 $179.76 $319.80
EQ/Putnam International Equity $98.76 $144.12 $192.03 $343.81
- -----------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
IF YOU DO NOT SURRENDER YOUR CONTRACT AT
THE END OF EACH PERIOD SHOWN, THE
EXPENSES WOULD BE:
---------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Money Market $26.25 $80.65 $137.72 $293.13
Alliance High Yield $28.83 $88.40 $150.63 $318.85
Alliance Common Stock $26.44 $81.23 $138.70 $295.11
Alliance Aggressive Stock $28.23 $86.60 $147.65 $312.96
Alliance Small Cap Growth $32.01 $97.88 $166.34 $349.63
EQ/Alliance Premier Growth $31.41 $96.11 - -
BT Equity 500 Index $25.45 $78.25 $133.71 $285.07
BT Small Company Index $27.44 $84.23 $143.69 $305.09
BT International Equity Index $29.92 $91.66 $156.05 $329.53
Capital Guardian U.S. Equity $29.42 $90.17 - -
Capital Guardian Research $29.42 $90.17 - -
Capital Guardian International $31.91 $97.59 - -
JPM Core Bond $27.93 $85.72 $146.17 $310.01
Lazard Large Cap Value $29.42 $90.17 $153.58 $324.68
Lazard Small Cap Value $31.91 $97.59 $165.86 $348.69
MFS Growth with Income $28.43 $87.20 - -
MFS Research $28.43 $87.20 $148.64 $314.93
MFS Emerging Growth Companies $28.43 $87.20 $148.64 $314.93
Morgan Stanley Emerging Markets Equity $37.37 $113.76 $192.41 $399.49
EQ/Putnam Growth & Income Value $28.43 $87.20 $148.64 $314.93
EQ/Putnam Investors Growth $29.42 $90.17 $153.58 $324.68
EQ/Putnam International Equity $31.91 $97.59 $165.86 $348.69
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) The amount accumulated from the $1,000 contribution could not be paid in the
form of an annuity payout option at the end of any of the periods shown in
the examples. This is because if the amount applied to purchase an annuity
payout option is less than $2,000, or the initial payment is less than $20,
we may pay the amount to you in a single sum instead of payments under an
annuity payout option. See "Accessing your money."
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE 15
- --------------------------------------------------------------------------------
IF YOU ELECT AN ANNUITY PAYOUT OPTION:
Assuming an annuity payout option could be issued (see note (1) above), and you
elect a life annuity payout option, the expenses shown in the example for "if
you do not surrender your contract" would, in each case, be increased by $4.43
based on the average amount applied to annuity payout options in 1998. See
"Annuity administrative fee" under "Charges and expenses."
CONDENSED FINANCIAL INFORMATION
Please see Appendix I at the end of this prospectus for the unit values and the
number of units outstanding as of the end of the periods shown for each of the
variable investment options available as of December 31, 1998.
<PAGE>
- --------------------------------------------------------------------------------
16 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
1
Contract features and benefits
- --------------------------------------------------------------------------------
HOW YOU CAN PURCHASE AND CONTRIBUTE TO YOUR CONTRACT
You may purchase a contract by making payments to us that we call
"contributions." We require a minimum contribution amount for each type of
contract purchased. The following table summarizes our rules regarding
contributions to your contract. All ages in the table refer to the age of the
annuitant named in the contract.
- --------------------------------------------------------------------------------
The "annuitant" is the person who is the measuring life for determining contract
benefits. The annuitant is not necessarily the contract owner.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
AVAILABLE
CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON
TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NQ 0 through 83 o $5,000 (initial) o After-tax money. o No additional
contributions after
o $1,000 (additional) o Paid to us by check or age 84.
transfer of contract
value in a tax-deferred
exchange under
Section 1035 of the
Internal Revenue Code.
- ----------------------------------------------------------------------------------------------------------------------------
Flexible 20 through 70 o $2,000 (initial) o "Regular" traditional o No regular IRA
Premium IRA IRA contributions. contributions in the
o $50 (additional after calendar year you turn
the first contract year) o Rollovers from a age 70 1/2 and
qualified plan. thereafter.
o Rollovers from a TSA.
o Total regular
o Rollovers from another contributions may not
traditional individual exceed $2,000 for a
retirement year.
arrangement.
o No additional rollover
or direct transfer
o Direct custodian- contributions after
to-custodian transfers age 71.
from another
traditional individual o Rollover and direct
retirement transfer contributions
arrangement. after age 70 1/2 must
be net of required
minimum distributions.
Although we accept rollover and direct transfer contributions under the Flexible Premium IRA
contract, we intend that this contract be used for ongoing regular contributions.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
AVAILABLE
CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON
TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rollover IRA 20 through 83 o $5,000 (initial) o Rollovers from a o No rollover or direct
qualified plan. transfer contributions
o $1,000 (additional) after age 84.
o Rollovers from a TSA.
o Contributions after
o Rollovers from another age 70 1/2 must be net
traditional individual of required minimum
retirement distributions.
arrangement.
o Regular IRA
o Direct contributions are not
custodian-to-custodian permitted.
transfers from another
traditional individual
retirement
arrangement.
Only rollover and direct transfer contributions are permitted under the Rollover
IRA contract.
- ----------------------------------------------------------------------------------------------------------------------------
Flexible 20 through 83 o $2,000 (initial) o Regular after-tax o No additional regular
Premium Roth contributions. after-tax contributions
IRA o $50 (additional after after age 84.
the first contract year) o Rollovers from another
Roth IRA. o No additional rollover
or direct transfer
o Conversion rollovers contributions after
from a traditional IRA. age 84.
o Direct transfers from
another Roth IRA. o Contributions are
subject to income limits
and other tax rules. See
"Tax information-
Contributions to
Roth IRAs."
Although we accept rollover and direct transfer contributions under the Flexible
Premium Roth IRA contract, we intend that this contract be used for ongoing regular
contributions.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
18 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
AVAILABLE
CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON
TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Roth 20 through 83 o $5,000 (initial) o Rollovers from another o No additional rollover
Conversion IRA Roth IRA. or direct transfer
o $1,000 (additional) contributions after
o Conversion rollovers age 84.
from a traditional IRA.
o Conversion rollovers
o Direct transfers from after age 70 1/2 must be
another Roth IRA. net of required
minimum distributions
for the traditional IRA
you are rolling over.
o You cannot roll over
funds from a traditional
IRA if your adjusted
gross income is
$100,000 or more.
o Regular after-tax
contributions are not
permitted.
Only rollover and direct transfer contributions are permitted under the Roth
Conversion IRA contract.
- ----------------------------------------------------------------------------------------------------------------------------
QP 20 through 75 o $5,000 (initial) o Only transfer o Regular ongoing
contributions from an payroll contributions
o $1,000 (additional) existing qualified plan are not permitted.
trust as a change of
investment vehicle o No additional transfer
contributions after age 76.
under the plan.
o The plan must be o For defined benefit
qualified under Section plans, employee
401(a) of the Internal contributions are not
Revenue Code. permitted.
o For 401(k) plans, o Contributions after age
transferred 70 1/2 must be net of
contributions may only any required minimum
include employee distributions.
pre-tax contributions.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
AVAILABLE
CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON
TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rollover TSA 20 through 83 o $5,000 (initial) o Rollovers from another o No additional rollover
TSA contract or or direct transfer
o $1,000 (additional) arrangement. contributions after
age 84.
o Rollovers from a
traditional IRA which o Contributions after age
was a "conduit" for 70 1/2 must be net of
TSA funds previously required minimum
rolled over. distributions.
o Direct transfers from
another contract or
arrangement under
Section 403(b) of the
Internal Revenue Code,
complying with IRS
Revenue Ruling 90-24.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See "Tax information" for a more detailed discussion of sources of contributions
and certain contribution limitations. We may refuse to accept any contribution
if the sum of all contributions under all Equitable Accumulator contracts with
the same annuitant would then total more than $1,500,000. We reserve the right
to limit aggregate contributions made after the first contract year to 150% of
first-year contributions. We may also refuse to accept any contribution if the
sum of all contributions under all Equitable Life annuity accumulation contracts
that you own would then total more than $2,500,000.
For information on when contributions are credited under your contract see
"Dates and prices at which contract events occur" under "More information" later
in this prospectus.
<PAGE>
- --------------------------------------------------------------------------------
20 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNER AND ANNUITANT REQUIREMENTS
Under NQ contracts, the annuitant can be different than the owner. A joint
owner may also be named. Only natural persons can be joint owners. This means
that an entity such as a corporation cannot be a joint owner.
Under all IRA and Rollover TSA contracts, the owner and annuitant must be the
same person.
Under QP contracts, the owner must be the trustee of the qualified plan and
the annuitant must be the plan participant/employee. See Appendix II for more
information on QP contracts.
A participant is an individual who is currently, or was formerly,
participating in an eligible employer's QP or TSA plan.
HOW YOU CAN MAKE YOUR CONTRIBUTIONS
Except as noted below, contributions must be by check drawn on a U.S. bank, in
U.S. dollars, and made payable to Equitable Life. We do not accept third-party
checks endorsed to us except for rollover contributions, tax-free exchanges or
trustee checks that involve no refund. All checks are subject to our ability
to collect the funds. We reserve the right to reject a payment if it is
received in an unacceptable form.
For your convenience, we will accept initial and additional contributions by
wire transmittal from certain broker-dealers who have agreements with us for
this purpose. Additional contributions may also be made under our automatic
investment program. These methods of payment are discussed in detail under
"More information" later in this prospectus.
Your initial contribution must generally be accompanied by an application and
any other form we need to process the payments. If any information is missing
or unclear, we will try to obtain that information. If we are unable to obtain
all of the information we require within five business days after we receive
an incomplete application or form, we will inform the registered
representative submitting the application on your behalf. We will then return
the contribution to you unless you specifically direct us to keep your
contribution until we receive the required information.
- --------------------------------------------------------------------------------
Our "business day" is any day the New York Stock Exchange is open for trading.
- --------------------------------------------------------------------------------
SECTION 1035 EXCHANGES
You may apply the value of an existing nonqualified deferred annuity contract
(or life insurance or endowment contract) to purchase an Equitable Accumulator
NQ contract in a tax-free exchange if you follow certain procedures as shown
in the form that we require you to use. Also see "Tax information" later in
this prospectus.
WHAT ARE YOUR INVESTMENT OPTIONS UNDER THE CONTRACT?
Your investment options are the variable investment options, the fixed
maturity options, and the account for special dollar cost averaging.
VARIABLE INVESTMENT OPTIONS
Your investment results in any one of the 22 variable investment options will
depend on the investment performance of the underlying portfolios. Listed
below are the currently available portfolios, their investment objectives, and
their advisers.
- --------------------------------------------------------------------------------
You can choose from among 22 variable investment options.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS OF EQ ADVISORS TRUST
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME OBJECTIVE ADVISER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Money Market High level of current income while preserving Alliance Capital Management L.P.
assets and maintaining liquidity
- -----------------------------------------------------------------------------------------------------------------------------
Alliance High Yield High return by maximizing current income and, Alliance Capital Management L.P.
to the extent consistent with that objective,
capital appreciation
- -----------------------------------------------------------------------------------------------------------------------------
Alliance Common Stock Long-term growth of capital and increasing Alliance Capital Management L.P.
income
- -----------------------------------------------------------------------------------------------------------------------------
Alliance Aggressive Stock Long-term growth of capital Alliance Capital Management L.P.
- -----------------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth Long-term growth of capital Alliance Capital Management L.P.
- -----------------------------------------------------------------------------------------------------------------------------
EQ/Alliance Premier Growth Long-term growth of capital Alliance Capital Management L.P.
- -----------------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index Replicate as closely as possible (before Bankers Trust Company
deduction of portfolio expenses) the total return
of the Standard & Poor's 500 Composite Stock
Price Index
- -----------------------------------------------------------------------------------------------------------------------------
BT Small Company Index Replicate as closely as possible (before Bankers Trust Company
deduction of portfolio expenses) the total return
of the Russell 2000 Index
- -----------------------------------------------------------------------------------------------------------------------------
BT International Equity Index Replicate as closely as possible (before Bankers Trust Company
deduction of portfolio expenses) the total return
of the Morgan Stanley Capital International
Europe, Australia, Far East Index
- -----------------------------------------------------------------------------------------------------------------------------
Capital Guardian U.S. Equity Long-term growth of capital Capital Guardian Trust Company
- -----------------------------------------------------------------------------------------------------------------------------
Capital Guardian Research Long-term growth of capital Capital Guardian Trust Company
- -----------------------------------------------------------------------------------------------------------------------------
Capital Guardian International Long-term growth of capital by investing Capital Guardian Trust Company
primarily in non-United States equity securities
- -----------------------------------------------------------------------------------------------------------------------------
JPM Core Bond High total return consistent with moderate risk J. P. Morgan Investment Management Inc.
of capital and maintenance of liquidity
- -----------------------------------------------------------------------------------------------------------------------------
Lazard Large Cap Value Capital appreciation Lazard Asset Management
- -----------------------------------------------------------------------------------------------------------------------------
Lazard Small Cap Value Capital appreciation Lazard Asset Management
- -----------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Reasonable current income and long-term Massachusetts Financial Services Company
growth of capital and income
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
22 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS OF EQ ADVISORS TRUST (CONTINUED)
- -----------------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME OBJECTIVE ADVISER
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MFS Research Long-term growth of capital and future income Massachusetts Financial Services Company
- -----------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Long-term capital growth Massachusetts Financial Services Company
Companies
- -----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Long-term capital appreciation Morgan Stanley Asset Management
Markets Equity
- -----------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Growth & Income Capital growth, current income is a secondary Putnam Investment Management, Inc.
Value objective
- -----------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth Long-term growth of capital and any increased Putnam Investment Management, Inc.
income that results from this growth
- -----------------------------------------------------------------------------------------------------------------------------
EQ/Putnam International Equity Capital appreciation Putnam Investment Management, Inc.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other important information about the portfolios is included in the prospectus
for EQ Advisors Trust attached at the end of this prospectus.
FIXED MATURITY OPTIONS
We offer fixed maturity options with maturity dates ranging from one to ten
years. You can allocate your contributions to one or more of these fixed
maturity options. These amounts become part of our general account assets.
They will accumulate interest at the "rate to maturity" for each fixed
maturity option. The total amount you allocate to and accumulate in each fixed
maturity option is called the "fixed maturity amount." The fixed maturity
options are not available in contracts issued in Maryland.
Fixed maturity options range from one to ten years to maturity.
The rate to maturity you will receive for each fixed maturity option is the
rate to maturity in effect for new contributions allocated to that fixed
maturity option on the date we apply your contribution. This rate will never
be less than 3%. If you make any withdrawals or transfers from a fixed
maturity option before the maturity date, we will make a "market value
adjustment" that may increase or decrease any fixed maturity amount you have
left in that fixed maturity option. We will discuss the market value
adjustment below and in greater detail later in this prospectus under "More
information."
On the maturity date of a fixed maturity option your fixed maturity amount,
assuming you have not made any withdrawals or transfers, will equal your
contribution to that fixed maturity option plus interest, at the rate to
maturity for that contribution, to the date of the calculation. This is the
fixed maturity option's "maturity value." Before maturity, the current value
we will report for your fixed maturity amounts will reflect a market value
adjustment. Your current value will reflect the market value adjustment that
we would make if you were to withdraw all of your fixed maturity amounts on
the date of the report. We call this your "market adjusted amount."
FIXED MATURITY OPTIONS AND MATURITY DATES. We currently offer fixed maturity
options ending on February 15th for each of the maturity years 2000 through
2009. Not all of these fixed maturity options will be available for annuitant
ages 76 and older. See "Allocating
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
your contributions" below. As fixed maturity options expire, we expect to add
maturity years so that generally 10 fixed maturity options are available at
any time.
We will not accept allocations to a fixed maturity option if on the date the
contribution is to be applied:
o the fixed maturity option's maturity date is within the current calendar
year; or
o the rate to maturity is 3%; or
o for annuitants ages 76 or older, the fixed maturity option's maturity date
is later than the February 15th immediately following the date annuity
payments are to begin.
YOUR CHOICES AT THE MATURITY DATE. We will notify you on or before December
31st of the year before each of your fixed maturity options is scheduled to
mature. At that time, you may choose to have one of the following take place
on the maturity date, as long as none of the conditions listed above or in
"Allocating your contributions," below would apply:
(a) transfer the maturity value into another available fixed maturity option
or into any of the variable investment options; or
(b) withdraw the maturity value (there may be a withdrawal charge).
If we do not receive your choice on or before the fixed maturity option's
maturity date, we will automatically transfer your maturity value into the
fixed maturity option that will mature next.
MARKET VALUE ADJUSTMENT. If you make any withdrawals (including transfers,
surrender of your contract, or when we make deductions for charges) from a
fixed maturity option before it matures we will make a market value
adjustment, which will increase or decrease any fixed maturity amount you have
in that fixed maturity option. The amount of the adjustment will depend on two
factors:
(a) the difference between the rate to maturity that applies to the amount
being withdrawn and the rate to maturity in effect at that time for new
allocations to that same fixed maturity option, and
(b) the length of time remaining until the maturity date.
In general, if interest rates rise from the time that you originally allocate
an amount to a fixed maturity option to the time that you take a withdrawal,
the market value adjustment will be negative. Likewise, if interest rates drop
at the end of that time, the market value adjustment will be positive. Also,
the amount of the market value adjustment, either up or down, will be greater
the longer the time remaining until the fixed maturity option's maturity date.
Therefore, it is possible that the market value adjustment could greatly
reduce your value in the fixed maturity options, particularly in the fixed
maturity options with later maturity dates.
We provide an illustration of the market adjusted amount of specified maturity
values, an explanation of how we calculate the market value adjustment, and
information concerning our general account and investments purchased with
amounts allocated to the fixed maturity options, under "More information"
later in this prospectus. Appendix III of this prospectus provides an example
of how the market value adjustment is calculated.
ACCOUNT FOR SPECIAL DOLLAR COST AVERAGING
The account for special dollar cost averaging is part of our general account.
We pay interest at guaranteed rates in this account. We will credit interest
to the amounts that you have in the account for special dollar cost averaging
every day. We set the interest rates periodically, according to procedures
that we have. We reserve the right to change these procedures.
The account for special dollar cost averaging is available for allocation of
all or a portion of your initial contribution under the special dollar cost
averaging program. We will guarantee to pay our current interest rate that is
in effect on the date that your contribution is allocated to this account.
Your guaranteed interest rate will be shown in your contract. The
<PAGE>
- --------------------------------------------------------------------------------
24 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
rate will never be less than 3%. See "Allocating your contributions," below
for the rules and restrictions that apply to the special dollar cost averaging
program.
ALLOCATING YOUR CONTRIBUTIONS
You may choose from among three ways to allocate your contributions under your
contract: self-directed, principal assurance, or dollar cost averaging.
SELF-DIRECTED ALLOCATION
You may allocate your contributions to one or more, or all, of the variable
investment options and fixed maturity options. Allocations must be in whole
percentages and you may change your allocations at any time. However, the
total of your allocations must equal 100%. If the annuitant is age 76 or
older, you may allocate contributions to fixed maturity options if their
maturities are five years or less. Also, you may not allocate amounts to fixed
maturity options with maturity dates that are later than the February 15th
immediately following the date annuity payments are to begin.
PRINCIPAL ASSURANCE ALLOCATION
Under this allocation program you select a fixed maturity option. We specify
the portion of your initial contribution to be allocated to that fixed
maturity option in an amount that will cause the maturity value to equal the
amount of your entire initial contribution on the fixed maturity option's
maturity date. The maturity date you select generally may not be later than 10
years, or earlier than 7 years from your contract date. You allocate the rest
of your contribution to the variable investment options however you choose.
For example, if your initial contribution is $10,000, and on August 2, 1999
you chose the fixed maturity option with a maturity date of February 15, 2009,
since the rate to maturity was 5.85% on August 2, 1999, we would have
allocated $5,811.03 to that fixed maturity option and the balance to your
choice of variable investment options. On the maturity date your value in the
fixed maturity option would be $10,000.
The principal assurance allocation is only available for annuitant ages 75 or
younger when the contract is issued. If you are purchasing a Rollover IRA,
Flexible Premium IRA, QP, or Rollover TSA contract, before you select a
maturity year that would extend beyond the year in which you will reach age
70 1/2, you should consider whether your value in the variable investment
options, or your other traditional IRA or TSA funds are sufficient to meet
your required minimum distributions. See "Tax information."
DOLLAR COST AVERAGING
We offer two dollar cost averaging programs. Each program allows you to
gradually allocate amounts to the variable investment options by periodically
transferring approximately the same dollar amount to the variable investment
options you select. This will cause you to purchase more units if the unit's
value is low and fewer units if the unit's value is high. Therefore, you may
get a lower average cost per unit over the long term. These plans of
investing, however, do not guarantee that you will earn a profit or be
protected against losses.
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Units measure your value in each variable investment option.
- --------------------------------------------------------------------------------
SPECIAL DOLLAR COST AVERAGING PROGRAMS. Under the special dollar cost
averaging program, you may choose to allocate all or a portion of your initial
contribution to the account for special dollar cost averaging. However, you
must allocate at least $2,000 to the account for special dollar cost averaging
for this program. In Pennsylvania we refer to this program as "enhanced rate
dollar cost averaging."
You may have your account value transferred to any of the variable investment
options. We will transfer amounts from the account for special dollar cost
averaging into the variable investment options over the time period that you
select. We offer time periods of 6 or 12 months. We may also offer other time
periods. Your registered representative can provide information on the time
periods currently available or you may contact our processing office. You may
only select one time period. Each time period has a different
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CONTRACT FEATURES AND BENEFITS 25
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interest rate. Once you select a time period, you may not change it.
Currently, your account value will be transferred from the account for special
dollar cost averaging into the variable investment options on a monthly basis.
We may offer this program in the future with transfers on a different basis.
We will transfer all amounts out of the account for special dollar cost
averaging by the end of the chosen time period. The transfer date will be the
same day of the month as the contract date, but not later than the 28th day of
the month.
If you choose to allocate only a portion of your initial contribution to the
account for special dollar cost averaging, the remaining balance of your
initial contribution will be allocated to the variable investment options or
fixed maturity options according to your instructions. You may not allocate
additional contributions to the account for special dollar cost averaging.
- --------------------------------------------------------------------------------
The account for special dollar cost averaging provides guaranteed interest.
- --------------------------------------------------------------------------------
The only amounts that should be transferred from the account for special
dollar cost averaging are your regularly scheduled transfers to the variable
investment options. If you request to transfer or withdraw any other amounts,
we will transfer all of the value that you have remaining in the account for
special dollar cost averaging to the investment options according to the
allocation percentages we have on file for you. As a result, you will no
longer be able to participate in the special dollar cost averaging program.
You may also ask us to cancel your participation at any time.
If the account for special dollar cost averaging is not available in your
state, we offer a special dollar cost averaging program in the Alliance Money
Market option. Under this program we will not deduct the mortality and expense
risks and administrative charges from assets in the Alliance Money Market
option. You may not allocate amounts other than your initial contribution to
this program, which is in effect only for your first contract year. We reserve
the right to discontinue offering the Alliance Money Market special dollar
cost averaging program for new contracts once the account for special dollar
cost averaging becomes available in a state. Your registered representative
can provide information about state availability. You may also contact us
directly.
GENERAL DOLLAR COST AVERAGING PROGRAM. If your value in the Alliance Money
Market option is at least $5,000, you may choose, at any time, to have a
specified dollar amount or percentage of your value transferred from that
option to the other variable investment options. You can select to have
transfers made on a monthly, quarterly, or annual basis. The transfer date
will be the same calendar day of the month as the contract date, but not later
than the 28th day of the month. You can also specify the number of transfers
or instruct us to continue making the transfers until all amounts in the
Alliance Money Market option have been transferred out.
The minimum amount that we will transfer each time is $250. The maximum amount
we will transfer is equal to your value in the Alliance Money Market option at
the time the program is elected, divided by the number of transfers scheduled
to be made.
If, on any transfer date, your value in the Alliance Money Market option is
equal to or less than the amount you have elected to have transferred, the
entire amount will be transferred. The general dollar cost averaging program
will then end. You may change the transfer amount once each contract year or
cancel this program at any time.
-------------------------
You may not elect dollar cost averaging if you are participating in the
rebalancing program. See "Transferring your money among investment options."
OUR BASEBUILDER OPTION
The baseBUILDER option offers you a combined guaranteed minimum income benefit
and guaranteed minimum death benefit. The combined benefit is available if the
annuitant is between the ages of 20 and 75. There is an additional charge for
this benefit. See "baseBUILDER benefits charge" under "Charges and expenses."
<PAGE>
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26 CONTRACT FEATURES AND BENEFITS
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
baseBUILDER provides income protection if you elect an income payout while the
annuitant is alive and a death benefit if the annuitant dies.
- --------------------------------------------------------------------------------
The guaranteed minimum income benefit component of baseBUILDER is described
below under "Your guaranteed minimum income benefit under baseBUILDER." As
part of baseBUILDER you have a choice of two guaranteed minimum death benefit
options: either a "5% roll up to age 80" or an "annual ratchet to age 80." The
two options are described under "Guaranteed minimum death benefit." The
guaranteed minimum death benefit is provided under the contract even if you do
not elect baseBUILDER, and for a broader range of annuitant ages at contract
issue than those available under baseBUILDER. baseBUILDER is not currently
available in New York.
YOUR GUARANTEED MINIMUM INCOME BENEFIT UNDER BASEBUILDER
The guaranteed minimum income benefit guarantees you a minimum amount of
lifetime income under our Income Manager (life annuity with a period certain)
payout annuity contract. The Income Manager (life annuity with a period
certain) payout annuity contract provides payments during a specified period
of time (called a period certain) that will continue for the rest of the
annuitant's life thereafter. If the annuitant dies before the period certain
has ended, payments will continue to the beneficiary for the time remaining in
the period certain.
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We also refer to the guaranteed minimum income benefit as the "Living
Benefit."
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GUARANTEED MINIMUM INCOME BENEFIT'S BENEFIT BASE.
On the contract date, your guaranteed minimum income benefit's benefit base
("benefit base") is equal to the initial contribution. Thereafter, the benefit
base will be credited with interest each day through the annuitant's age 80.
The effective annual interest rate is 5% for amounts in the variable
investment options (other than the Alliance Money Market option) and in the
special dollar cost averaging programs. Amounts in the Alliance Money Market
option, the fixed maturity options, and in a Rollover TSA contract loan
reserve account will be credited with interest at a 3% effective annual rate.
No interest is credited after age 80.
If you make an additional contribution to your contract, we will increase your
current benefit base by the dollar amount of the additional contribution on
the date that the contribution is allocated to your investment options. If you
take a withdrawal from your contract, we will adjust your benefit base for the
withdrawal on the date that you make the withdrawal. See "How withdrawals
affect your guaranteed minimum income benefit and guaranteed minimum death
benefit" under "Accessing your money" for more detailed information. The
benefit base will be reduced by any withdrawal charge remaining when you
exercise your guaranteed minimum income benefit. Under Rollover TSA contracts,
we will also reduce your benefit base by the amount of any outstanding loan
plus accrued interest on the date that you exercise your guaranteed minimum
income benefit.
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Your benefit base is not an account value or a cash value and is used solely
for purposes of calculating your guaranteed minimum income benefit.
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EXERCISING YOUR BENEFIT AND INCOME YOU WILL RECEIVE.
If you exercise the guaranteed minimum income benefit, the annual lifetime
income that you will receive under the Income Manager (life annuity with a
period certain) payout annuity contract, will be the greater of (i) your
guaranteed minimum income benefit, or (ii) the income provided by applying
your actual account value at our then current annuity purchase factors.
The guaranteed minimum income benefit is based on conservative actuarial
factors. Therefore, even if your account value is less than your benefit base,
you may generate more income by applying your account value to current annuity
purchase factors. We will make this comparison for you when the need arises.
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The guaranteed minimum income benefit should be regarded as a safety net only.
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CONTRACT FEATURES AND BENEFITS 27
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ILLUSTRATIONS OF GUARANTEED MINIMUM INCOME BENEFIT.
The table below illustrates the guaranteed minimum income benefit amounts per
$100,000 of initial contribution, for a male annuitant age 60 (at issue) on
the contract date anniversaries indicated, assuming no additional
contributions, withdrawals, or loans under Rollover TSA contracts, and
assuming there were no allocations to the Alliance Money Market option or the
fixed maturity options.
--------------------------------------------------------------
Guaranteed minimum
income benefit - annual income
Contract date payable for life with
anniversary at exercise 10 year period certain
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7 $8,315
10 $10,341
15 $14,924
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Under NQ, and all IRA contracts, you may exercise the guaranteed minimum
income benefit only within 30 days following the seventh or later contract
date anniversary under your contract. However, you may not exercise the
benefit before the annuitant is age 60, or after the annuitant is age 83.
There is an exception if the annuitant is between ages 20 and 44 when your
contract is issued. In this case you may exercise the benefit following the
15th or later contract date anniversary, but not after the annuitant is age
83. See "Exercise of guaranteed minimum income benefit under QP and Rollover
TSA contracts" below regarding exercising the benefit under QP and Rollover
TSA contracts.
Your contract will terminate when you exercise your guaranteed minimum income
benefit. You will then receive an Income Manager (life annuity with a period
certain) payout annuity contract. Your period certain will be based on the
annuitant's age at the time the benefit is exercised, as follows:
------------------------------------------------------------------
Level payments*
------------------------------------------------------------------
Period certain years
--------------------------------
Annuitant's
age at exercise IRAs NQ
------------------------------------------------------------------
60 to 75 10 10
76 9 10
77 8 10
78 7 10
79 7 10
80 7 10
81 7 9
82 7 8
83 7 7
------------------------------------------------------------------
* Other forms and periods certain may also be available. For Rollover IRA and
Flexible Premium IRA contracts, please see "Required minimum distributions"
under "Individual retirement arrangements" in "Tax information," as to how
this option may be affected if exercised after age 70 1/2.
You will begin receiving payments one payment period after the payout annuity
contract is issued. For example, if you select monthly annuity payments, we
will send your first payment to you approximately one month from the date your
contract is issued.
Each year on your contract date anniversary, if you are eligible to exercise
the guaranteed minimum income benefit, we will send you an eligibility notice
illustrating how much income could be provided as of the contract date
anniversary. You may then notify us within 30 days following the contract date
anniversary if you want to exercise the guaranteed minimum income benefit. You
must return your contract to us in order to exercise this benefit. The amount
of income you actually receive will be determined when we receive your request
to exercise the benefit.
You may also apply your cash value at any time to an Income Manager (life
annuity with a period certain) payout annuity contract, and you may always
apply your account value to any of our annuity payout options. The traditional
annuity payout options are discussed under "Accessing your money." These
options differ from the Income Manager payout annuity contracts. They may
provide higher or lower income levels, but do not have all the features of the
Income Manager payout annuity contract. You may request an
<PAGE>
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28 CONTRACT FEATURES AND BENEFITS
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illustration of the Income Manager payout annuity contract from your
registered representative.
The Income Manager (life annuity with a period certain) payout annuity
contracts are offered through our prospectus for the Income Manager payout
annuities. You may obtain a copy of the most current version from your
registered representative. You should read it carefully before you decide to
exercise your guaranteed minimum income benefit.
SUCCESSOR ANNUITANT/CONTRACT OWNER. If the successor annuitant/contract owner
(discussed under "More information" later in this prospectus) elects to
continue the contract after your death, the guaranteed minimum income benefit
will continue to be available on the contract date anniversaries specified
above based on the contract date. However, the guaranteed minimum income
benefit must be exercised based on the age of the successor annuitant/
contract owner.
EXERCISE OF GUARANTEED MINIMUM INCOME BENEFIT UNDER QP AND ROLLOVER TSA
CONTRACTS. Under QP contracts, the guaranteed minimum income benefit may be
exercised in the same manner as described above only after the trustee of the
qualified plan directly rolls over the QP contract to a Rollover IRA contract.
In this process the ownership of the QP contract is changed to the annuitant.
The rollover to a Rollover IRA contract and change of ownership may only occur
when the annuitant will no longer be a participant in the qualified plan.
Similarly, under Rollover TSA contracts the contract owner must convert the
Rollover TSA contract in a direct rollover to a Rollover IRA contract
according to our rules. The rollover to a Rollover IRA contract may only occur
when you are eligible for a rollover distribution from a TSA. This may
generally occur when you are age 59 1/2, or you are separated from service
from the employer who provided the Rollover TSA funds. See "Rollover or direct
transfer contributions" under "Tax information" later in this prospectus.
GUARANTEED MINIMUM DEATH BENEFIT
Applicable for annuitant ages 0 through 79 at issue of NQ contracts; 20
through 79 at issue of Rollover IRA, Roth Conversion IRA, Flexible Premium
Roth IRA, and Rollover TSA contracts; 20 through 70 at issue of Flexible
Premium IRA contracts; and 20 through 75 at issue of QP contracts.
You may elect either the "5% roll up to age 80" or the "annual ratchet to age
80" guaranteed minimum death benefit when you apply for a contract. Once you
have made your election, you may not change it.
5% ROLL UP TO AGE 80. On the contract date, the guaranteed minimum death
benefit equals your initial contribution. Thereafter, the guaranteed minimum
death benefit will be credited with interest each day through the annuitant's
age 80. The effective annual interest rate is 5% for amounts in the variable
investment options (other than the Alliance Money Market option) and in the
special dollar cost averaging programs. Amounts in the Alliance Money Market
option, the fixed maturity options and in a Rollover TSA contract loan reserve
account will be credited with interest at a 3% effective annual rate. No
interest is credited after the annuitant is age 80.
If you make additional contributions, we will increase your current guaranteed
minimum death benefit by the dollar amount of the additional contribution on
the date the contribution is allocated to your investment options. If you take
a withdrawal from your contract, we will adjust your guaranteed minimum death
benefit for the withdrawal on the date you take the withdrawal.
The 5% roll up to age 80 guaranteed minimum death benefit is not available in
New York.
ANNUAL RATCHET TO AGE 80. On the contract date, your guaranteed minimum death
benefit equals your initial contribution. Then, on each contract date
anniversary, we will determine your guaranteed minimum death benefit by
comparing your current guaranteed minimum death benefit to your account value
on that contract date anniversary. If your account value is higher than your
guaranteed minimum death benefit, we will increase your guaranteed minimum
<PAGE>
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CONTRACT FEATURES AND BENEFITS 29
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death benefit to equal your account value. On the other hand, if your account
value on the contract date anniversary is less than your guaranteed minimum
death benefit, we will not adjust your guaranteed minimum death benefit either
up or down.
If you make additional contributions, we will increase your current guaranteed
minimum death benefit by the dollar amount of the contribution on the date the
contribution is allocated to your investment options. If you take a withdrawal
from your contract, we will adjust your guaranteed minimum death benefit on
the date you take the withdrawal.
Applicable for annuitant ages 80 through 83 when the contract is issued.
On the contract date, your guaranteed minimum death benefit equals your
initial contribution. Thereafter, it will be increased by the dollar amount of
any additional contributions. We will adjust your guaranteed minimum death
benefit if you take any withdrawals.
Please see "How withdrawals affect your guaranteed minimum income benefit and
guaranteed minimum death benefit" under "Accessing your money" for information
on how withdrawals affect your guaranteed minimum death benefit. For contracts
issued in New York, the guaranteed minimum death benefit at the annuitant's
death will never be less than your value in the variable investment options,
plus the sum of the fixed maturity amounts in each fixed maturity option.
See Appendix IV for an example of how we calculate the guaranteed minimum
death benefit.
YOUR RIGHT TO CANCEL WITHIN A CERTAIN NUMBER OF DAYS
If for any reason you are not satisfied with your contract, you may return it
to us for a refund. To exercise this cancellation right you must mail the
contract directly to our processing office within 10 days after you receive
it. In some states, this "free look" period may be longer.
Generally, your refund will equal your account value under the contract and
will reflect (i) any investment gain or loss in the variable investment
options (less the daily charges we deduct), (ii) any positive or negative
market value adjustments in the fixed maturity options, and (iii) any
guaranteed interest in the account for special dollar cost averaging, through
the date we receive your contract. Some states require that we refund the full
amount of your contribution (not reflecting (i), (ii) or (iii) above). For any
IRA contract returned to us within seven days after you receive it, we are
required to refund the full amount of your contribution.
We may require that you wait six months before you may apply for a contract
with us again if:
o you cancel your contract during the free look period; or
o you change your mind before you receive your contract whether we have
received your contribution or not.
Please see "Tax information" for possible consequences of cancelling your
contract.
If you fully convert an existing traditional IRA contract to a Roth Conversion
IRA or Flexible Premium Roth IRA contract, you may cancel your Roth Conversion
IRA or Flexible Premium Roth IRA contract and return to a Rollover IRA or
Flexible Premium IRA contract, whichever applies. Our processing office, or
your registered representative, can provide you with the cancellation
instructions.
<PAGE>
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30 DETERMINING YOUR CONTRACT'S VALUE
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2
Determining your contract's value
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YOUR ACCOUNT VALUE
Your "account value" is the total of the (i) values you have in the variable
investment options, (ii) market adjusted amounts in the fixed maturity
options, and (iii) value in the account for special dollar cost averaging.
These amounts are subject to certain fees and charges discussed under "Charges
and expenses." Under Rollover TSA contracts, if you have any outstanding loan,
your account value will include any amount in the loan reserve account.
Your contract also has a "cash value." At any time before annuity payments
begin, your contract's cash value is equal to the account value, less the
annual administrative charge under Flexible Premium IRA and Flexible Premium
Roth IRA contracts, and less any withdrawal charge that may apply if you
surrender your contract. The 15% free withdrawal amount does not apply if you
surrender your contract. If you have a Rollover TSA contract with an
outstanding loan, your cash value is also reduced by the amount of any
outstanding loan plus accrued interest. Please see "Surrendering your contract
to receive its cash value" under "Accessing your money."
YOUR CONTRACT'S VALUE IN THE VARIABLE INVESTMENT OPTIONS
Each variable investment option invests in shares of a corresponding
portfolio. Your value in each variable investment option is measured by
"units." The value of your units will increase or decrease as though you had
invested it in the corresponding portfolio's shares directly. Your value,
however, will be reduced by the amount of the fees and charges that we deduct
under the contract.
The unit value for each variable investment option depends on the investment
performance of that option, minus daily charges for mortality and expense
risks and administrative expenses. On any day, your value in any variable
investment option equals the number of units credited to that option, adjusted
for any units deducted from your contract under that option, multiplied by
that day's value for one unit. The number of your contract units in any
variable investment option does not change unless you make additional
contributions, make a withdrawal, or transfer amounts among investment
options, or we transfer your loan amount to the loan reserve account under a
TSA contract. In addition, when we deduct the baseBUILDER benefits charge and
any withdrawal charge the number of units credited to your contract will be
reduced. Your units are also reduced under Flexible Premium IRA and Flexible
Premium Roth IRA contracts when we deduct the annual administrative charge. A
description of how unit values are calculated is found in the SAI.
YOUR CONTRACT'S VALUE IN THE FIXED MATURITY OPTIONS
Your value in each fixed maturity option at any time before the maturity date
is the market adjusted amount in each option. This is equivalent to your fixed
maturity amount increased or decreased by the market value adjustment. Your
value, therefore, may be higher or lower than your contributions (less
withdrawals) accumulated at the rate to maturity. At the maturity date, your
value in the fixed maturity option will equal its maturity value.
YOUR CONTRACT'S VALUE IN THE ACCOUNT FOR SPECIAL DOLLAR COST AVERAGING
Your value in the account for special dollar cost averaging at any time will
equal your initial contribution allocated to that option, plus interest, less
the sum of all amounts that have been transferred to the variable investment
options you have selected.
<PAGE>
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TRANSFERRING YOUR MONEY AMONG INVESTMENT OPTIONS 31
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3
Transferring your money among investment options
- --------------------------------------------------------------------------------
TRANSFERRING YOUR ACCOUNT VALUE
At any time before the date annuity payments are to begin, you can transfer
some or all of your account value among the investment options, subject to the
following:
o You may not transfer any amount to the account for special dollar cost
averaging.
o You may not transfer to a fixed maturity option that matures in the current
calendar year, or that has a rate to maturity of 3%.
o If the annuitant is 76 or older, you must limit your transfers to fixed
maturity options to those with maturities of five years or less. Also, the
maturity dates may be no later than the February 15th immediately following
the date annuity payments are to begin.
o If you make transfers out of a fixed maturity option other than at its
maturity date the transfer may cause a market value adjustment.
You may request a transfer in writing or by telephone using TOPS. You must
send in all written transfer requests directly to our processing office.
Transfer requests should specify:
(1) the contract number,
(2) the dollar amounts or percentages of your current account value to be
transferred, and
(3) the investment options to and from which you are transferring.
We may, at any time, restrict the use of market timers and other agents acting
under a power of attorney who are acting on behalf of more than one contract
owner. Any agreements to use market timing services to make transfers are
subject to our rules in effect at that time.
We will confirm all transfers in writing.
REBALANCING YOUR ACCOUNT VALUE
We currently offer a rebalancing program that you can use to automatically
reallocate your account value among the variable investment options. You must
tell us:
(a) the percentage you want invested in each variable investment option (whole
percentages only), and
(b) how often you want the rebalancing to occur (quarterly, semiannually, or
annually on a contract year basis. Rebalancing will occur on the same day
of the month as the contract date).
While your rebalancing program is in effect, we will transfer amounts among
each variable investment option so that the percentage of your account value
that you specify is invested in each option at the end of each rebalancing
date. Your entire account value in the variable investment options must be
included in the rebalancing program.
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Rebalancing does not assure a profit or protect against loss. You should
periodically review your allocation percentages as your needs change. You may
want to discuss the rebalancing program with your registered representative or
other financial adviser before electing the program.
- --------------------------------------------------------------------------------
You may elect the rebalancing program at any time. You may also change your
allocation instructions or cancel the program at any time. If you request a
transfer while the rebalancing program is in effect, we will process the
transfer as requested and then cancel the rebalancing program.
You may not elect the rebalancing program if you are participating in a dollar
cost averaging program. Rebalancing is not available for amounts you have
allocated in the fixed maturity options.
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32 ACCESSING YOUR MONEY
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4
Accessing your money
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WITHDRAWING YOUR ACCOUNT VALUE
You have several ways to withdraw your account value before annuity payments
begin. The table below shows the methods available under each type of
contract. More information follows the table. For the tax consequences of
withdrawals, see "Tax information."
------------------------------------------------------------------------------
Method of withdrawal
------------------------------------------------------------------------------
Substantially Minimum
Contract Lump sum Systematic equal distribution
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NQ Yes Yes No No
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Rollover IRA Yes Yes Yes Yes
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Flexible
Premium IRA Yes Yes Yes Yes
Roth Conversion
IRA Yes Yes Yes No
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Flexible
Premium
Roth IRA Yes Yes Yes No
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QP Yes No No Yes
------------------------------------------------------------------------------
Rollover TSA Yes* No No Yes
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* For some Rollover TSA contracts, your ability to take withdrawals, loans or
surrender your contract may be limited. You must provide withdrawal
restriction information when you apply for a contract. See "Tax
information -- Tax Sheltered Annuity contracts (TSAs)."
LUMP SUM WITHDRAWALS
(All contracts)
You may take lump sum withdrawals from your account value at any time.
(Rollover TSA contracts may have restrictions.) The minimum amount you may
withdraw is $1,000. If you request to withdraw more than 90% of a contract's
current cash value we will treat it as a request to surrender the contract for
its cash value. See "Surrendering your contract to receive its cash value"
below.
Lump sum withdrawals in excess of the 15% free withdrawal amount may be
subject to a withdrawal charge. Under Rollover TSA contracts, if a loan is
outstanding, you may only take lump sum withdrawals as long as the cash value
remaining after any withdrawal equals at least 10% of the outstanding loan
plus accrued interest.
SYSTEMATIC WITHDRAWALS
(NQ and all IRA contracts)
You may take systematic withdrawals of a particular dollar amount or a
particular percentage of your account value.
You may take systematic withdrawals on a monthly, quarterly, or annual basis
as long as the withdrawals do not exceed the following percentages of your
account value: 1.2% monthly, 3.6% quarterly, and 15.0% annually. The minimum
amount you may take in each systematic withdrawal is $250. If the amount
withdrawn would be less than $250 on the date a withdrawal is to be taken, we
will not make a payment and we will terminate your systematic withdrawal
election.
We will make the withdrawals on any day of the month that you select as long
as it is not later than the 28th day of the month. If you do not select a
date, we will make the withdrawals on the same calendar day of the month as
the contract date. You must wait at least 28 days after your contract is
issued before your systematic withdrawals can begin.
You may elect to take systematic withdrawals at any time. If you own an IRA
contract, you may elect this withdrawal method only if you are between ages
59 1/2 and 70 1/2. You may not elect the systematic withdrawal method if you
have balances in the account for special dollar cost averaging.
You may change the payment frequency, or the amount or percentage of your
systematic withdrawals, once each contract year. However, you may not change
the amount or percentage in any contract year in which you have already taken
a lump sum withdrawal. You can cancel the systematic withdrawal option at any
time.
Systematic withdrawals are not subject to a withdrawal charge, except to the
extent that, when added to a lump sum withdrawal previously taken in the same
contract year, the systematic withdrawal exceeds the 15% free withdrawal
amount.
<PAGE>
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ACCESSING YOUR MONEY 33
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SUBSTANTIALLY EQUAL WITHDRAWALS
(All IRA contracts)
The substantially equal withdrawals option allows you to receive distributions
from your account value without triggering the 10% additional federal tax
penalty, which normally applies to distributions made before age 59 1/2. See
"Tax information." Once you begin to take substantially equal withdrawals, you
should not stop them or change the pattern of your withdrawals until the later
of age 59 1/2 or five full years after the first withdrawal. If you stop or
change the withdrawals or take a lump sum withdrawal, you may be liable for
the 10% federal tax penalty that would have otherwise been due on prior
withdrawals made under this option and for any interest on those withdrawals.
You may elect to take substantially equal withdrawals at any time before age
59 1/2. We will make the withdrawal on any day of the month that you select
as long as it is not later than the 28th day of the month. You may not elect
to receive the first payment in the same contract year in which you took a
lump sum withdrawal. We will calculate the amount of your substantially equal
withdrawals. The payments will be made monthly, quarterly, or annually as you
select. These payments will continue until we receive written notice from you
to cancel this option or you take a lump sum withdrawal. You may elect to
start receiving substantially equal withdrawals again, but the payments may
not restart in the same contract year in which you took a lump sum withdrawal.
We will calculate the new withdrawal amount.
You may not elect substantially equal withdrawals if you have balances in the
account for special dollar cost averaging.
Substantially equal withdrawals are not subject to a withdrawal charge.
MINIMUM DISTRIBUTION WITHDRAWALS (Rollover IRA, Flexible Premium IRA, QP, and
Rollover TSA contracts only - See "Tax information")
We offer the minimum distribution withdrawal option to help you meet required
minimum distributions under federal income tax rules. You may elect this
option in the year in which you reach age 70 1/2. The minimum amount we will
pay out is $250. You may elect the method you want us to use to calculate your
minimum distribution withdrawals from the choices we offer. Currently, minimum
distribution withdrawal payments will be made annually.
We do not impose a withdrawal charge on minimum distribution withdrawals
except if when added to a lump sum withdrawal previously taken in the same
contract year, the minimum distribution withdrawal exceeds the 15% free
withdrawal amount.
We will calculate your annual payment based on your account value at the end
of the prior calendar year based on the method you choose.
Under Rollover TSA contracts, you may not elect minimum distribution
withdrawals if a loan is outstanding.
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For Rollover IRA, Flexible Premium IRA, QP, and Rollover TSA contracts, we
will send a form outlining the distribution options available before you reach
age 70 1/2 (if you have not begun your annuity payments before that time).
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HOW WITHDRAWALS ARE TAKEN FROM YOUR ACCOUNT VALUE
Unless you specify otherwise, we will subtract your withdrawals on a pro rata
basis from your value in the variable investment options. If there is
insufficient value or no value in the variable investment options, any
additional amount of the withdrawal required or the total amount of the
withdrawal will be withdrawn from the fixed maturity options in order of the
earliest maturity date(s) first. A market value adjustment may apply.
HOW WITHDRAWALS AFFECT YOUR GUARANTEED MINIMUM INCOME BENEFIT AND GUARANTEED
MINIMUM DEATH BENEFIT
Withdrawals will reduce your guaranteed benefits on either a dollar-for-dollar
basis or on a pro rata basis as explained below:
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34 ACCESSING YOUR MONEY
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INCOME BENEFIT
Benefit base - Your current benefit base will be reduced on a dollar-for-
dollar basis as long as the sum of your withdrawals in a contract year is 5%
or less of the guaranteed minimum death benefit on the most recent contract
date anniversary. Once you take a withdrawal that causes the sum of your
withdrawals in a contract year to exceed 5% of the guaranteed minimum death
benefit on the most recent contract date anniversary, that withdrawal and any
subsequent withdrawals in that same contract year will reduce your current
benefit base on a pro rata basis.
DEATH BENEFIT
5% roll up to age 80 -- If you elect the 5% roll up to age 80 guaranteed
minimum death benefit, your current guaranteed minimum death benefit will be
reduced on a dollar-for-dollar basis as long as the sum of your withdrawals in
a contract year is 5% or less of the guaranteed minimum death benefit on the
most recent contract date anniversary. Once you take a withdrawal that causes
the sum of your withdrawals in a contract year to exceed 5% of the guaranteed
minimum death benefit on the most recent contract date anniversary, that
withdrawal and any subsequent withdrawals in that same contract year will
reduce your current guaranteed minimum death benefit on a pro rata basis.
Annual ratchet to age 80 -- If you elect the annual ratchet to age 80
guaranteed minimum death benefit, each withdrawal will always reduce your
current guaranteed minimum death benefit on a pro rata basis.
Annuitant issue ages 80 through 83 -- If your contract was issued when the
annuitant was between ages 80 and 83, each withdrawal will always reduce your
current guaranteed minimum death benefit on a pro rata basis.
---------------------------
Reduction on a dollar-for-dollar basis means that your current benefit will be
reduced by the dollar amount of the withdrawal. Reduction on a pro rata basis
means that we calculate the percentage of your current account value that is
being withdrawn and we reduce your current benefit by that same percentage.
For example, if your account value is $30,000 and you withdraw $12,000, you
have withdrawn 40% of your account value. If your guaranteed minimum death
benefit was $40,000 before the withdrawal, it would be reduced by $16,000
($40,000 x.40) and your new guaranteed minimum death benefit after the
withdrawal would be $24,000 ($40,000 - $16,000).
The timing of your withdrawals and whether they exceed the 5% threshold
described above can have a significant impact on your guaranteed minimum
income benefit or guaranteed minimum death benefit.
LOANS UNDER ROLLOVER TSA CONTRACTS
You may take loans from a Rollover TSA unless restricted by the employer who
provided the Rollover TSA funds. If you cannot take a loan, or cannot take a
loan without approval from the employer who provided the funds, we will have
this information in our records based on what you and the employer who
provided the funds told us when you purchased your contract. The employer must
also tell us whether special employer plan rules of the Employee Retirement
Income Security Act of 1974 ("ERISA") apply. We will not permit you to take a
loan while you are taking minimum distribution withdrawals.
You should read the terms and conditions on our loan request form carefully
before taking out a loan. Under Rollover TSA contracts subject to ERISA, you
may only take a loan with the written consent of your spouse. Your contract
contains further details of the loan provision. Also, see "Tax information"
for general rules applicable to loans.
We will permit you to have only one loan outstanding at a time. The minimum
loan amount is $1,000. The maximum amount is $50,000 or, if less, 50% of your
account value, subject to any limits under the federal income tax rules. The
term of a loan is five years. However, if you use the loan to acquire your
primary residence, the term is 10 years. The term may not extend beyond the
earliest of:
(1) the date annuity payments begin,
(2) the date the contract terminates, and
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ACCESSING YOUR MONEY 35
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(3) the date a death benefit is paid (the outstanding loan will be deducted
from the death benefit amount).
Interest will accrue daily on your outstanding loan at a rate we set. The loan
interest rate will be equal to the Moody's Corporate Bond Yield Averages for
Baa bonds for the calendar month ending two months before the first day of the
calendar quarter in which the rate is determined.
LOAN RESERVE ACCOUNT. On the date your loan is processed, we will transfer the
amount of your loan to the loan reserve account. Unless you specify otherwise,
we will subtract your loan on a pro rata basis from your value in the variable
investment options. If there is insufficient value or no value in the variable
investment options, any additional amount of the loan will be subtracted from
the fixed maturity options in order of the earliest maturity date(s) first. A
market value adjustment may apply.
We will credit interest to the amount in the loan reserve account at a rate of
2% lower than the loan interest rate that applies for the time your loan is
outstanding. On each contract date anniversary after the date the loan is
processed, we will transfer the amount of interest earned in the loan reserve
account to the variable investment options on a pro rata basis. When you make
a loan repayment, unless you specify otherwise, we will transfer the dollar
amount of the loan repaid from the loan reserve account to the investment
options according to the allocation percentages we have on our records.
SURRENDERING YOUR CONTRACT TO RECEIVE ITS CASH VALUE
You may surrender your contract to receive its cash value at any time while
the annuitant is living and before you begin to receive annuity payments.
(Rollover TSA contracts may have restrictions.) For a surrender to be
effective, we must receive your written request and your contract at our
processing office. We will determine your cash value on the date we receive
the required information. All benefits under the contract will terminate as of
that date.
You may receive your cash value in a single sum payment or apply it to one or
more of the annuity payout options. See "Choosing your annuity payout options"
below. We will usually pay the cash value within seven calendar days, but we
may delay payment as described in "When to expect payments" below. For the tax
consequences of surrenders, see "Tax information."
WHEN TO EXPECT PAYMENTS
Generally, we will fulfill requests for payments out of the variable
investment options within seven calendar days after the date of the
transaction to which the request relates. These transactions may include
applying proceeds to a variable annuity, payment of a death benefit, payment
of any amount you withdraw (less any withdrawal charge) and, upon surrender,
payment of the cash value. We may postpone such payments or applying proceeds
for any period during which:
(1) the New York Stock Exchange is closed or restricts trading,
(2) sales of securities or determination of the fair value of a variable
investment option's assets is not reasonably practicable because of an
emergency, or
(3) the SEC, by order, permits us to defer payment to protect people remaining
in the variable investment options.
We can defer payment of any portion of your value in the fixed maturity
options and the account for special dollar cost averaging (other than for
death benefits) for up to six months while you are living. We also may defer
payments for a reasonable amount of time (not to exceed 15 days) while we are
waiting for a contribution check to clear.
All payments are made by check and are mailed to you (or the payee named in a
tax-free exchange) by U.S. mail, unless you request that we use an express
delivery service at your expense.
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36 ACCESSING YOUR MONEY
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CHOOSING YOUR ANNUITY PAYOUT OPTIONS
Equitable Accumulator offers you several choices for receiving retirement
income. Each choice enables you to receive fixed or, in some cases, variable
annuity payments.
You can choose from among the six different annuity payout options listed
below. Restrictions apply, depending on the type of contract you own.
------------------------------------------------------------------------------
Annuity payout options Life annuity
Life annuity - period
certain
Life annuity - refund
certain
Period certain annuity
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Income Manager payout Life annuity with a period
options certain
Period certain annuity
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ANNUITY PAYOUT OPTIONS
You can choose from among the following annuity payout options:
o Life annuity: An annuity that guarantees payments for the rest of the
annuitant's life. Payments end with the last monthly payment before the
annuitant's death. Because there is no continuation of benefits following
the annuitant's death with this payout option, it provides the highest
monthly payment of any of the life annuity options, so long as the annuitant
is living.
o Life annuity -- period certain: An annuity that guarantees payments for the
rest of the annuitant's life. If the annuitant dies before the end of a
selected period of time ("period certain"), payments continue to the
beneficiary for the balance of the period certain. A life annuity with a
period certain of 10 years is the normal form of annuity under the
contracts. The period certain cannot extend beyond the annuitant's life
expectancy.
o Life annuity -- refund certain: An annuity that guarantees payments for the
rest of the annuitant's life. If the annuitant dies before the amount
applied to purchase the annuity option has been recovered, payments to the
beneficiary will continue until that amount has been recovered. This payout
option is available only as a fixed annuity.
o Period certain annuity: An annuity that guarantees payments for a specific
period of time, usually 5, 10, 15, or 20 years. This option does not
guarantee payments for the rest of the annuitant's life. It does not permit
any repayment of the unpaid principal, so you cannot elect to receive part
of the payments as a single sum payment with the rest paid in monthly
annuity payments. Currently, this payout option is available only as a fixed
annuity.
All of the above payout options are available as fixed annuities. With fixed
annuities, we guarantee fixed annuity payments that will be based either on
the tables of guaranteed annuity payments in your contract or on our then
current annuity rates, whichever is more favorable for you.
The life annuity, life annuity -- period certain, and life annuity -- refund
certain payout options are available on a single life or joint and survivor
life basis. The joint and survivor life annuity guarantees payments for the
rest of the annuitant's life and, after the annuitant's death, payments
continue to the survivor.
The following annuity payout options are available as variable annuities:
o Life annuity (except in New York)
o Life annuity -- period certain
o Joint and survivor life annuity (100% to survivor)
o Joint and survivor life period certain annuity (100% to survivor)
Variable annuities may be funded through your choice of variable investment
options investing in portfolios of EQ Advisors Trust. The contract also offers
a fixed annuity option that can be elected in combination with the variable
annuity payout options. The amount of each variable annuity payment will
fluctuate, depending upon the performance of the variable investment options,
and whether the actual rate
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ACCESSING YOUR MONEY 37
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of investment return is higher or lower than an assumed base rate. Please see
"Annuity Unit Values" in the SAI.
We may offer other payout options not outlined here. Your registered
representative can provide details.
SELECTING AN ANNUITY PAYOUT OPTION
When you select a payout option, we will issue you a separate written
agreement confirming your right to receive annuity payments. We require you to
return your contract before annuity payments begin.
For NQ and IRA contracts, unless you choose a different payout option, we will
pay annuity payments under a life annuity with a period certain of 10 years.
The only payout options available under QP contracts and Rollover TSA
contracts are the life annuity 10 year period certain and the joint and
survivor life annuity 10 year period certain. You choose whether these
payments will be either fixed or variable.
You can choose the date annuity payments begin but it may not be earlier than
one year from the contract date. You can change the date your annuity payments
are to begin anytime before that date as long as you do not choose a date
later than the 28th day of any month. Also, that date may not be later than
the contract date anniversary that follows the annuitant's 90th birthday. This
may be different in some states.
Before your annuity payments are to begin, we will notify you by letter that
the annuity payout options are available. Once you have selected a payout
option and payments have begun, no change can be made other than transfers (if
permitted in the future) among the variable investment options if a variable
annuity is selected.
The amount of the annuity payments will depend on:
(1) the amount applied to purchase the annuity;
(2) the type of annuity chosen, and whether it is fixed or variable. If you
choose a variable annuity, we will use an assumed base rate of either 5%
or 3 1/2% to calculate the level of payments. We provide information about
the assumed base rate in the SAI;
(3) in the case of a life annuity, the annuitant's age (or the annuitant's and
joint annuitant's ages); and
(4) in certain instances, the sex of the annuitant(s).
In no event will you ever receive payments under a fixed option or an initial
payment under a variable option of less than the minimum amounts guaranteed by
the contract.
The amount we apply to provide annuity payments will depend on the type of
payout option you select. If you select a payout option that provides for
payments for the rest of the annuitant's life, then we will apply your account
value. If you select a payout option that provides for payments for a period
certain, then we will apply your cash value. However, if the period certain is
more than five years, we will apply not less than 95% of the account value.
Amounts in the fixed maturity options that are applied to a payout option
before a maturity date will result in a market value adjustment.
If, at the time you elect a payout option, the amount to be applied is less
than $2,000 or the initial payment under the form elected is less than $20
monthly, we reserve the right to pay the account value in a single sum rather
than as payments under the payout option chosen.
INCOME MANAGER PAYOUT OPTIONS
For NQ and IRA contracts, two Income Manager payout options are also
available. These are the Income Manager (life annuity with a period certain)
and the Income Manager (period certain).
For QP contracts, the Income Manager payout options are available only after
the trustee of the qualified plan directly rolls over the QP contract to a
Rollover IRA contract. In this process the ownership of the QP contract is
changed to the annuitant. The rollover to a Rollover IRA contract and the
change of ownership may only occur when the annuitant will no longer be a
participant in the qualified plan.
For Rollover TSA contracts, the Income Manager payout annuity options are
available only after the Rollover TSA
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38 ACCESSING YOUR MONEY
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contract is rolled over to a Rollover IRA contract. This may generally occur
when you are age 59 1/2, or you have separated from service with the employer
who provided the Rollover TSA funds.
The Income Manager (life annuity with a period certain) provides guaranteed
payments for the annuitant's life or for the annuitant's life and the life of
a joint annuitant. The Income Manager (period certain) provides payments for a
specified period. The contract owner and annuitant must meet the issue age and
payment requirements. Both Income Manager annuities provide guaranteed level
payments (NQ and IRA contracts). The Income Manager (life annuity with a
period certain) also provides guaranteed increasing payments (NQ contracts
only).
If you apply only part of the account value of your contract to either of the
Income Manager payout annuities we will consider it a withdrawal and may
deduct a withdrawal charge. We will not deduct a withdrawal charge if you
apply all of your account value at a time when the dollar amount of the
withdrawal charge is greater than 2% of remaining contributions (after
withdrawals). However, a new withdrawal charge schedule will apply under the
Income Manager annuity. For purposes of the withdrawal charge schedule, the
year in which your account value is applied under the Income Manager annuity
will be "contract year 1." In addition, we will not deduct a withdrawal charge
if you apply all of your account value from your Equitable Accumulator
contract when the dollar amount of the withdrawal charge under such contract
is 2% or less. This means that no withdrawal charge schedule will apply under
the Income Manager payout annuity contract.
You should consider the timing of your purchase as it relates to the potential
for withdrawal charges under the Income Manager annuity. No additional
contributions will be permitted under an Income Manager (life annuity with a
period certain).
You also may apply your account value to an Income Manager (period certain)
annuity once withdrawal charges are no longer in effect under your contract.
No withdrawal charges will apply under that Income Manager annuity.
The Income Manager annuities are described in a separate prospectus. Copies of
the most current version are available from your registered representative. To
purchase an Income Manager annuity we also require the return of your
contract. We will issue an Income Manager annuity to put one of the payout
annuities into effect. Depending upon your circumstances, this may be done on
a tax-free basis. Please consult your tax adviser.
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CHARGES AND EXPENSES 39
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5
Charges and expenses
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CHARGES THAT EQUITABLE LIFE DEDUCTS
We deduct the following charges each day from the net assets of each variable
investment option. These charges are reflected in the unit values of each
variable investment option:
o A mortality and expense risks charge
o An administrative charge
We deduct the following charges from your account value. When we deduct these
charges from your variable investment options, we reduce the number of units
credited to your contract:
o On each contract date anniversary - an annual administrative charge, if
applicable (Flexible Premium IRA and Flexible Premium Roth IRA contracts
only).
o At the time you make certain withdrawals or surrender your contract - a
withdrawal charge.
o If you elect the optional benefit - a charge for the optional baseBUILDER
benefit.
o At the time annuity payments are to begin - charges for state premium and
other applicable taxes. An annuity administrative fee may also apply.
More information about these charges appears below. We will not increase these
charges for the life of your contract, except as noted. We may reduce certain
charges under group or sponsored arrangements. See "Group or sponsored
arrangements" below.
To help with your retirement planning, we may offer other annuities with
different charges, benefits, and features. Please contact your registered
representative for more information.
MORTALITY AND EXPENSE RISKS CHARGE
We deduct a daily charge from the net assets in each variable investment
option to compensate us for mortality and expense risks, including the
guaranteed minimum death benefit. The daily charge is equivalent to an annual
rate of 1.10% of the net assets in each variable investment option.
The mortality risk we assume is the risk that annuitants as a group will live
for a longer time than our actuarial tables predict. If that happens, we would
be paying more in annuity income than we planned. We also assume a risk that
the mortality assumptions reflected in our guaranteed annuity payment tables,
shown in each contract, will differ from actual mortality experience. Lastly,
we assume a mortality risk to the extent that at the time of death, the
guaranteed minimum death benefit exceeds the cash value of the contract. The
expense risk we assume is the risk that it will cost us more to issue and
administer the contracts than we expect.
ADMINISTRATIVE CHARGE
We deduct a daily charge from the net assets in each variable investment
option. The charge, together with the annual administrative charge described
below, is to compensate us for administrative expenses under the contracts.
The daily charge is equivalent to an annual rate of 0.25% of the net assets in
each variable investment option. We reserve the right under the contracts to
increase this charge to an annual rate of 0.35%.
ANNUAL ADMINISTRATIVE CHARGE (FLEXIBLE PREMIUM IRA AND FLEXIBLE PREMIUM ROTH
IRA CONTRACTS ONLY)
Under Flexible Premium IRA and Flexible Premium Roth IRA contracts, we deduct
an administrative charge from your account value on each contract date
anniversary. We deduct the charge if your account value on the last business
day of the contract year is less than $25,000. If your account value on such
date is $25,000 or more, we do not deduct the charge. During the first two
contract years, the charge is equal to $30 or, if less, 2% of your account
value. The charge is $30 for contract years three and later.
We will deduct this charge from your value in the variable investment options
on a pro rata basis. If there is not enough value in the variable investment
options, we will deduct all or a portion of the charge from the fixed maturity
options in order of the earliest maturity date(s) first. If you surrender your
contract during the contract year we will deduct a pro rata portion of the
charge.
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40 CHARGES AND EXPENSES
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WITHDRAWAL CHARGE
A withdrawal charge applies in two circumstances: (1) if you make one or more
withdrawals during a contract year that, in total, exceed the 15% free
withdrawal amount, described below, or (2) if you surrender your contract to
receive its cash value.
The withdrawal charge equals a percentage of the contributions withdrawn. The
percentage that applies depends on how long each contribution has been
invested in the contract. We determine the withdrawal charge separately for
each contribution according to the following table:
----------------------------------------------------------------
Contract year
----------------------------------------------------------------
1 2 3 4 5 6 7 8+
----------------------------------------------------------------
Percentage of
contribution 7% 6% 5% 4% 3% 2% 1% 0%
For purposes of calculating the withdrawal charge, we treat the contract year
in which we receive a contribution as "contract year 1." Amounts withdrawn up
to the free withdrawal amount are not considered withdrawal of any
contribution. We also treat contributions that have been invested the longest
as being withdrawn first. We treat contributions as withdrawn before earnings
for purposes of calculating the withdrawal charge. However, federal income tax
rules treat earnings under your contract as withdrawn first. See "Tax
information."
In order to give you the exact dollar amount of the withdrawal you request, we
deduct the amount of the withdrawal and the withdrawal charge from your
account value. Any amount deducted to pay withdrawal charges is also subject
to a withdrawal charge. We deduct the charge in proportion to the amount of
the withdrawal subtracted from each investment option. The withdrawal charge
helps cover our sales expenses.
The withdrawal charge does not apply in the circumstances described below.
15% FREE WITHDRAWAL AMOUNT. Each contract year you can withdraw up to 15% of
your account value without paying a withdrawal charge. The 15% free withdrawal
amount is determined using your account value on the most recent contract date
anniversary, minus any other withdrawals made during the contract year. The
15% free withdrawal amount does not apply if you surrender your contract.
Note the following special rule for NQ contracts issued to a charitable
remainder trust, the free withdrawal amount will equal the greater of: (1) the
current account value, less contributions that have not been withdrawn
(earnings in the contract), and (2) the 15% free withdrawal amount defined
above.
MINIMUM DISTRIBUTIONS. The withdrawal charge does not apply to withdrawals
taken under our minimum distribution withdrawal option. However, those
withdrawals are counted towards the 15% free withdrawal amount if you also
make a lump sum withdrawal in any contract year.
DISABILITY, TERMINAL ILLNESS OR CONFINEMENT TO NURSING HOME. The withdrawal
charge also does not apply if:
o The annuitant has qualified to receive Social Security disability benefits
as certified by the Social Security Administration; or
o We receive proof satisfactory to us (including certification by a licensed
physician) that the annuitant's life expectancy is six months or less; or
o The annuitant has been confined to a nursing home for more than 90 days (or
such other period, as required in your state) as verified by a licensed
physician. A nursing home for this purpose means one that is (a) approved by
Medicare as a provider of skilled nursing care service, or (b) licensed as a
skilled nursing home by the state or territory in which it is located (it
must be within the United States, Puerto Rico, or U.S. Virgin Islands) and
meets all of the following:
- its main function is to provide skilled, intermediate, or custodial nursing
care;
- it provides continuous room and board to three or more persons;
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CHARGES AND EXPENSES 41
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- it is supervised by a registered nurse or licensed practical nurse;
- it keeps daily medical records of each patient;
- it controls and records all medications dispensed; and
- its primary service is other than to provide housing for residents.
We reserve the right to impose a withdrawal charge, in accordance with your
contract and applicable state law, if the disability is caused by a
preexisting condition or a condition that began within 12 months of the
contract date. Some states may not permit us to waive the withdrawal charge in
the above circumstances, or may limit the circumstances for which the
withdrawal charge may be waived. Your registered representative can provide
more information or you may contact our processing office.
BASEBUILDER BENEFITS CHARGE
If you elect the baseBUILDER combined guaranteed minimum income benefit and
guaranteed minimum death benefit, we deduct a charge annually from your
account value on each contract date anniversary. The charge is equal to 0.30%
of the benefit base in effect on the contract date anniversary.
We will deduct this charge from your value in the variable investment options
on a pro rata basis. If there is not enough value in the variable investment
options, we will deduct all or a portion of the charge from the fixed maturity
options in order of the earliest maturity date(s) first. A market value
adjustment may apply.
CHARGES FOR STATE PREMIUM AND OTHER APPLICABLE TAXES
We deduct a charge for applicable taxes such as premium taxes that may be
imposed in your state. Generally, we deduct the charge from the amount applied
to provide an annuity payout option. The current tax charge that might be
imposed varies by state and ranges from 0% to 3.5% (1% in Puerto Rico and 5%
in the U.S. Virgin Islands).
ANNUITY ADMINISTRATIVE FEE
We generally deduct a fee of up to $350 from the amount to be applied to
purchase a life annuity payout option.
CHARGES THAT EQ ADVISORS TRUST DEDUCTS
EQ Advisors Trust deducts charges for the following types of fees and
expenses:
o Management fees ranging from 0.25% to 1.15%.
o 12b-1 fees of 0.25%.
o Operating expenses, such as trustees' fees, independent auditors' fees,
legal counsel fees, administrative service fees, custodian fees, and
liability insurance.
o Investment-related expenses, such as brokerage commissions.
These charges are reflected in the daily share price of each portfolio. Since
shares of EQ Advisors Trust are purchased at their net asset value, these fees
and expenses are, in effect, passed on to the variable investment options and
are reflected in their unit values. For more information about these charges,
please refer to the prospectus for EQ Advisors Trust following this
prospectus.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the withdrawal
charge or the mortality and expense risks charge, or change the minimum
initial contribution requirements. We also may change the guaranteed minimum
income benefit and the guaranteed minimum death benefit, or offer variable
investment options that invest in shares of EQ Advisors Trust that are not
subject to the 12b-1 fee. Group arrangements include those in which a trustee
or an employer, for example, purchases contracts covering a group of
individuals on a group basis. Group arrangements are not available for IRA
contracts. Sponsored arrangements include those in which an employer allows us
to sell contracts to its employees or retirees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group or sponsoring
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42 CHARGES AND EXPENSES
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organization, among other factors. We take all these factors into account when
reducing charges. To qualify for reduced charges, a group or sponsored
arrangement must meet certain requirements, such as requirements for size and
number of years in existence. Group or sponsored arrangements that have been
set up solely to buy contracts or that have been in existence less than six
months will not qualify for reduced charges.
We also may establish different rates to maturity for the fixed maturity
options under different classes of contracts for group or sponsored
arrangements.
We will make these and any similar reductions according to our rules in effect
when we approve a contract for issue. We may change these rules from time to
time. Any variation will reflect differences in costs or services and will not
be unfairly discriminatory.
Group or sponsored arrangements may be governed by federal income tax rules,
ERISA, or both. We make no representations with regard to the impact of these
and other applicable laws on such programs. We recommend that employers,
trustees, and others purchasing or making contracts available for purchase
under such programs seek the advice of their own legal and benefits advisers.
OTHER DISTRIBUTION ARRANGEMENTS
We may reduce or eliminate charges when sales are made in a manner that result
in savings of sales and administrative expenses, such as sales through persons
who are compensated by clients for recommending investments and who receive no
commission or reduced commissions in connection with the sale of the
contracts. We will not permit a reduction or elimination of charges where it
would be unfairly discriminatory.
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PAYMENT OF DEATH BENEFIT 43
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6
Payment of death benefit
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YOUR BENEFICIARY AND PAYMENT OF BENEFIT
You designate your beneficiary when you apply for your contract. You may
change your beneficiary at any time. The change will be effective on the date
the written request for the change is received in our processing office. We
are not responsible for any beneficiary change request that we do not receive.
We will send you a written confirmation when we receive your request. Under
jointly owned contracts, the surviving owner is considered the beneficiary,
and will take the place of any other beneficiary. You may be limited as to the
beneficiary you can designate in a Rollover TSA contract. In a QP contract,
the beneficiary must be the trustee.
The death benefit is equal to your account value, or, if greater, the
guaranteed minimum death benefit. The guaranteed minimum death benefit is part
of your contract, whether you select the combined baseBUILDER benefit or not.
We determine the amount of the death benefit as of the date we receive
satisfactory proof of the annuitant's death and any required instructions for
the method of payment. Under Rollover TSA contracts we will deduct the amount
of any outstanding loan plus accrued interest from the amount of the death
benefit.
EFFECT OF THE ANNUITANT'S DEATH
If the annuitant dies before the annuity payments begin, we will pay the death
benefit to your beneficiary.
Generally, the death of the annuitant terminates the contract. However, a
beneficiary who is the surviving spouse of the owner/annuitant can choose to
be treated as the successor owner/annuitant and continue the contract. Only a
spouse can be a successor owner/annuitant. A successor owner/annuitant, can
only be named under NQ and IRA contracts.
For Rollover IRA and Flexible Premium IRA contracts, a beneficiary who is not
a surviving spouse may be able to have limited ownership as discussed under
"Beneficiary continuation option for Rollover IRA and Flexible Premium IRA
contracts" below.
WHEN AN NQ CONTRACT OWNER DIES BEFORE THE ANNUITANT
Under certain conditions the owner can change after the original owner's
death. When you are not the annuitant under an NQ contract and you die before
annuity payments begin, the beneficiary named to receive the death benefit
upon the annuitant's death will automatically become the successor owner. If
you do not want the beneficiary to be the successor owner, you should name a
specific successor owner. You may name a successor owner at any time by
sending satisfactory notice to our processing office. If the contract is
jointly owned and the first owner to die is not the annuitant, the surviving
owner becomes the sole contract owner. This person will be considered the
successor owner for purposes of the distribution rules described in this
section. The surviving owner automatically takes the place of any other
beneficiary designation.
Unless the surviving spouse of the owner who has died (or in the case of a
joint ownership situation, the surviving spouse of the first owner to die) is
the successor owner for this purpose, the entire interest in the contract must
be distributed under the following rules:
o The cash value of the contract must be fully paid to the designated
beneficiary (new owner) by December 31st of the fifth calendar year after
your death (or in a joint ownership situation, the death of the first owner
to die).
o The successor owner may instead elect to receive the cash value as a life
annuity (or payments for a period certain of not longer than the new owner's
life expectancy). Payments must begin no later than December 31st following
the calendar year of the non-annuitant owner's death. Unless this
alternative is elected, we will pay any cash value on December 31st of the
fifth calendar year following the year of your death (or the death of the
first owner to die).
o If the surviving spouse is the successor owner or joint owner, the spouse
may elect to continue the contract. No distributions are required as long as
the surviving spouse and annuitant are living.
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44 PAYMENT OF DEATH BENEFIT
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HOW DEATH BENEFIT PAYMENT IS MADE
We will pay the death benefit to the beneficiary in the form of the annuity
payout option you have chosen. If you have not chosen an annuity payout option
as of the time of the annuitant's death, the beneficiary will receive the
death benefit in a single sum. However, subject to any exceptions in the
contract, our rules and any applicable requirements under federal income tax
rules, the beneficiary may elect to apply the death benefit to one or more
annuity payout options we offer at the time. See "Choosing your annuity payout
options" under "Accessing your money" earlier in this prospectus. Please note
that if you are both the contract owner and the annuitant, you may elect only
a life annuity or an annuity that does not extend beyond the life expectancy
of the beneficiary.
SUCCESSOR OWNER AND ANNUITANT
If you are both the contract owner and the annuitant, and your spouse is the
sole beneficiary or the joint owner, then your spouse may elect to receive the
death benefit or continue the contract as successor owner/annuitant.
If your surviving spouse decides to continue the contract, then on the
contract date anniversary following your death, we will increase the account
value to equal your current guaranteed minimum death benefit, if it is higher
than the account value. In determining whether the guaranteed minimum death
benefit will continue to grow, we will use your surviving spouse's age (as of
the contract date anniversary).
BENEFICIARY CONTINUATION OPTION FOR ROLLOVER IRA AND FLEXIBLE PREMIUM IRA
CONTRACTS
Upon your death under a Rollover IRA or Flexible Premium IRA contract, a
nonspouse beneficiary may generally elect to keep the contract in your name
and receive distributions under the contract instead of the death benefit
being paid in a single sum.
If you die AFTER the "Required Beginning Date" (see "Tax information") for
required minimum distributions, the contract will continue if:
(a) you were receiving minimum distribution withdrawals from this contract;
and
(b) the pattern of minimum distribution withdrawals you chose was based in
part on the life of the designated beneficiary.
The withdrawals will then continue to be paid to the beneficiary on the same
basis as you chose before your death. We will be able to tell your beneficiary
whether this option is available to them. You should contact our processing
office for further information.
If you die BEFORE the Required Beginning Date (and therefore you were not
taking minimum distribution withdrawals under the contract), an eligible
beneficiary may take minimum distribution withdrawals under the contract. We
will increase the account value to equal the death benefit if the death
benefit is greater than the account value. That amount will be used to provide
the withdrawals. If the eligible beneficiary elects as described in the next
paragraph, these withdrawals will begin by December 31st of the calendar year
following your death. These withdrawals will be based on the beneficiary's
life expectancy. If there is more than one beneficiary, the shortest life
expectancy is used. An eligible beneficiary can choose instead to continue the
contract in your name without having to take annual withdrawals. If the
beneficiary chooses this option, all amounts must be distributed from the
contract by December 31 of the fifth calendar year following your death.
The designated beneficiary must be a natural person and of legal age at the
time of election. The beneficiary must elect this option within 30 days
following the date we receive proof of your death. The death benefit will be
paid to the beneficiary according to our standard procedures, unless an
election is made within 30 days to: (1) receive the death benefit; (2)
continue the contract and take annual withdrawals as described above; or (3)
defer payment of the account value for up to five years.
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PAYMENT OF DEATH BENEFIT 45
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While the contract continues in your name, the beneficiary may make transfers
among the investment options. However, additional contributions will not be
permitted and the guaranteed minimum income benefit and the death benefit
(including the guaranteed minimum death benefit) provisions will no longer be
in effect. Although the only withdrawals that will be permitted are minimum
distribution withdrawals, the beneficiary may choose at any time to withdraw
all of the account value and no withdrawal charges will apply.
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46 TAX INFORMATION
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7
Tax information
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OVERVIEW
In this part of the prospectus, we discuss the current federal income tax
rules that generally apply to Equitable Accumulator contracts owned by United
States taxpayers. The tax rules can differ, depending on the type of contract,
whether NQ, Rollover IRA, Flexible Premium IRA, Roth Conversion IRA, Flexible
Premium Roth IRA, QP, or Rollover TSA. Therefore, we discuss the tax aspects
of each type of contract separately.
Federal income tax rules include the United States laws in the Internal
Revenue Code, and Treasury Department Regulations and Internal Revenue Service
("IRS") interpretations of the Internal Revenue Code. These tax rules may
change. We cannot predict whether, when, or how these rules could change. Any
change could affect contracts purchased before the change.
We cannot provide detailed information on all tax aspects of the contracts.
Moreover, the tax aspects that apply to a particular person's contract may
vary depending on the facts applicable to that person. We do not discuss state
income and other state taxes, federal income tax, and withholding rules for
non-U.S. taxpayers, or federal gift and estate taxes. Transfers of the
contract, rights under the contract, or payments under the contract may be
subject to gift or estate taxes. You should not rely only on this document,
but should consult your tax adviser before your purchase.
If you are buying a contract to fund a retirement plan that already provides
tax deferral under sections of the Internal Revenue Code (IRA, QP, and
Rollover TSA), you should do so for the contract's features and benefits other
than tax deferral. In such situations, the tax deferral of the contract does
not provide additional benefits.
TRANSFERS AMONG INVESTMENT OPTIONS
You can make transfers among investment options inside the contract without
triggering taxable income.
TAXATION OF NONQUALIFIED ANNUITIES
CONTRIBUTIONS
You may not deduct the amount of your contributions to a nonqualified annuity
contract.
CONTRACT EARNINGS
Generally, you are not taxed on contract earnings until you receive a
distribution from your contract, whether as a withdrawal or as an annuity
payment. However, earnings are taxable, even without a distribution:
o if a contract fails investment diversification requirements as specified in
federal income tax rules (these rules are based on or are similar to those
specified for mutual funds under the securities laws);
o if you transfer a contract, for example, as a gift to someone other than
your spouse (or former spouse);
o if you use a contract as security for a loan (in this case, the amount
pledged will be treated as a distribution); and
o if the owner is other than an individual (such as a corporation,
partnership, trust, or other non-natural person).
All nonqualified deferred annuity contracts that Equitable Life and its
affiliates issue to you during the same calendar year are linked together and
treated as one contract for calculating the taxable amount of any distribution
from any of those contracts.
ANNUITY PAYMENTS
Once annuity payments begin, a portion of each payment is taxable as ordinary
income. You get back the remaining portion without paying taxes on it. This is
your "investment in the contract." Generally, your investment in the contract
equals the contributions you made, less any amounts you previously withdrew
that were not taxable.
For fixed annuity payments, the tax-free portion of each payment is determined
by (1) dividing your investment in the contract by the total amount you are
expected to receive out of the contract, and (2) multiplying the result by the
amount
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TAX INFORMATION 47
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of the payment. For variable annuity payments, your investment in the contract
divided by the number of expected payments is your tax-free portion of each
payment.
Once you have received the amount of your investment in the contract, all
payments after that are fully taxable. If payments under a life annuity stop
because the annuitant dies, there is an income tax deduction for any
unrecovered investment in the contract.
PAYMENTS MADE BEFORE ANNUITY PAYMENTS BEGIN
If you make withdrawals before annuity payments begin under your contract,
they are taxable to you as ordinary income if there are earnings in the
contract. Generally, earnings are your account value less your investment in
the contract. If you withdraw an amount which is more than the earnings in the
contract as of the date of the withdrawal, the balance of the distribution is
treated as a return of your investment in the contract and is not taxable.
CONTRACTS PURCHASED THROUGH EXCHANGES
You may purchase your NQ contract through an exchange of another contract.
Normally, exchanges of contracts are taxable events. The exchange will not be
taxable under Section 1035 of the Internal Revenue Code if:
o the contract that is the source of the funds you are using to purchase the
NQ contract is another nonqualified deferred annuity contract or life
insurance or endowment contract.
o the owner and the annuitant are the same under the source contract and the
Equitable Accumulator NQ contract. If you are using a life insurance or
endowment contract the owner and the insured must be the same on both sides
of the exchange transaction.
The tax basis of the source contract carries over to the Equitable Accumulator
NQ contract.
SURRENDERS
If you surrender or cancel the contract, the distribution is taxable as
ordinary income (not capital gain) to the extent it exceeds your investment in
the contract.
DEATH BENEFIT PAYMENTS MADE TO A BENEFICIARY AFTER YOUR DEATH
For the rules applicable to death benefits, see "Payment of death benefit"
earlier in this prospectus. The tax treatment of a death benefit taken as a
single sum is generally the same as the tax treatment of a withdrawal from or
surrender of your contract. The tax treatment of a death benefit taken as
annuity payments is generally the same as the tax treatment of annuity
payments under your contract.
EARLY DISTRIBUTION PENALTY TAX
If you take distributions before you are age 591|M/2 a penalty tax of 10% of
the taxable portion of your distribution applies in addition to the income
tax. The extra penalty tax does not apply to pre-age 591|M/2 distributions
made:
o on or after your death; or
o because you are disabled (special federal income tax definition); or
o in the form of substantially equal periodic annuity payments for your life
and (or life expectancy) or the joint lives (or joint life expectancy) of
you and beneficiary.
SPECIAL RULES FOR NQ CONTRACTS ISSUED IN PUERTO RICO
Under current law we treat income from NQ contracts as U.S. source. A Puerto
Rico resident is subject to U.S. taxation on such U.S. source income. Only
Puerto Rico source income of Puerto Rico residents is excludable from U.S.
taxation. Income from NQ contracts is also subject to Puerto Rico tax. The
calculation of the taxable portion of amounts distributed from a contract may
differ in the two jurisdictions. Therefore, you might have to file both U.S.
and Puerto Rico tax returns, showing different amounts of income from the
contract for each tax return. Puerto Rico generally provides a credit against
Puerto Rico tax for U.S. tax paid. Depending on your personal situation and
the timing of the different tax liabilities, you may not be able to take full
advantage of this credit.
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48 TAX INFORMATION
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INDIVIDUAL RETIREMENT ARRANGEMENTS (IRAS)
GENERAL
"IRA" stands for individual retirement arrangement. There are two basic types
of such arrangements, individual retirement accounts and individual retirement
annuities. In an individual retirement account, a trustee or custodian holds
the assets for the benefit of the IRA owner. The assets can include mutual
funds and certificates of deposit. In an individual retirement annuity, an
insurance company issues an annuity contract that serves as the IRA.
There are two basic types of IRAs, as follows:
o Traditional IRAs, typically funded on a pre-tax basis including SEP-IRAs and
SIMPLE-IRAs, issued and funded in connection with employer-sponsored
retirement plans; and
o Roth IRAs, first available in 1998, funded on an after-tax basis.
Regardless of the type of IRA, your ownership interest in the IRA cannot be
forfeited. You or your beneficiaries who survive you are the only ones who can
receive the IRA's benefits or payments.
You can hold your IRA assets in as many different accounts and annuities as
you would like, as long as you meet the rules for setting up and making
contributions to IRAs. However, if you own multiple IRAs, you may be required
to combine IRA values or contributions for tax purposes. For further
information about individual retirement arrangements, you can read Internal
Revenue Service Publication 590 ("Individual Retirement Arrangements (IRAs)").
This publication is usually updated annually, and can be obtained from any IRS
district office or the IRS Web site (http://www.irs.ustreas.gov).
Equitable Life designs its traditional IRA contracts to qualify as individual
retirement annuities under Section 408(b) of the Internal Revenue Code. You
may purchase the contract as a traditional IRA or Roth IRA. The traditional
IRAs we offer are the Rollover IRA and Flexible Premium IRA. The versions of
the Roth IRA available are the Roth Conversion IRA and Flexible Premium Roth
IRA. This prospectus contains the information that the IRS requires you to
have before you purchase an IRA. This section of the prospectus covers some of
the special tax rules that apply to IRAs. The next section covers Roth IRAs.
Education IRAs are not discussed in this prospectus because they are not
available in individual retirement annuity form.
The Equitable Accumulator IRA contract has been approved by the IRS as to form
for use as a traditional IRA. We have submitted the Roth IRA version for
formal IRS approval. This IRS approval is a determination only as to the form
of the annuity. It does not represent a determination of the merits of the
annuity as an investment. The IRS approval does not address every feature
possibly available under the Equitable Accumulator IRA contract.
CANCELLATION
You can cancel an Equitable Accumulator IRA contract by following the
directions under "Your right to cancel within a certain number of days" under
"Contract features and benefits" earlier in the prospectus. You can cancel an
Equitable Accumulator Roth Conversion IRA contract issued as a result of a
full conversion of an Equitable Accumulator Rollover IRA or Flexible Premium
IRA contract by following the instructions in the request for full conversion
form. The form is available from our processing office or your registered
representative. If you cancel an IRA contract, we may have to withhold tax,
and we must report the transaction to the IRS. A contract cancellation could
have an unfavorable tax impact.
TRADITIONAL INDIVIDUAL RETIREMENT ANNUITIES (TRADITIONAL IRAS)
CONTRIBUTIONS TO TRADITIONAL IRAS. Individuals may make three different types
of contributions to a traditional IRA:
o regular contributions out of earned income or compensation; or
o tax-free "rollover" contributions; or
o direct custodian-to-custodian transfers from other traditional IRAs
("direct transfers").
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Regular traditional IRA, direct transfer, and rollover contributions may be
made to a Flexible Premium IRA contract. We only permit direct transfer and
rollover contributions under a Rollover IRA contract. See "Rollovers and
transfers" below.
REGULAR CONTRIBUTIONS TO TRADITIONAL IRAS
LIMITS ON CONTRIBUTIONS. Generally, $2,000 is the maximum amount that you may
contribute to all IRAs (including Roth IRAs) in any taxable year. When your
earnings are below $2,000, your earned income or compensation for the year is
the most you can contribute. This $2,000 limit does not apply to rollover
contributions or direct custodian-to-custodian transfers into a traditional
IRA. You cannot make regular traditional IRA contributions for the tax year in
which you reach age 70 1/2 or any tax year after that.
SPECIAL RULES FOR SPOUSES. If you are married and file a joint income tax
return, you and your spouse may combine your compensation to determine the
amount of regular contributions you are permitted to make to traditional IRAs
(and Roth IRAs discussed below). Even if one spouse has no compensation or
compensation under $2,000, married individuals filing jointly can contribute
up to $4,000 for any taxable year to any combination of traditional IRAs and
Roth IRAs. (Any contributions to Roth IRAs reduce the ability to contribute to
traditional IRAs and vice versa.) The maximum amount may be less if earned
income is less and the other spouse has made IRA contributions. No more than a
combined total of $2,000 can be contributed annually to either spouse's
traditional and Roth IRAs. Each spouse owns his or her traditional IRAs and
Roth IRAs even if the other spouse funded the contributions. A working spouse
age 70 1/2 or over can contribute up to the lesser of $2,000 or 100% of
"earned income" to a traditional IRA for a nonworking spouse until the year in
which the nonworking spouse reaches age 70 1/2.
DEDUCTIBILITY OF CONTRIBUTIONS. The amount of traditional IRA contributions
that you can deduct for a tax year depends on whether you are covered by an
employer-sponsored tax-favored retirement plan, as defined under special
federal income tax rules. Your Form W-2 will indicate whether or not you are
covered by such a retirement plan.
If you are not covered by a retirement plan during any part of the year, you
can make fully deductible contributions to your traditional IRAs for each tax
year up to $2,000 or, if less, your earned income.
If you are covered by a retirement plan during any part of the year, and your
adjusted gross income (AGI) is below the lower dollar figure in a phase-out
range, you can make fully deductible contributions to your traditional IRAs.
For each tax year, your fully deductible contribution can be up to $2,000 or,
if less, your earned income.
If you are covered by a retirement plan during any part of the year, and your
AGI falls within a phase-out range, you can make partially deductible
contributions to your traditional IRAs.
If you are covered by a retirement plan during any part of the year, and your
AGI falls above the higher figure in the phase-out range, you may not deduct
any of your regular contributions to your traditional IRAs.
If you are single and covered by a retirement plan during any part of the
taxable year, the deduction for traditional IRA contributions phases out with
AGI between $31,000 and $41,000 in 1999. This range will increase every year
until 2005 when the range is $50,000-$60,000.
If you are married and file a joint return, and you are covered by a
retirement plan during any part of the taxable year, the deduction for
traditional IRA contributions phases out with AGI between $51,000 and $61,000
in 1999. This range will increase every year until 2007 when the range is
$80,000-$100,000.
Married individuals filing separately and living apart at all times are not
considered married for purposes of this deductible contribution calculation.
Generally, the active participation in an employer-sponsored retirement plan
of an
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50 TAX INFORMATION
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individual is determined independently for each spouse. Where spouses have
"married filing jointly" status, however, the maximum deductible traditional
IRA contribution for an individual who is not an active participant (but whose
spouse is an active participant) is phased out for taxpayers with AGI of
between $150,000 and $160,000.
To determine the deductible amount of the contribution in 1999, you determine
AGI and subtract $31,000 if you are single, or $51,000 if you are married and
file a joint return with your spouse. The resulting amount is your excess AGI.
You then determine the limit on the deduction for traditional IRA
contributions using the following formula:
($10,000-excess AGI) times $2,000 (or earned Equals the adjusted
-------------------- x income, if less) = deductible
divided by $10,000 contribution
limit
NONDEDUCTIBLE REGULAR CONTRIBUTIONS. If you are not eligible to deduct part or
all of the traditional IRA contribution, you may still make nondeductible
contributions on which earnings will accumulate on a tax-deferred basis. The
combined deductible and nondeductible contributions to your traditional IRA
(or the nonworking spouse's traditional IRA) may not, however, exceed the
maximum $2,000 per person limit. See "Excess contributions" below. You must
keep your own records of deductible and nondeductible contributions in order
to prevent double taxation on the distribution of previously taxed amounts.
See "Withdrawals, payments and transfers of funds out of traditional IRAs"
below.
If you are making nondeductible contributions in any taxable year, or you have
made nondeductible contributions to a traditional IRA in prior years and are
receiving distributions from any traditional IRA, you must file the required
information with the IRS. Moreover, if you are making nondeductible
traditional IRA contributions, you must retain all income tax returns and
records pertaining to such contributions until interests in all traditional
IRAs are fully distributed.
WHEN YOU CAN MAKE REGULAR CONTRIBUTIONS. If you file your tax returns on a
calendar year basis like most taxpayers, you have until the April 15 return
filing deadline (without extensions) of the following calendar year to make
your regular traditional IRA contributions for a tax year.
EXCESS CONTRIBUTIONS
Excess contributions to IRAs are subject to a 6% excise tax for the year in
which made and for each year after until withdrawn. The following are excess
contributions to IRAs:
o regular contributions of more than $2,000; or
o regular contributions of more than earned income for the year, if that
amount is under $2,000; or
o regular contributions to a traditional IRA made after you reach age 70 1/2;
or
o rollover contributions of amounts which are not eligible to be rolled over.
For example, after-tax contributions to a qualified plan or minimum
distributions required to be made after age 70 1/2.
You can avoid the excise tax by withdrawing an excess contribution (rollover
or regular) before the due date (including extensions) for filing your federal
income tax return for the year. If it is an excess regular traditional IRA
contribution, you cannot take a tax deduction for the amount withdrawn. You do
not have to include the excess contribution withdrawn as part of your income.
It is also not subject to the 10% additional penalty tax on early
distributions, discussed below under "Early distribution penalty tax." You do
have to withdraw any earnings that are attributed to the excess contribution.
The withdrawn earnings would be included in your gross income and could be
subject to the 10% penalty tax.
Even after the due date for filing your return, you may withdraw an excess
rollover contribution, without income inclusion or 10% penalty, if:
(1) the rollover was from a qualified retirement plan to a traditional IRA;
(2) the excess contribution was due to incorrect information that the plan
provided; and
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(3) you took no tax deduction for the excess contribution.
RECHARACTERIZATIONS
Amounts that have been contributed as traditional IRA funds may subsequently
be treated as Roth IRA funds. Special federal income tax rules allow you to
change your mind again and have amounts that are subsequently treated as Roth
IRA funds, once again treated as traditional IRA funds. You do this by using
the forms we prescribe. This is referred to as having "recharacterized" your
contribution.
ROLLOVERS AND TRANSFERS
Rollover contributions may be made to a traditional IRA from these sources:
o qualified plans;
o TSAs (including Internal Revenue Code Section 403(b)(7) custodial
accounts); and
o other traditional IRAs.
Any amount contributed to a traditional IRA after you reach age 70 1/2 must be
net of your required minimum distribution for the year in which the rollover
or direct transfer contribution is made.
ROLLOVERS FROM QUALIFIED PLANS OR TSAS
There are two ways to do rollovers:
o Do it yourself
You actually receive a distribution that can be rolled over and you roll it
over to a traditional IRA within 60 days after the date you receive the
funds. The distribution from your qualified plan or TSA will be net of 20%
mandatory federal income tax withholding. If you want, you can replace the
withheld funds yourself and roll over the full amount.
o Direct rollover
You tell your qualified plan trustee or TSA issuer/custodian/fiduciary to
send the distribution directly to your traditional IRA issuer. Direct
rollovers are not subject to mandatory federal income tax withholding.
All distributions from a TSA or qualified plan are eligible rollover
distributions, unless the distribution is:
o only after-tax contributions you made to the plan; or
o "required minimum distributions" after age 70 1/2 or separation from
service; or
o substantially equal periodic payments made at least annually for your life
(or life expectancy) or the joint lives (or joint life expectancies) of you
and your designated beneficiary; or
o a hardship withdrawal; or
o substantially equal periodic payments made for a specified period of 10
years or more; or
o corrective distributions that fit specified technical tax rules; or
o loans that are treated as distributions; or
o a death benefit payment to a beneficiary who is not your surviving spouse;
or
o a qualified domestic relations order distribution to a beneficiary who is
not your current spouse or former spouse.
ROLLOVERS FROM TRADITIONAL IRAS TO TRADITIONAL IRAS
You may roll over amounts from one traditional IRA to one or more of your
other traditional IRAs if you complete the transaction within 60 days after
you receive the funds. You may make such a rollover only once in every
12-month period for the same funds. Trustee-to-trustee or custodian-to-
custodian direct transfers are not rollover transactions. You can make these
more frequently than once in every 12-month period.
The surviving spouse beneficiary of a deceased individual can roll over or
directly transfer an inherited traditional IRA to one or more other
traditional IRAs. Also, in some cases, traditional IRAs can be transferred on
a tax-free basis between spouses or former spouses as a result of a
court-ordered divorce or separation decree.
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WITHDRAWALS, PAYMENTS AND TRANSFERS OF FUNDS OUT OF TRADITIONAL IRAS
NO FEDERAL INCOME TAX LAW RESTRICTIONS ON WITHDRAWALS. You can withdraw any or
all of your funds from a traditional IRA at any time. You do not need to wait
for a special event like retirement.
TAXATION OF PAYMENTS. Earnings in traditional IRAs are not subject to federal
income tax until you or your beneficiary receive them. Taxable payments or
distributions include withdrawals from your contract, surrender of your
contract, and annuity payments from your contract. Death benefits are also
taxable. Except as discussed below, the total amount of any distribution from
a traditional IRA must be included in your gross income as ordinary income.
If you have ever made nondeductible IRA contributions to any traditional IRA
(it does not have to be to this particular traditional IRA contract), those
contributions are recovered tax free when you get distributions from any
traditional IRA. You must keep permanent tax records of all of your
nondeductible contributions to traditional IRAs. At the end of any year in
which you have received a distribution from any traditional IRA, you calculate
the ratio of your total nondeductible traditional IRA contributions (less any
amounts previously withdrawn tax free) to the total account balances of all
traditional IRAs you own at the end of the year plus all traditional IRA
distributions made during the year. Multiply this by all distributions from
the traditional IRA during the year to determine the nontaxable portion of
each distribution.
In addition, a distribution is not taxable if:
o the amount received is a withdrawal of excess contributions, as described
under "Excess contributions" above; or
o the entire amount received is rolled over to another traditional IRA (see
"Rollovers and transfers" above); or
o in certain limited circumstances, where the traditional IRA acts as a
"conduit," you roll over the entire amount into a qualified plan or TSA that
accepts rollover contributions. To get this conduit traditional IRA
treatment:
o the source of funds you used to establish the traditional IRA must have been
a rollover contribution from a qualified plan; and
o the entire amount received from the traditional IRA (including any earnings
on the rollover contribution) must be rolled over into another qualified
plan within 60 days of the date received.
Similar rules apply in the case of a TSA.
However, you may lose conduit treatment if you make an eligible rollover
distribution contribution to a traditional IRA and you commingle this
contribution with other contributions. In that case, you may not be able to
roll over these eligible rollover distribution contributions and earnings to
another qualified plan or TSA at a future date. The Rollover IRA contract can
be used as a conduit IRA if amounts are not commingled.
Distributions from a traditional IRA are not eligible for favorable five-year
averaging (or, in some cases, ten-year averaging and long-term capital gain
treatment) available to certain distributions from qualified plans.
REQUIRED MINIMUM DISTRIBUTIONS
LIFETIME REQUIRED MINIMUM DISTRIBUTIONS. You must start taking annual
distributions from your traditional IRAs beginning at age 70 1/2.
WHEN YOU HAVE TO TAKE THE FIRST REQUIRED MINIMUM DISTRIBUTION. The first
required minimum distribution is for the calendar year in which you turn age
70 1/2. You have the choice to take this first required minimum distribution
during the calendar year you actually reach age 70 1/2, or to delay taking it
until the first three-month period in the next calendar year (January 1 -
April 1). Distributions must start no later than your Required Beginning Date,
which is April 1st of the calendar year after the calendar year in which you
turn age 70 1/2. If you choose to delay taking the first annual minimum
distribution, then you will have to take two minimum distributions in that
year - the delayed
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one for the first year and the one actually for that year. Once minimum
distributions begin, they must be made at some time each year.
HOW YOU CAN CALCULATE REQUIRED MINIMUM DISTRIBUTIONS. There are two approaches
to taking required minimum distributions -- "account-based" or "annuity-
based."
Account-based method. If you choose an account-based method, you divide the
value of your traditional IRA as of December 31st of the past calendar year by
a life expectancy factor from IRS tables. This gives you the required minimum
distribution amount for that particular IRA for that year. The required
minimum distribution amount will vary each year as the account value and your
life expectancy factors change.
You have a choice of life expectancy factors, depending on whether you choose
a method based only on your life expectancy, or the joint life expectancies of
you and another individual. You can decide to "recalculate" your life
expectancy every year by using your current life expectancy factor. You can
decide instead to use the "term certain" method, where you reduce your life
expectancy by one every year after the initial year. If your spouse is your
designated beneficiary for the purpose of calculating annual account-based
required minimum distributions, you can also annually recalculate your
spouse's life expectancy if you want. If you choose someone who is not your
spouse as your designated beneficiary for the purpose of calculating annual
account-based required minimum distributions, you have to use the term certain
method of calculating that person's life expectancy. If you pick a nonspouse
designated beneficiary, you may also have to do another special calculation.
You can later apply your traditional IRA funds to a life annuity-based payout.
You can only do this if you already chose to recalculate your life expectancy
annually (and your spouse's life expectancy if you select a spousal joint
annuity). For example, if you anticipate exercising your guaranteed minimum
income benefit or selecting any other form of life annuity payout after you
are age 70 1/2, you must have elected to recalculate life expectancies.
Annuity-based method. If you choose an annuity-based method, you do not have
to do annual calculations. You apply the account value to an annuity payout
for your life or the joint lives of you and a designated beneficiary, or for a
period certain not extending beyond applicable life expectancies.
DO YOU HAVE TO PICK THE SAME METHOD TO CALCULATE YOUR REQUIRED MINIMUM
DISTRIBUTIONS FOR ALL OF YOUR TRADITIONAL IRAS AND OTHER RETIREMENT PLANS? No.
If you want, you can choose a different method and a different beneficiary for
each of your traditional IRAs and other retirement plans. For example, you can
choose an annuity payout from one IRA, a different annuity payout from a
qualified plan, and an account-based annual withdrawal from another IRA.
WILL WE PAY YOU THE ANNUAL AMOUNT EVERY YEAR FROM YOUR TRADITIONAL IRA BASED
ON THE METHOD YOU CHOOSE? No, unless you affirmatively select an annuity
payout option or an account-based withdrawal option such as our minimum
distribution withdrawal option. Because the options we offer do not cover
every option permitted under federal income tax rules, you may prefer to do
your own required minimum distribution calculations for one or more of your
traditional IRAs.
WHAT IF YOU TAKE MORE THAN YOU NEED TO FOR ANY YEAR? The required minimum
distribution amount for your traditional IRAs is calculated on a year-by-year
basis. There are no carry-back or carry-forward provisions. Also, you cannot
apply required minimum distribution amounts you take from your qualified plans
to the amounts you have to take from your traditional IRAs and vice versa.
However, the IRS will let you calculate the required minimum distribution for
each traditional IRA that you maintain, using the method that you picked for
that particular IRA. You can add these required minimum distribution amount
calculations together. As long as the total amount you take out every year
satisfies your overall traditional IRA required minimum distribution amount,
you may choose to take your annual required minimum distribution from any one
or more traditional IRAs that you own.
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WHAT IF YOU TAKE LESS THAN YOU NEED TO FOR ANY YEAR?
Your IRA could be disqualified, and you could have to pay tax on the entire
value. Even if your IRA is not disqualified, you could have to pay a 50%
penalty tax on the shortfall (required amount for traditional IRAs less amount
actually taken). It is your responsibility to meet the required minimum
distribution rules. We will remind you when our records show that your age
70 1/2 is approaching. If you do not select a method with us, we will assume
you are taking your required minimum distribution from another traditional IRA
that you own.
WHAT ARE THE REQUIRED MINIMUM DISTRIBUTION PAYMENTS AFTER YOU DIE? If you die
after either (a) the start of annuity payments, or (b) your Required Beginning
Date, your beneficiary must receive payment of the remaining values in the
contract at least as rapidly as under the distribution method before your
death. In some circumstances, your surviving spouse may elect to become the
owner of the traditional IRA and halt distributions until he or she reaches
age 70 1/2.
If you die before your Required Beginning Date and before annuity payments
begin, federal income tax rules require complete distribution of your entire
value in the contract within five years after your death. Payments to a
designated beneficiary over the beneficiary's life or over a period certain
that does not extend beyond the beneficiary's life expectancy are also
permitted, if these payments start within one year of your death. A surviving
spouse beneficiary can also (a) delay starting any payments until you would
have reached age 70 1/2 or (b) roll over your traditional IRA into his or her
own traditional IRA.
SUCCESSOR ANNUITANT AND OWNER
If your spouse is the sole primary beneficiary and elects to become the
successor annuitant and owner, no death benefit is payable until your
surviving spouse's death.
PAYMENTS TO A BENEFICIARY AFTER YOUR DEATH
IRA death benefits are taxed the same as IRA distributions.
BORROWING AND LOANS ARE PROHIBITED TRANSACTIONS
You cannot get loans from a traditional IRA. You cannot use a traditional IRA
as collateral for a loan or other obligation. If you borrow against your IRA
or use it as collateral, its tax-favored status will be lost as of the first
day of the tax year in which this prohibited event occurs. If this happens,
you must include the value of the traditional IRA in your federal gross
income. Also, the early distribution penalty tax of 10% will apply if you have
not reached age 59 1/2 before the first day of that tax year.
EARLY DISTRIBUTION PENALTY TAX
A penalty tax of 10% of the taxable portion of a distribution applies to
distributions from a traditional IRA made before you reach age 59 1/2. The
extra penalty tax does not apply to pre-age 59 1/2 distributions made:
o on or after your death; or
o because you are disabled (special federal income tax definition); or
o used to pay certain extraordinary medical expenses (special federal income
tax definition); or
o used to pay medical insurance premiums for unemployed individuals (special
federal income tax definition); or
o used to pay certain first-time home buyer expenses (special federal income
tax definition; $10,000 lifetime total limit for these distributions from
all your traditional and Roth IRAs); or
o used to pay certain higher education expenses (special federal income tax
definition); or
o in the form of substantially equal periodic payments made at least annually
over your life (or your life expectancy), or over the joint lives of you and
your beneficiary (or your joint life expectancy) using an IRS-approved
distribution method.
To meet this last exception, you could elect to apply your contract value to
an Income Manager (life annuity with a period certain) payout annuity contract
(level payments version). You could also elect the substantially equal
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withdrawals option. We will calculate the substantially equal annual payments
under a method we select based on guidelines issued by the IRS (currently
contained in IRS Notice 89-25, Question and Answer 12). Although substantially
equal withdrawals and Income Manager payments are not subject to the 10%
penalty tax, they are taxable as discussed in "Withdrawals, payments and
transfers of funds out of traditional IRAs" above. Once substantially equal
withdrawals or Income Manager annuity payments begin, the distributions should
not be stopped or changed until the later of your reaching age 59 1/2 or five
years after the date of the first distribution, or the penalty tax, including
an interest charge for the prior penalty avoidance, may apply to all prior
distributions under either option. Also, it is possible that the IRS could
view any additional withdrawal or payment you take from your contract as
changing your pattern of substantially equal withdrawals or Income Manager
payments for purposes of determining whether the penalty applies.
ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRAS)
This section of the prospectus covers some of the special tax rules that apply
to Roth IRAs. If the rules are the same as those that apply to the traditional
IRA, we will refer you to the same topic under "traditional IRAs."
The Equitable Accumulator Roth IRA contract is designed to qualify as a Roth
individual retirement annuity under Sections 408A and 408(b) of the Internal
Revenue Code.
CONTRIBUTIONS TO ROTH IRAS
Individuals may make four different types of contributions to a Roth IRA:
o regular after-tax contributions out of earnings; or
o taxable rollover contributions from traditional IRAs ("conversion"
contributions); or
o tax-free rollover contributions from other Roth IRAs; or
o tax-free direct custodian-to-custodian transfers from other Roth IRAs
("direct transfers").
Regular after-tax, direct transfer, and rollover contributions may be made to
a Flexible Premium Roth IRA contract. We only permit direct transfer and
rollover contributions under the Roth Conversion IRA contract. See "Rollovers
and direct transfers" below. If you use the forms we require, we will also
accept traditional IRA funds which are subsequently recharacterized as Roth
IRA funds following special federal income tax rules.
REGULAR CONTRIBUTIONS TO ROTH IRAS
LIMITS ON REGULAR CONTRIBUTIONS. Generally, $2,000 is the maximum amount that
you may contribute to all IRAs (including Roth IRAs) in any taxable year. This
$2,000 limit does not apply to rollover contributions or direct custodian-to-
custodian transfers into a Roth IRA. Any contributions to Roth IRAs reduce
your ability to contribute to traditional IRAs and vice versa. When your
earnings are below $2,000, your earned income or compensation for the year is
the most you can contribute. If you are married and file a joint income tax
return, you and your spouse may combine your compensation to determine the
amount of regular contributions you are permitted to make to Roth IRAs and
traditional IRAs. See the discussion above under traditional IRAs.
With a Roth IRA, you can make regular contributions when you reach 70 1/2, as
long as you have sufficient earnings. But, you cannot make contributions for
any year that:
o your federal income tax filing status is "married filing jointly" and your
adjusted gross income is over $160,000; or
o your federal income tax filing status is "single" and your adjusted gross
income is over $110,000.
However, you can make regular Roth IRA contributions in reduced amounts when:
o your federal income tax filing status is "married filing jointly" and your
adjusted gross income is between $150,000 and $160,000; or
o your federal income tax filing status is "single" and your adjusted gross
income is between $95,000 and $110,000.
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If you are married and filing separately and your adjusted gross income is
between $0 and $10,000 the amount of regular contributions you are permitted
to make is phased out. If your adjusted gross income is more than $10,000 you
cannot make regular Roth IRA contributions.
WHEN YOU CAN MAKE CONTRIBUTIONS. Same as traditional IRAs.
DEDUCTIBILITY OF CONTRIBUTIONS. Roth IRA contributions are not tax deductible.
ROLLOVERS AND DIRECT TRANSFERS
WHAT IS THE DIFFERENCE BETWEEN ROLLOVER AND DIRECT TRANSFER TRANSACTIONS? You
may make rollover contributions to a Roth IRA from only two sources:
o another Roth IRA ("tax-free rollover contribution"); or
o another traditional IRA, including a SEP-IRA or SIMPLE-IRA, in a taxable
conversion rollover ("conversion contribution").
You may not make contributions to a Roth IRA from a qualified plan under
Section 401(a) of the Internal Revenue Code, or a TSA under Section 403(b) of
the Internal Revenue Code. You may make direct transfer contributions to a
Roth IRA only from another Roth IRA.
The difference between a rollover transaction and a direct transfer
transaction is the following: in a rollover transaction you actually take
possession of the funds rolled over, or are considered to have received them
under tax law in the case of a change from one type of plan to another. In a
direct transfer transaction, you never take possession of the funds, but
direct the first Roth IRA custodian, trustee, or issuer to transfer the first
Roth IRA funds directly to Equitable Life, as the Roth IRA issuer. You can
make direct transfer transactions only between identical plan types (for
example, Roth IRA to Roth IRA). You can also make rollover transactions
between identical plan types. However, you can only use rollover transactions
between different plan types (for example, traditional IRA to Roth IRA).
You may make both Roth IRA to Roth IRA rollover transactions and Roth IRA to
Roth IRA direct transfer transactions. This can be accomplished on a
completely tax-free basis. However, you may make Roth IRA to Roth IRA rollover
transactions only once in any 12-month period for the same funds. Trustee-to-
trustee or custodian-to-custodian direct transfers can be made more frequently
than once a year. Also, if you send us the rollover contribution to apply it
to a Roth IRA, you must do so within 60 days after you receive the proceeds
from the original IRA to get rollover treatment.
The surviving spouse beneficiary of a deceased individual can roll over or
directly transfer an inherited Roth IRA to one or more other Roth IRAs. In
some cases, Roth IRAs can be transferred on a tax-free basis between spouses
or former spouses as a result of a court-ordered divorce or separation decree.
CONVERSION CONTRIBUTIONS TO ROTH IRAS
In a conversion rollover transaction, you withdraw (or are considered to have
withdrawn) all or a portion of funds from a traditional IRA you maintain and
convert it to a Roth IRA within 60 days after you receive (or are considered
to have received) the traditional IRA proceeds. Unlike a rollover from a
traditional IRA to another traditional IRA, the conversion rollover
transaction is not tax-free. Instead, the distribution from the traditional
IRA is generally fully taxable. For this reason, we are required to withhold
10% federal income tax from the amount converted unless you elect out of such
withholding. If you have ever made nondeductible regular contributions to any
traditional IRA -- whether or not it is the traditional IRA you are converting
-- a pro rata portion of the distribution is tax free.
There is, however, no early distribution penalty tax on the traditional IRA
withdrawal that you are converting to a Roth IRA, even if you are under age
59 1/2.
You cannot make conversion contributions to a Roth IRA for any taxable year in
which your adjusted gross income exceeds $100,000. For this purpose, your
adjusted gross
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income is computed without the gross income stemming from the traditional IRA
conversion. You also cannot make conversion contributions to a Roth IRA for
any taxable year in which your federal income tax filing status is "married
filing separately."
Finally, you cannot make conversion contributions to a Roth IRA to the extent
that the funds in your traditional IRA are subject to the annual required
minimum distribution rule applicable to traditional IRAs beginning at age
70 1/2.
WITHDRAWALS, PAYMENTS AND TRANSFERS OF FUNDS OUT OF ROTH IRAS
NO FEDERAL INCOME TAX LAW RESTRICTIONS ON WITHDRAWALS. You can withdraw any or
all of your funds from a Roth IRA at any time; you do not need to wait for a
special event like retirement.
DISTRIBUTIONS FROM ROTH IRAS
Distributions include withdrawals from your contract, surrender of your
contract, and annuity payments from your contract. Death benefits are also
distributions.
The following distributions from Roth IRAs are free of income tax:
o Rollover from a Roth IRA to another Roth IRA;
o Direct transfer from a Roth IRA to another Roth IRA;
o Qualified distributions from a Roth IRA; and
o Return of excess contributions or amounts recharacterized to a traditional
IRA.
QUALIFIED DISTRIBUTIONS FROM ROTH IRAS. Qualified distributions from Roth IRAs
made because of one of the following four qualifying events or reasons are not
includable in income:
o you reach age 59 1/2; or
o you die; or
o you become disabled (special federal income tax definition); or
o your distribution is a "qualified first-time homebuyer distribution"
(special federal income tax definition; $10,000 lifetime total limit for
these distributions from all of your traditional and Roth IRAs).
You also have to meet a five-year aging period. A qualified distribution is
any distribution made after the five-taxable-year period beginning with the
first taxable year for which you made any contribution to any Roth IRA
(whether or not the one from which the distribution is being made). It is not
possible to have a tax-free qualified distribution before the year 2003
because of the five-year aging requirement.
NONQUALIFIED DISTRIBUTIONS FROM ROTH IRAS. Nonqualified distributions from
Roth IRAs are distributions that do not meet the qualifying event and
five-year aging period tests described above. Such distributions are
potentially taxable as ordinary income. Nonqualified distributions receive
return-of-investment-first treatment. Only the difference between the amount
of the distribution and the amount of contributions to all of your Roth IRAs
is taxable. You have to reduce the amount of contributions to all of your Roth
IRAs to reflect any previous tax-free recoveries.
You must keep your own records of regular and conversion contributions to all
Roth IRAs to assure appropriate taxation. You may have to file information on
your contributions to and distributions from any Roth IRA on your tax return.
You may have to retain all income tax returns and records pertaining to such
contributions and distributions until your interests in all Roth IRAs are
distributed.
Like traditional IRAs, taxable distributions from a Roth IRA are not entitled
to the special favorable five-year averaging method (or, in certain cases,
favorable ten-year averaging and long-term capital gain treatment) available
in certain cases to distributions from qualified plans.
REQUIRED MINIMUM DISTRIBUTIONS AT DEATH
Same as traditional IRA under "What are the required minimum distribution
payments after you die?" Lifetime required minimum distributions do not apply.
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PAYMENTS TO A BENEFICIARY AFTER YOUR DEATH
Distributions to a beneficiary generally receive the same tax treatment as if
the distribution had been made to you.
BORROWING AND LOANS ARE PROHIBITED TRANSACTIONS
Same as traditional IRA.
EXCESS CONTRIBUTIONS
Same as traditional IRA, except that regular contributions made after age
70 1/2 are not excess contributions.
Excess rollover contributions to Roth IRAs are contributions not eligible to
be rolled over (for example, conversion contributions from a traditional IRA
if your adjusted gross income is in excess of $100,000 in the conversion
year).
You can withdraw or recharacterize any contribution to a Roth IRA before the
due date (including extensions) for filing your federal income tax return for
the tax year. If you do this, you must also withdraw or recharacterize any
earnings attributable to the contribution.
EARLY DISTRIBUTION PENALTY TAX
Same as traditional IRA.
For Roth IRAs, special penalty rules may apply to amounts withdrawn
attributable to 1998 conversion rollovers.
SPECIAL RULES FOR NONQUALIFIED CONTRACTS IN QUALIFIED PLANS
Under QP contracts your plan administrator or trustee notifies you as to tax
consequences. See Appendix II.
TAX-SHELTERED ANNUITY CONTRACTS (TSAS)
GENERAL
This section of the prospectus covers some of the special tax rules that apply
to TSA contracts under Section 403(b) of the Internal Revenue Code (TSAs). If
the rules are the same as those that apply to another kind of contract, for
example, traditional IRAs, we will refer you to the same topic under
"traditional IRAs."
CONTRIBUTIONS TO TSAS
There are two ways you can make contributions to this Equitable Accumulator
Rollover TSA contract:
o a rollover from another TSA contract or arrangement that meets the
requirements of Section 403(b) of the Internal Revenue Code, or
o a full or partial direct transfer of assets ("direct transfer") from another
contract or arrangement that meets the requirements of Section 403(b) of the
Internal Revenue Code by means of IRS Revenue Ruling 90-24.
With appropriate written documentation satisfactory to us, we will accept
rollover contributions from "conduit IRAs" for TSA funds.
If you make a direct transfer, you must fill out our transfer form.
EMPLOYER-REMITTED CONTRIBUTIONS. The Equitable Accumulator Rollover TSA
contract does not accept employer-remitted contributions. However, we provide
the following discussion as part of our description of restrictions on the
distribution of funds directly transferred, which include employer-remitted
contributions to other TSAs.
Employer-remitted contributions to TSAs made through the employer's payroll
are subject to annual limits. (Tax-free transfer or tax-deferred rollover
contributions from another 403(b) arrangement are not subject to these annual
contribution limits.) Commonly, some or all of the contributions made to a TSA
are made under a salary reduction agreement between the employee and the
employer. These contributions are called "salary reduction" or "elective
deferral" contributions. However, a TSA can also be wholly or partially funded
through nonelective employer contributions or after-tax employee
contributions. Amounts attributable to salary reduction contributions to TSAs
are generally subject to withdrawal restrictions. Also, all amounts
attributable to investments in a 403(b)(7) custodial account are subject to
withdrawal restrictions discussed below.
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ROLLOVER OR DIRECT TRANSFER CONTRIBUTIONS. You may make rollover contributions
to your Equitable Accumulator Rollover TSA contract from TSAs under Section
403(b) of the Internal Revenue Code. Generally, you may make a rollover
contribution to a TSA when you have a distributable event from an existing TSA
as a result of your:
o termination of employment with the employer who provided the TSA funds; or
o reaching age 59 1/2 even if you are still employed; or
o disability (special federal income tax definition).
A transfer occurs when changing the funding vehicle, even if there is no
distributable event. Under a direct transfer, you do not receive a
distribution. We accept direct transfers of TSA funds under Revenue Ruling
90-24 only if:
o you give us acceptable written documentation as to the source of the funds,
and
o the Equitable Accumulator contract receiving the funds has provisions at
least as restrictive as the source contract.
Before you transfer funds to an Equitable Accumulator Rollover TSA contract,
you may have to obtain your employer's authorization or demonstrate that you
do not need employer authorization. For example, the transferring TSA may be
subject to Title I of ERISA, if the employer makes matching contributions to
salary reduction contributions made by employees. In that case, the employer
must continue to approve distributions from the plan or contract.
Your contribution to the Equitable Accumulator Rollover TSA must be net of the
required minimum distribution for the tax year in which we issue the contract
if:
o you are or will be at least age 70 1/2 in the current calendar year, and
o you have separated from service with the employer who provided the funds to
purchase the TSA you are transferring or rolling over to the Equitable
Accumulator Rollover TSA.
This rule applies regardless of whether the source of funds is a:
o rollover by check of the proceeds from another TSA; or
o direct rollover from another TSA; or
o direct transfer under Revenue Ruling 90-24 from another TSA.
Further, you must use the same elections regarding recalculation of your life
expectancy (and if applicable, your spouse's life expectancy) if you have
already begun to receive required minimum distributions from or with respect
to the TSA from which you are making your contribution to the Equitable
Accumulator Rollover TSA. You must also elect or have elected a minimum
distribution calculation method requiring recalculation of your life
expectancy (and if applicable, your spouse's life expectancy) if you elect an
annuity payout for the funds in this contract subsequent to this year.
DISTRIBUTIONS FROM TSAS
GENERAL. Depending on the terms of the employer plan and your employment
status, you may have to get your employer's consent to take a loan or
withdrawal. Your employer will tell us this when you establish the TSA through
a direct transfer.
WITHDRAWAL RESTRICTIONS. If this is a Revenue Ruling 90-24 direct transfer, we
will treat all amounts transferred to this contract and any future earnings on
the amount transferred as not eligible for withdrawal until one of the
following events happens:
o you are separated from service with the employer who provided the funds to
purchase the TSA you are transferring to the Equitable Accumulator Rollover
TSA;
o you reach age 59 1/2; or
o you die; or
o you become disabled (special federal income tax definition); or
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o you take a hardship withdrawal (special federal income tax definition).
If any portion of the funds directly transferred to your TSA contract is
attributable to amounts that you invested in a 403(b)(7) custodial account,
such amounts, including earnings, are subject to withdrawal restrictions. With
respect to the portion of the funds that were never invested in a 403(b)(7)
custodial account, these restrictions apply to the salary reduction (elective
deferral) contributions to a TSA annuity contract you made and any earnings on
them. These restrictions do not apply to the amount directly transferred to
your TSA contract that represents your December 31, 1988 account balance
attributable to salary reduction contributions to a TSA annuity contract and
earnings. To take advantage of this grandfathering you must properly notify us
in writing at our processing office of your December 31, 1988 account balance
if you have qualifying amounts transferred to your TSA contract.
THIS PARAGRAPH APPLIES ONLY TO PARTICIPANTS IN A TEXAS OPTIONAL RETIREMENT
PROGRAM. Texas Law permits withdrawals only after one of the following
distributable events occur:
(1) the requirements for minimum distribution (discussed under "Required
minimum distributions" below) are met; or
(2) death; or
(3) retirement; or
(4) termination of employment in all Texas public institutions of higher
education.
For you to make a withdrawal, we must receive a properly completed written
acknowledgement from the employer. If a distributable event occurs before you
are vested, we will refund to the employer any amounts provided by an
employer's first-year matching contribution. We reserve the right to change
these provisions without your consent, but only to the extent necessary to
maintain compliance with applicable law. Loans are not permitted under Texas
Optional Retirement Programs.
TAX TREATMENT OF DISTRIBUTIONS. Amounts held under TSAs are generally not
subject to federal income tax until benefits are distributed. Distributions
include withdrawals from your TSA contract and annuity payments from your TSA
contract. Death benefits paid to a beneficiary are also taxable distributions.
Unless an exception applies, amounts distributed from TSAs are includable in
gross income as ordinary income. Distributions from TSAs may be subject to 20%
federal income tax withholding. See "Federal and state income tax withholding
and information reporting" below. In addition, TSA distributions may be
subject to additional tax penalties.
If you have made after-tax contributions, you will have a tax basis in your
TSA contract, which will be recovered tax-free. Since we do not track your
investment in the contract, if any, it is your responsibility to determine how
much of the distribution is taxable.
DISTRIBUTIONS BEFORE ANNUITY PAYMENTS BEGIN. On a total surrender, the amount
received in excess of the investment in the contract is taxable. We will
report the total amount of the distribution. The amount of any partial
distribution from a TSA prior to the annuity starting date is generally
taxable, except to the extent that the distribution is treated as a withdrawal
of after-tax contributions. Distributions are normally treated as pro rata
withdrawals of after-tax contributions and earnings on those contributions.
ANNUITY PAYMENTS. If you elect an annuity payout option, you will recover any
investment in the contract as each payment is received by dividing the
investment in the contract by an expected return determined under an IRS table
prescribed for qualified annuities. The amount of each payment not excluded
from income under this exclusion ratio is fully taxable. The full amount of
the payments received after your investment in the contract is recovered is
fully taxable. If you (and your beneficiary under a joint and survivor
annuity) die before recovering the full investment in the contract, a
deduction is allowed on your (or your beneficiary's) final tax return.
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PAYMENTS TO A BENEFICIARY AFTER YOUR DEATH
Death benefit distributions from a TSA generally receive the same tax
treatment as distributions during your lifetime. In some instances,
distributions from a TSA made to your surviving spouse may be rolled over to a
traditional IRA.
LOANS FROM TSAS
You may take loans from a TSA unless restricted by the employer (for example,
under an employer plan subject to ERISA). If you cannot take a loan, or cannot
take a loan without approval from the employer who provided the funds, we will
have this information in our records based on what you and the employer who
provided the TSA funds told us when you purchased your contract.
Loans are generally not treated as a taxable distribution. If the amount of
the loan exceeds permissible limits under federal income tax rules when made,
the amount of the excess is treated (solely for tax purposes) as a taxable
distribution. Additionally, if the loan is not repaid at least quarterly,
amortizing (paying down) interest and principal, the amount not repaid when
due will be treated as a taxable distribution. Under Proposed Treasury
Regulations the entire unpaid balance of the loan is includable in income in
the year of the default.
TSA loans are subject to federal income tax limits and may also be subject to
the limits of the plan from which the funds came. Federal income tax rule
requirements apply even if the plan is not subject to ERISA. For example,
loans offered by TSAs are subject to the following conditions:
o The amount of a loan to a participant, when combined with all other loans to
the participant from all qualified plans of the employer, cannot exceed the
lesser of (1) the greater of $10,000 or 50% of the participant's
nonforfeitable accrued benefits and (2) $50,000 reduced by the excess (if
any) of the highest outstanding loan balance over the previous twelve months
over the outstanding loan balance of plan loans on the date the loan was
made.
o In general, the term of the loan cannot exceed five years unless the loan is
used to acquire the participant's primary residence. Equitable Accumulator
Rollover TSA contracts have a term limit of 10 years for loans used to
acquire the participant's primary residence.
o All principal and interest must be amortized in substantially level payments
over the term of the loan, with payments being made at least quarterly.
The amount borrowed and not repaid may be treated as a distribution if:
o the loan does not qualify under the conditions above;
o the participant fails to repay the interest or principal when due; or
o in some instances, the participant separates from service with the employer
who provided the funds or the plan is terminated.
In this case, the participant may have to include the unpaid amount due as
ordinary income. In addition, the 10% early distribution penalty tax may
apply. The amount of the unpaid loan balance is reported to the IRS on Form
1099-R as a distribution.
TAX-DEFERRED ROLLOVERS AND DIRECT TRANSFERS
You may roll over any "eligible rollover distribution" from a TSA into another
eligible retirement plan, either directly or within 60 days of your receiving
the distribution. To the extent rolled over, a distribution remains
tax-deferred.
You may roll over a distribution from a TSA to another TSA or to a traditional
IRA. A spousal beneficiary may roll over death benefits only to a traditional
IRA.
The taxable portion of most distributions will be eligible for rollover,
except as specifically excluded under federal income tax rules. Distributions
that you cannot roll over generally include periodic payments for life or for
a period of 10 years or more, hardship withdrawals, and required minimum
distributions under federal income tax rules.
Direct transfers of TSA funds from one TSA to another under Revenue Ruling
90-24 are not distributions.
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REQUIRED MINIMUM DISTRIBUTIONS
Same as traditional IRA with these differences:
WHEN YOU HAVE TO TAKE THE FIRST REQUIRED MINIMUM DISTRIBUTION. The minimum
distribution rules force TSA participants to start calculating and taking
annual distributions from their TSAs by a required date. Generally, you must
take the first required minimum distribution for the calendar year in which
you turn age 70 1/2. You may be able to delay the start of required minimum
distributions for all or part of your account balance until after age 70 1/2,
as follows:
o For TSA participants who have not retired from service with the employer who
provided the funds for the TSA by the calendar year the participant turns
age 70 1/2, the required beginning date for minimum distributions is
extended to April 1 following the calendar year of retirement.
o TSA plan participants may also delay the start of required minimum
distributions to age 75 of the portion of their account value attributable
to their December 31, 1986 TSA account balance, even if retired at age
70 1/2. We will know whether or not you qualify for this exception because
it will only apply to people who establish their Equitable Accumulator
Rollover TSA by direct Revenue Ruling 90-24 transfers. If you do not give us
the amount of your December 31, 1986 account balance that is being
transferred to the Equitable Accumulator Rollover TSA on the form used to
establish the TSA, you do not qualify.
SPOUSAL CONSENT RULES
This will only apply to you if you establish your Equitable Accumulator
Rollover TSA by direct Revenue Ruling 90-24 transfer. Your employer will tell
us on the form used to establish the TSA whether or not you need to get
spousal consent for loans, withdrawals, or other distributions. If you do, you
will need such consent if you are married when you request a withdrawal under
the TSA contract. In addition, unless you elect otherwise with the written
consent of your spouse, the retirement benefits payable under the plan must be
paid in the form of a qualified joint and survivor annuity. A qualified joint
and survivor annuity is payable for the life of the annuitant with a survivor
annuity for the life of the spouse in an amount not less than one-half of the
amount payable to the annuitant during his or her lifetime. In addition, if
you are married, the beneficiary must be your spouse, unless your spouse
consents in writing to the designation of another beneficiary.
If you are married and you die before annuity payments have begun, payments
will be made to your surviving spouse in the form of a life annuity unless at
the time of your death a contrary election was in effect. However, your
surviving spouse may elect, before payments begin, to receive payments in any
form permitted under the terms of the TSA contract and the plan of the
employer who provided the funds for the TSA.
EARLY DISTRIBUTION PENALTY TAX
A penalty tax of 10% of the taxable portion of a distribution applies to
distributions from a TSA before you reach age 59 1/2. This is in addition to
any income tax. There are exceptions to the extra penalty tax. No penalty tax
applies to pre-age 59 1/2 distributions made:
o on or after your death; or
o because you are disabled (special federal income tax definition); or
o to pay for certain extraordinary medical expenses (special federal income
tax definition); or
o if you are separated from service, any form of payout after you are age 55;
or
o only if you are separated from service, a payout in the form of
substantially equal periodic payments made at least annually over your life
(or your life expectancy), or over the joint lives of you and your
beneficiary (or your joint life expectancy) using an IRS-approved
distribution method.
FEDERAL AND STATE INCOME TAX WITHHOLDING AND INFORMATION REPORTING
We must withhold federal income tax from distributions from annuity contracts.
You may be able to elect out of this
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income tax withholding in some cases. Generally, we do not have to withhold if
your distributions are not taxable. The rate of withholding will depend on the
type of distribution and, in certain cases, the amount of your distribution.
Any income tax withheld is a credit against your income tax liability. If you
do not have sufficient income tax withheld or do not make sufficient estimated
income tax payments, you may incur penalties under the estimated income tax
rules.
You must file your request not to withhold in writing before the payment or
distribution is made. Our processing office will provide forms for this
purpose. You cannot elect out of withholding unless you provide us with your
correct Taxpayer Identification Number and a United States residence address.
You cannot elect out of withholding if we are sending the payment out of the
United States.
You should note the following special situations:
o We might have to withhold on amounts we pay under a free look or
cancellation.
o We are generally required to withhold on conversion rollovers of traditional
IRAs to Roth IRAs, as it is considered a withdrawal from the traditional IRA
and is taxable.
o We are required to withhold on the gross amount of a distribution from a
Roth IRA unless you elect out of withholding. This may result in tax being
withheld even though the Roth IRA distribution is not taxable in whole or in
part.
Special withholding rules apply to foreign recipients and United States
citizens residing outside the United States. We do not discuss these rules
here. Certain states have indicated that state income tax withholding will
also apply to payments from the contracts made to residents. In some states,
you may elect out of state withholding, even if federal withholding applies.
Generally, an election out of federal withholding will also be considered an
election out of state withholding. If you need more information concerning a
particular state or any required forms, call our processing office at the
toll-free number.
FEDERAL INCOME TAX WITHHOLDING ON PERIODIC ANNUITY PAYMENTS
We withhold differently on "periodic" and "non-periodic" payments. For a
periodic annuity payment, for example, unless you specify a different number
of withholding exemptions, we withhold assuming that you are married and
claiming three withholding exemptions. If you do not give us your correct
Taxpayer Identification Number, we withhold as if you are single with no
exemptions.
Based on the assumption that you are married and claiming three withholding
exemptions, if you receive less than $14,700 in periodic annuity payments in
1999, your payments will generally be exempt from federal income tax
withholding. You could specify a different choice of withholding exemption or
request that tax be withheld. Your withholding election remains effective
unless and until you revoke it. You may revoke or change your withholding
election at any time.
FEDERAL INCOME TAX WITHHOLDING ON NON-PERIODIC ANNUITY PAYMENTS (WITHDRAWALS)
For a non-periodic distribution (total surrender or partial withdrawal), we
generally withhold at a flat 10% rate. We apply that rate to the taxable
amount in the case of nonqualified contracts, and to the payment amount in the
case of IRAs and Roth IRAs.
You cannot elect out of withholding if the payment is an eligible rollover
distribution from a qualified plan or TSA. If a non-periodic distribution from
a qualified plan or TSA is not an eligible rollover distribution then the 10%
withholding rate applies.
MANDATORY WITHHOLDING FROM TSA AND QUALIFIED PLAN DISTRIBUTIONS
Unless you have the distribution go directly to the new plan, eligible
rollover distributions from qualified plans and TSAs are subject to mandatory
20% withholding. An eligible rollover distribution from a TSA can be rolled
over to another TSA or a traditional IRA. An eligible rollover distribution
from a qualified plan can be rolled over to another qualified plan
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or traditional IRA. All distributions from a TSA or qualified plan are
eligible rollover distributions unless they are on the following list of
exceptions:
o any after-tax contributions you made to the plan; or
o any distributions which are required minimum distributions after age 70 1/2
or separation from service; or
o hardship withdrawals; or
o substantially equal periodic payments made at least annually for your life
(or life expectancy) or the joint lives (or joint life expectancy) of you
and your designated beneficiary; or
o substantially equal periodic payments made for a specified period of 10
years or more; or
o corrective distributions that fit specified technical tax rules; or
o loans that are treated as distributions; or
o a death benefit payment to a beneficiary who is not your surviving spouse;
or
o a qualified domestic relations order distribution to a beneficiary who is
not your current spouse or former spouse.
A death benefit payment to your surviving spouse, or a qualified domestic
relations order distribution to your current or former spouse, may be a
distribution subject to mandatory 20% withholding.
IMPACT OF TAXES TO EQUITABLE LIFE
The contracts provide that we may charge Separate Account No. 49 for taxes. We
do not now, but may in the future set up reserves for such taxes.
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ABOUT OUR SEPARATE ACCOUNT NO. 49
Each variable investment option is a subaccount of our Separate Account No.
49. We established Separate Account No. 49 in 1996 under special provisions of
the New York Insurance Law. These provisions prevent creditors from any other
business we conduct from reaching the assets we hold in our variable
investment options for owners of our variable annuity contracts. We are the
legal owner of all of the assets in Separate Account No. 49 and may withdraw
any amounts that exceed our reserves and other liabilities with respect to
variable investment options under our contracts. The results of Separate
Account No. 49's operations are accounted for without regard to Equitable
Life's other operations.
Separate Account No. 49 is registered under the Investment Company Act of 1940
and is classified by that act as a "unit investment trust." The SEC, however,
does not manage or supervise Equitable Life or Separate Account No. 49.
Each subaccount (variable investment option) within Separate Account No. 49
invests solely in class IB shares issued by the corresponding portfolio of EQ
Advisors Trust.
We reserve the right subject to compliance with laws that apply:
(1) to add variable investment options to, or to remove variable investment
options from, Separate Account No. 49, or to add other separate accounts;
(2) to combine any two or more variable investment options;
(3) to transfer the assets we determine to be the shares of the class of
contracts to which the contracts belong from any variable investment
option to another variable investment option;
(4) to operate Separate Account No. 49 or any variable investment option as a
management investment company under the Investment Company Act of 1940 (in
which case, charges and expenses that otherwise would be assessed against
an underlying mutual fund would be assessed against Separate Account No.
49 or a variable investment option directly);
(5) to deregister Separate Account No. 49 under the Investment Company Act of
1940;
(6) to restrict or eliminate any voting rights as to Separate Account No. 49;
and
(7) to cause one or more variable investment options to invest some or all of
their assets in one or more other trusts or investment companies.
ABOUT EQ ADVISORS TRUST
EQ Advisors Trust is registered under the Investment Company Act of 1940. It
is classified as an "open-end management investment company," more commonly
called a mutual fund. EQ Advisors Trust issues different shares relating to
each portfolio.
Equitable Life serves as the investment manager of EQ Advisors Trust. As such,
Equitable Life oversees the activities of the investment advisers with respect
to EQ Advisors Trust and is responsible for retaining or discontinuing the
services of those advisers. (Prior to September 1999 EQ Financial Consultants,
Inc., the predecessor to AXA Advisors, LLC and a subsidiary of Equitable Life,
served as investment manager to EQ Advisors Trust.)
EQ Advisors Trust commenced operations on May 1, 1997. For periods prior to
October 18, 1999 the Alliance portfolios (other than EQ/Alliance Premier
Growth) were part of The Hudson River Trust. On October 18, 1999, these
portfolios became corresponding portfolios of EQ Advisors Trust.
EQ Advisors Trust does not impose sales charges or "loads" for buying and
selling its shares. All dividends and other distributions on shares are
reinvested in full. The Board of Trustees of EQ Advisors Trust may establish
additional portfolios or eliminate existing portfolios at any time. More
detailed information about EQ Advisors Trust, its investment objectives,
policies, restrictions, risks, expenses, the Rule 12b-1 Plan relating to its
Class IB shares, and other aspects of its operations, appears in the
prospectus for EQ Advisors Trust attached at the end of this prospectus, or in
its SAI which is available upon request.
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ABOUT OUR FIXED MATURITY OPTIONS
RATES TO MATURITY AND PRICE PER $100 OF MATURITY VALUE
We can determine the amount required to be allocated to one or more fixed
maturity options in order to produce specified maturity values. For example,
we can tell you how much you need to allocate per $100 of maturity value.
The rates to maturity for new allocations as of August 2, 1999 and the related
price per $100 of maturity value were as follows:
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FIXED MATURITY
OPTIONS WITH
FEBRUARY 15TH RATE TO MATURITY PRICE
MATURITY DATE OF AS OF PER $100 OF
MATURITY YEAR AUGUST 2, 1999 MATURITY VALUE
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2000 3.47% $98.18
2001 4.51% $93.42
2002 5.01% $88.31
2003 5.40% $83.00
2004 5.47% $78.51
2005 5.59% $73.96
2006 5.69% $69.61
2007 5.72% $65.72
2008 5.82% $61.67
2009 5.85% $58.11
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HOW WE DETERMINE THE MARKET VALUE ADJUSTMENT
We use the following procedure to calculate the market value adjustment (up or
down) we make if you withdraw all of your value from a fixed maturity option
before its maturity date.
(1) We determine the market adjusted amount on the date of the withdrawal as
follows:
(a) We determine the fixed maturity amount that would be payable on the
maturity date, using the rate to maturity for the fixed maturity
option.
(b) We determine the period remaining in your fixed maturity option (based
on the withdrawal date) and convert it to fractional years based on a
365-day year. For example, three years and 12 days becomes 3.0329.
(c) We determine the current rate to maturity that applies on the
withdrawal date to new allocations to the same fixed maturity option.
(d) We determine the present value of the fixed maturity amount payable at
the maturity date, using the period determined in (b) and the rate
determined in (c).
(2) We determine the fixed maturity amount as of the current date.
(3) We subtract (2) from the result in (1)(d). The result is the market value
adjustment applicable to such fixed maturity option, which may be positive
or negative.
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Your market adjusted amount is the present value of the maturity value
discounted at the rate to maturity in effect for new contributions to that
same fixed maturity option on the date of the calculation.
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If you withdraw only a portion of the amount in a fixed maturity option, the
market value adjustment will be a percentage of the market value adjustment
that would have applied if you had withdrawn the entire value in that fixed
maturity option. This percentage is equal to the percentage of the value in
the fixed maturity option that you are withdrawing. Any withdrawal charges
that are deducted from a fixed maturity option will result in a market value
adjustment calculated in the same way. See Appendix III for an example.
For purposes of calculating the rate to maturity for new allocations to a
fixed maturity option (see (1)(c) above), we use the rate we have in effect
for new allocations to that fixed maturity option. We use this rate even if
new allocations to that option would not be accepted at that time. This rate
will not be less than 3%. If we do not have a rate to maturity in effect for a
fixed maturity option to which the "current rate to maturity" in (1)(c) would
apply, we will use the rate at the next closest maturity date. If we are no
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longer offering new fixed maturity options, the "current rate to maturity"
will be determined in accordance with our procedures then in effect. We
reserve the right to add up to 0.25% to the current rate in (1)(c) above for
purposes of calculating the market value adjustment only.
INVESTMENTS UNDER THE FIXED MATURITY OPTIONS
Amounts allocated to the fixed maturity options are held in a "nonunitized"
separate account we have established under the New York Insurance Law. This
separate account provides an additional measure of assurance that we will make
full payment of amounts due under the fixed maturity options. Under New York
Insurance Law, the portion of the separate account's assets equal to the
reserves and other contract liabilities relating to the contracts are not
chargeable with liabilities from any other business we may conduct. We own the
assets of the separate account, as well as any favorable investment
performance on those assets. You do not participate in the performance of the
assets held in this separate account. We may, subject to state law that
applies, transfer all assets allocated to the separate account to our general
account. We guarantee all benefits relating to your value in the fixed
maturity options, regardless of whether assets supporting fixed maturity
options are held in a separate account or our general account.
We have no specific formula for establishing the rates to maturity for the
fixed maturity options. We expect the rates to be influenced by, but not
necessarily correspond to, among other things, the yields that we can expect
to realize on the separate account's investments from time to time. Our
current plans are to invest in fixed-income obligations, including corporate
bonds, mortgage-backed and asset-backed securities, and government and agency
issues having durations in the aggregate consistent with those of the fixed
maturity options.
Although the above generally describes our plans for investing the assets
supporting our obligations under the fixed maturity options under the
contracts, we are not obligated to invest those assets according to any
particular plan except as we may be required to by state insurance laws. We
will not determine the rates to maturity we establish by the performance of
the nonunitized separate account.
ABOUT THE GENERAL ACCOUNT
Our general account supports all of our policy and contract guarantees,
including those that apply to the fixed maturity options and the account for
special dollar cost averaging, as well as our general obligations.
The general account is subject to regulation and supervision by the Insurance
Department of the State of New York and to the insurance laws and regulations
of all jurisdictions where we are authorized to do business. Because of
exemptions and exclusionary provisions that apply, interests in the general
account have not been registered under the Securities Act of 1933, nor is the
general account an investment company under the Investment Company Act of
1940. However, the market value adjustment interests under the contracts are
registered under the Securities Act of 1933.
We have been advised that the staff of the SEC has not reviewed the portions
of this prospectus that relate to the general account (other than market value
adjustment interests). The disclosure with regard to the general account,
however, may be subject to certain provisions of the federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
ABOUT OTHER METHODS OF PAYMENT
WIRE TRANSMITTALS
We accept initial contributions sent by wire to our processing office by
agreement with certain broker-dealers. The transmittals must be accompanied by
information we require to allocate your contribution. Wire orders not
accompanied by complete information may be retained as described under "How
you can make your contributions" under "Contract features and benefits."
Even if we accept the wire order and essential information, a contract
generally will not be issued until we receive and accept a properly completed
application. In certain cases we
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may issue a contract based on information forwarded electronically. In these
cases, you must sign our Acknowledgement of Receipt form.
Where we require a signed application, no financial transactions will be
permitted until we receive the signed application and have issued the
contract. Where we require an Acknowledgement of Receipt form, financial
transactions are only permitted if you request them in writing, sign the
request and have it signature guaranteed, until we receive the signed
Acknowledgement of Receipt form.
After your contract has been issued, additional contributions may be
transmitted by wire.
AUTOMATIC INVESTMENT PROGRAM -- FOR NQ, FLEXIBLE PREMIUM IRA, AND FLEXIBLE
PREMIUM ROTH IRA CONTRACTS ONLY
You may use our automatic investment program, or "AIP," to have a specified
amount automatically deducted from a checking account, money market account,
or credit union checking account and contributed as an additional contribution
into an NQ, Flexible Premium IRA or Flexible Premium Roth IRA contract on a
monthly or quarterly basis. AIP is not available for Rollover IRA, Roth
Conversion IRA, QP, or Rollover TSA contracts.
For NQ contracts, the minimum amounts we will deduct are $100 monthly and $300
quarterly. Under Flexible Premium IRA and Flexible Premium Roth IRA contracts,
the minimum amount is $50. AIP additional contributions may be allocated to
any of the variable investment options and available fixed maturity options,
but not the account for special dollar cost averaging. You choose the day of
the month you wish to have your account debited. However, you may not choose a
date later than the 28th day of the month.
You may cancel AIP at any time by notifying our processing office. We are not
responsible for any debits made to your account before the time written notice
of cancellation is received at our processing office.
DATES AND PRICES AT WHICH CONTRACT EVENTS OCCUR
We describe below the general rules for when, and at what prices, events under
your contract will occur. Other portions of this prospectus describe
circumstances that may cause exceptions. We generally do not repeat those
exceptions below.
BUSINESS DAY
Our business day is any day the New York Stock Exchange is open for trading.
We calculate unit values for our variable investment options as of the end of
each business day. This usually is 4:00 p.m., Eastern time. Contributions will
be applied and any other transaction requests will be processed when they are
received along with all the required information.
o If your contribution, transfer, or any other transaction request, containing
all the required information, reaches us on a non-business day or after 4:00
p.m. on a business day, we will use the next business day.
o A loan request under your Rollover TSA contract will be processed on the
first business day of the month following the date on which the properly
completed loan request form is received.
o If your transaction is set to occur on the same day of the month as the
contract date and that date is the 29th, 30th or 31st of the month, then the
transaction will occur on the 1st day of the next month.
o When a charge is to be deducted on a contract date anniversary that is a
non-business day, we will deduct the charge on the next business day.
CONTRIBUTIONS AND TRANSFERS
o Contributions allocated to the variable investment options are invested at
the value next determined after the close of the business day.
o Contributions allocated to a fixed maturity option will receive the rate to
maturity in effect for that fixed maturity option on that business day.
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o Initial contributions allocated to the account for special dollar cost
averaging receive the interest rate in effect on that business day. At
certain times, we may offer the opportunity to lock in the interest rate for
an initial contribution to be received under Section 1035 exchanges and
trustee to trustee transfers. Your registered representative can provide
information or you can call our processing office.
o Transfers to or from variable investment options will be made at the value
next determined after the close of the business day.
o Transfers to a fixed maturity option will be based on the rate to maturity
in effect for that fixed maturity option on the business day of the
transfer.
ABOUT YOUR VOTING RIGHTS
As the owner of the shares of EQ Advisors Trust we have the right to vote on
certain matters involving the portfolios, such as:
o the election of trustees;
o the formal approval of independent auditors selected for EQ Advisors Trust;
or
o any other matters described in the prospectus for EQ Advisors Trust or
requiring a shareholders' vote under the Investment Company Act of 1940.
We will give contract owners the opportunity to instruct us how to vote the
number of shares attributable to their contracts if a shareholder vote is
taken. If we do not receive instructions in time from all contract owners, we
will vote the shares of a portfolio for which no instructions have been
received in the same proportion as we vote shares of that portfolio for which
we have received instructions. We will also vote any shares that we are
entitled to vote directly because of amounts we have in a portfolio in the
same proportions that contract owners vote.
VOTING RIGHTS OF OTHERS
Currently, we control EQ Advisors Trust. EQ Advisors Trust shares are sold to
our separate accounts and an affiliated qualified plan trust. In addition,
shares of EQ Advisors Trust are held by separate accounts of insurance
companies both affiliated and unaffiliated with us. Shares held by these
separate accounts will probably be voted according to the instructions of the
owners of insurance policies and contracts issued by those insurance
companies. While this will dilute the effect of the voting instructions of the
contract owners, we currently do not foresee any disadvantages because of
this. The Board of Trustees of EQ Advisors Trust intends to monitor events in
order to identify any material irreconcilable conflicts that may arise and to
determine what action, if any, should be taken in response. If we believe that
a response to any of those events insufficiently protects our contract owners,
we will see to it that appropriate action is taken.
SEPARATE ACCOUNT NO. 49 VOTING RIGHTS
If actions relating to Separate Account No. 49 require contract owner
approval, contract owners will be entitled to one vote for each unit they have
in the variable investment options. Each contract owner who has elected a
variable annuity payout option may cast the number of votes equal to the
dollar amount of reserves we are holding for that annuity in a variable
investment option divided by the annuity unit value for that option. We will
cast votes attributable to any amounts we have in the variable investment
options in the same proportion as votes cast by contract owners.
CHANGES IN APPLICABLE LAW
The voting rights we describe in this prospectus are created under applicable
federal securities laws. To the extent that those laws or the regulations
published under those laws eliminate the necessity to submit matters for
approval by persons having voting rights in separate accounts of insurance
companies, we reserve the right to proceed in accordance with those laws or
regulations.
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ABOUT OUR YEAR 2000 PROGRESS
Equitable Life relies upon various computer systems in order to administer
your contract and operate the investment options. Some of these systems belong
to service providers who are not affiliated with Equitable Life.
In 1995, Equitable Life began addressing the question of whether its computer
systems would recognize the year 2000 before, on or after January 1, 2000, and
Equitable Life has identified those of its systems critical to business
operations that were not year 2000 compliant. Equitable Life has completed the
work of modifying or replacing non-compliant systems and has confirmed,
through testing that its systems are year 2000 compliant. Equitable Life has
contacted third-party vendors and service providers to seek confirmation that
they are acting to address the year 2000 issue with the goal of avoiding any
material adverse effect on services provided to contract owners and on
operations of the investment options. All third-party vendors and service
providers considered critical to Equitable Life's business, and substantially
all vendors and service providers considered non-critical, have provided us
confirmation of their year 2000 compliance or a satisfactory plan for
compliance. If confirmation is not received from any of the remaining
non-critical vendors or service providers, the vendor or service provider will
be replaced, eliminated, or be the subject of contingency plans. Additionally,
Equitable Life has supplemented its existing business continuity and disaster
recovery plans to cover certain categories of contingencies that could arise
as a result of year 2000 related failures.
There are many risks associated with year 2000 issues, including the risk that
Equitable Life's computer systems will not operate as intended. Additionally,
there can be no assurance that the systems of third parties will be year 2000
compliant. Any significant unresolved difficulty related to the year 2000
compliance initiatives could result in an interruption in, or a failure of,
normal business operations and, accordingly, could have a material adverse
effect on our ability to administer your contract and operate the investment
options.
To the fullest extent permitted by law, the foregoing year 2000 discussion is
a "Year 2000 Readiness Disclosure" within the meaning of The Year 2000
Information and Readiness Disclosure Act (P.L. 105-271) (1998).
ABOUT LEGAL PROCEEDINGS
Equitable Life and its affiliates are parties to various legal proceedings. In
our view, none of these proceedings is likely to have a material adverse
effect upon Separate Account No. 49, our ability to meet our obligations under
the contracts, or the distribution of the contracts.
ABOUT OUR INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Equitable Life incorporated in this
prospectus by reference to the Annual Report on Form 10-K at December 31, 1998
and 1997, and for the three years ended December 31, 1998, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
TRANSFERS OF OWNERSHIP, COLLATERAL ASSIGNMENTS, LOANS, AND BORROWING
You can transfer ownership of an NQ contract at any time before annuity
payments begin. We will continue to treat you as the owner until we receive
notification of any change at our processing office. You cannot assign your NQ
contract as collateral or security for a loan. Loans are also not available
under your NQ contract. In some cases, an assignment or change of ownership
may have adverse tax consequences. See "Tax information" earlier in this
prospectus.
You cannot assign or transfer ownership of an IRA, QP, or Rollover TSA
contract except by surrender to us. Loans are not available and you cannot
assign IRA and QP contracts as security for a loan or other obligation. If the
employer that provided the funds does not restrict them, loans are available
under a Rollover TSA contract.
<PAGE>
- --------------------------------------------------------------------------------
MORE INFORMATION 71
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For limited transfers of ownership after the owner's death see "Beneficiary
continuation option for Rollover IRA and Flexible Premium IRA contracts" in
"Payment of death benefit" earlier in this prospectus. You may direct the
transfer of the values under your IRA, QP, or Rollover TSA contract to another
similar arrangement. Under federal income tax rules, in the case of such a
transfer, we will impose a withdrawal charge, if one applies.
DISTRIBUTION OF THE CONTRACTS
Equitable Distributors, Inc. ("EDI"), an indirect, wholly owned subsidiary of
Equitable Life, is the distributor of the contracts and has responsibility for
sales and marketing functions for Separate Account No. 49. EDI serves as the
principal underwriter of Separate Account No. 49. EDI also acts as distributor
for other Equitable Life annuity products with different features, expenses,
and fees. EDI is registered with the SEC as a broker-dealer and is a member of
the National Association of Securities Dealers, Inc. EDI's principal business
address is 1290 Avenue of the Americas, New York, New York 10104. Under a
distribution agreement between EDI, Equitable Life, and certain of Equitable
Life's separate accounts, including Separate Account No. 49, Equitable Life
paid EDI distribution fees of $35,452,793 for 1998, $9,566,343 for 1997, and
$87,157 for 1996, as the distributor of certain contracts, including these
contracts, and as the principal underwriter of several Equitable Life separate
accounts, including Separate Account No. 49.
The contracts will be sold by registered representatives of EDI, as well as by
affiliated and unaffiliated broker-dealers with which EDI has entered into
selling agreements. Broker-dealer sales compensation will generally not exceed
an amount equal to 7% of total contributions made under the contracts. EDI may
also receive compensation and reimbursement for its marketing services under
the terms of its distribution agreement with Equitable Life. Broker-dealers
receiving sales compensation will generally pay a portion of it to their
registered representatives as commissions related to sales of the contracts.
The offering of the contracts is intended to be continuous.
<PAGE>
- --------------------------------------------------------------------------------
72 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
9
Investment performance
- --------------------------------------------------------------------------------
We provide the following tables to show five different measurements of the
investment performance of the variable investment options and/or the
portfolios in which they invest. We include these tables because they may be
of general interest to you. THE RESULTS SHOWN REFLECT PAST PERFORMANCE. THEY
DO NOT INDICATE HOW THE VARIABLE INVESTMENT OPTIONS MAY PERFORM IN THE FUTURE.
THEY ALSO DO NOT REPRESENT THE RESULTS EARNED BY ANY PARTICULAR INVESTOR. YOUR
RESULTS WILL DIFFER.
Table 1 shows the average annual total return of the variable investment
options. Average annual total return is the annual rate of growth that would
be necessary to achieve the ending value of a contribution invested in the
variable investment options for the periods shown.
Table 2 shows the growth of a hypothetical $1,000 investment in the variable
investment options over the periods shown. Both Tables 1 and 2 take into
account all fees and charges under the contract, including the withdrawal
charge, the optional baseBUILDER benefits charge, the annual administrative
charge under Flexible Premium IRA and Flexible Premium Roth IRA contracts, but
do not reflect the charges for any applicable taxes such as premium taxes or
any applicable annuity administrative fee.
Tables 3, 4, and 5 show the rates of return of the variable investment options
on an annualized, cumulative, and year-by-year basis. These tables take into
account all fees and charges under the contract, but do not reflect the
withdrawal charge, the optional baseBUILDER benefits charge, the annual
administrative charge or the charges for any applicable taxes such as premium
taxes or any applicable annuity administrative fee. If the charges were
reflected they would effectively reduce the rates of return shown.
In all cases the results shown are based on the actual historical investment
experience of the portfolios in which the variable investment options invest.
In some cases, the results shown relate to periods when the variable
investment options and/or the contracts were not available. In those cases, we
adjusted the results of the portfolios to reflect the charges under the
contracts that would have applied had the investment options and/or contracts
been available. The contracts were first offered on May 1, 1997.
For the "Alliance" portfolios (other than EQ/Alliance Premier Growth), we have
adjusted the results prior to October 1996, when Class IB shares for these
portfolios were not available, to reflect the 12b-1 fees currently imposed.
Finally, the results shown for the Alliance Money Market and Alliance Common
Stock options for periods before March 22, 1985 reflect the results of the
variable investment options that preceded them. The "Since portfolio
inception" figures for these options are based on the date of inception of the
preceding variable investment options. We have adjusted these results to
reflect the maximum investment advisory fee payable for the portfolios, as
well as an assumed charge of 0.06% for direct operating expenses.
EQ Advisors Trust commenced operations on May 1, 1997. For periods prior to
October 18, 1999 the Alliance portfolios (other than EQ/Alliance Premier
Growth) were part of The Hudson River Trust. On October 18, 1999, these
portfolios became corresponding portfolios of EQ Advisors Trust. In each case,
the performance shown is for the indicated EQ Advisors Trust portfolio and any
predecessors that it may have had.
All rates of return presented are time-weighted and include reinvestment of
investment income, including interest and dividends.
BENCHMARKS
Tables 3 and 4 compare the performance of variable investment options to
market indices that serve as benchmarks. Market indices are not subject to any
charges for investment advisory fees, brokerage commission or other operating
expenses typically associated with a managed portfolio. Also, they do not
reflect other contract charges such as the mortality and expense risks charge,
administrative charges, or any withdrawal or optional benefit charge.
Comparisons with these benchmarks, therefore, may be of limited use. We
include them because they are widely known and may help you to understand the
universe of securities from which each portfolio is likely to select its
holdings. Benchmark data reflect the reinvestment of dividend income. The
benchmarks include:
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------
ALLIANCE MONEY MARKET: Salomon Brothers Three-Month T-Bill
Index.
ALLIANCE HIGH YIELD: Merrill Lynch High Yield Master Index.
ALLIANCE COMMON STOCK: Standard & Poor's 500 Index.
ALLIANCE AGGRESSIVE STOCK: 50% Russell 2000 Index and 50%
Standard & Poor's Mid-Cap Total Return Index.
ALLIANCE SMALL CAP GROWTH: Russell 2000 Growth Index.
EQ/ALLIANCE PREMIER GROWTH: Standard & Poor's 500 Index.
BT EQUITY 500 INDEX: Standard & Poor's 500 Index.
BT SMALL COMPANY INDEX: Russell 2000 Index.
BT INTERNATIONAL EQUITY INDEX: Morgan Stanley Capital
International Europe, Australia, Far East Index.
CAPITAL GUARDIAN U.S. EQUITY: Standard & Poor's 500 Index.
CAPITAL GUARDIAN RESEARCH: Standard & Poor's 500 Index.
CAPITAL GUARDIAN INTERNATIONAL: Morgan Stanley Capital
International Europe, Australia, Far East Index.
JPM CORE BOND: Salomon Brothers Broad Investment Grade Bond.
LAZARD LARGE CAP VALUE: Standard & Poor's 500 Index.
LAZARD SMALL CAP VALUE: Russell 2000 Index.
MFS GROWTH WITH INCOME: Standard & Poor's 500 Index.
MFS RESEARCH: Standard & Poor's 500 Index.
MFS EMERGING GROWTH COMPANIES: Russell 2000 Index.
MORGAN STANLEY EMERGING MARKETS EQUITY: Morgan Stanley
Capital International Emerging Markets Free Price Return Index.
EQ/PUTNAM GROWTH & INCOME VALUE: Standard & Poor's 500
Index.
EQ/PUTNAM INVESTORS GROWTH: Standard & Poor's 500 Index.
EQ/PUTNAM INTERNATIONAL EQUITY: Morgan Stanley Capital
International Europe, Australia, Far East Index.
- -----------------------------------------------------------------------
LIPPER SURVEY. The Lipper Variable Insurance Products Performance Analysis
Survey (Lipper Survey) records the performance of a large group of variable
annuity products, including managed separate accounts of insurance companies.
According to Lipper Analytical Services, Inc. (Lipper), the data are presented
net of investment management fees, direct operating expenses and asset-based
charges applicable under annuity contracts. Lipper data provide a more
accurate picture than market benchmarks of the Equitable Accumulator
performance relative to other variable annuity products.
<PAGE>
- --------------------------------------------------------------------------------
74 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 1
AVERAGE ANNUAL TOTAL RETURN UNDER A CONTRACT SURRENDERED ON DECEMBER 31, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
LENGTH OF INVESTMENT PERIOD
----------------------------------------------------------------
SINCE SINCE
1 3 5 10 OPTION PORTFOLIO
VARIABLE INVESTMENT OPTIONS YEAR YEARS YEARS YEARS INCEPTION* INCEPTION**
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Money Market (3.64)% 1.59% 2.40% 3.35% 0.59% 4.74%
- -------------------------------------------------------------------------------------------------------
Alliance High Yield (13.96)% 7.72% 7.28% 8.93% 1.60% 8.27%
- -------------------------------------------------------------------------------------------------------
Alliance Common Stock 20.02% 24.05% 19.18% 16.35% 17.73% 14.23%
- -------------------------------------------------------------------------------------------------------
Alliance Aggressive Stock (8.60)% 7.09% 8.76% 16.79% 0.53% 15.54%
- -------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth (13.03)% -- -- -- 5.51% 5.51%
- -------------------------------------------------------------------------------------------------------
BT Equity 500 Index 16.14% -- -- -- 16.14% 16.14%
- -------------------------------------------------------------------------------------------------------
BT Small Company Index (10.93)% -- -- -- (10.93)% (10.93)%
- -------------------------------------------------------------------------------------------------------
BT International Equity Index 11.17% -- -- -- 11.17% 11.17%
- -------------------------------------------------------------------------------------------------------
JPM Core Bond 0.26% -- -- -- 0.26% 0.26%
- -------------------------------------------------------------------------------------------------------
Lazard Large Cap Value 11.14% -- -- -- 11.14% 11.14%
- -------------------------------------------------------------------------------------------------------
Lazard Small Cap Value (15.62)% -- -- -- (15.62)% (15.62)%
- -------------------------------------------------------------------------------------------------------
MFS Research 15.13% -- -- -- 15.64% 15.64%
- -------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies 25.40% -- -- -- 24.05% 24.05%
- -------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets Equity (35.31) -- -- -- (35.31)% (28.99)%
- -------------------------------------------------------------------------------------------------------
EQ/Putnam Growth & Income Value 4.00% -- -- -- 10.08% 10.08%
- -------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth 27.15% -- -- -- 26.08% 26.08%
- -------------------------------------------------------------------------------------------------------
EQ/Putnam International Equity 10.56% -- -- --- 9.98% 9.98%
- -------------------------------------------------------------------------------------------------------
</TABLE>
* The variable investment option inception dates are: Alliance Money Market,
Alliance High Yield, Alliance Common Stock, and Alliance Aggressive Stock
(October 16, 1996); Alliance Small Cap Growth, MFS Research, MFS Emerging
Growth Companies, EQ/Putnam Growth & Income Value, EQ/Putnam Investors
Growth, and EQ/Putnam International Equity (May 1, 1997); BT Equity 500
Index, BT Small Company Index, BT International Equity Index, JPM Core
Bond, Lazard Large Cap Value, Lazard Small Cap Value, and Morgan Stanley
Emerging Markets Equity (December 31, 1997). The inception dates for the
variable investment options that became available on or after December 31,
1998, and are therefore not shown in this table are: MFS Growth with Income
(December 31, 1998); EQ/Alliance Premier Growth, Capital Guardian U.S.
Equity, Capital Guardian Research, and Capital Guardian International
(April 30, 1999).
** The inception dates for the portfolios underlying the Alliance variable
investment options shown in the tables are for portfolios of The Hudson
River Trust, the assets of which became assets of corresponding portfolios
of EQ Advisors Trust on October 18, 1999. The portfolio inception dates
are: Alliance Money Market (July 13, 1981); Alliance High Yield (January 2,
1987); Alliance Common Stock (January 13, 1976); Alliance Aggressive Stock
(January 27, 1986); Alliance Small Cap Growth, MFS Research, MFS Emerging
Growth Companies, EQ Putnam Growth & Income Value, EQ/Putnam Investors
Growth, and EQ/Putnam International Equity (May 1, 1997); BT Equity 500
Index, BT Small Company Index, BT International Equity Index, JPM Core
Bond, Lazard Large Cap Value, and Lazard Small Cap Value (December 31,
1997); and Morgan Stanley Emerging Markets Equity (August 20, 1997). The
inception dates for the portfolios that became available on or after
December 31, 1998 and are therefore not shown in the tables are: MFS Growth
with Income (December 31, 1998); EQ/Alliance Premier Growth, Capital
Guardian U.S. Equity, Capital Guardian Research, and Capital Guardian
International (April 30, 1999).
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 75
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 2
GROWTH OF $1,000 UNDER A CONTRACT SURRENDERED ON DECEMBER 31, 1998:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
LENGTH OF INVESTMENT PERIOD
-----------------------------------------------
SINCE
1 3 5 10 PORTFOLIO
VARIABLE INVESTMENT OPTIONS YEAR YEARS YEARS YEARS INCEPTION*
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance Money Market $963.60 $1,048.36 $1,126.12 $1,390.07 $2,302.95
- ---------------------------------------------------------------------------------------------------------
Alliance High Yield $860.40 $1,250.11 $1,421.32 $2,352.06 $2,593.84
- ---------------------------------------------------------------------------------------------------------
Alliance Common Stock $1,200.20 $1,908.73 $2,404.59 $4,547.90 $21,336.21
- ---------------------------------------------------------------------------------------------------------
Alliance Aggressive Stock $914.00 $1,228.21 $1,521.63 $4,719.54 $6,539.96
- ---------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth $869.70 - - - $1,113.16
- ---------------------------------------------------------------------------------------------------------
BT Equity 500 Index $1,161.40 - - - $1,161.40
- ---------------------------------------------------------------------------------------------------------
BT Small Company Index $890.70 - - - $890.70
- ---------------------------------------------------------------------------------------------------------
BT International Equity Index $1,111.70 - - - $1,111.70
- ---------------------------------------------------------------------------------------------------------
JPM Core Bond $1,002.60 - - - $1,002.60
- ---------------------------------------------------------------------------------------------------------
Lazard Large Cap Value $1,111.40 - - - $1,111.40
- ---------------------------------------------------------------------------------------------------------
Lazard Small Cap Value $843.80 - - - $843.80
- ---------------------------------------------------------------------------------------------------------
MFS Research $1,151.30 - - - $1,337.29
- ---------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies $1,254.00 - - - $1,538.76
- ---------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets Equity $646.90 - - - $504.25
- ---------------------------------------------------------------------------------------------------------
EQ/Putnam Growth & Income Value $1,040.00 - - - $1,211.78
- ---------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth $1,271.50 - - - $1,589.59
- ---------------------------------------------------------------------------------------------------------
EQ/Putnam International Equity $1,105.60 - - - $1,209.59
- ---------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------
* Portfolio inception dates are shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
76 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 3
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
SINCE
PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION*
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLIANCE MONEY MARKET 3.66% 3.68% 3.49% 3.90% -- 5.38%
- -------------------------------------------------------------------------------------------------------------
Lipper Money Market 4.84% 4.87% 4.77% 5.20% -- 6.77%
- -------------------------------------------------------------------------------------------------------------
Benchmark 5.05% 5.18% 5.11% 5.44% -- 6.76%
- -------------------------------------------------------------------------------------------------------------
ALLIANCE HIGH YIELD (6.66)% 9.57% 8.23% 9.39% -- 8.73%
- -------------------------------------------------------------------------------------------------------------
Lipper High Current Yield (0.44)% 8.21% 7.37% 9.34% -- 8.97%
- -------------------------------------------------------------------------------------------------------------
Benchmark 3.66% 9.11% 9.01% 11.08% -- 10.72%
- -------------------------------------------------------------------------------------------------------------
ALLIANCE COMMON STOCK 27.32% 25.56% 19.97% 16.74% 16.71% 14.53%
- -------------------------------------------------------------------------------------------------------------
Lipper Growth 22.86% 22.23% 18.63% 16.72% 16.30% 16.01%
- -------------------------------------------------------------------------------------------------------------
Benchmark 28.58% 28.23% 24.06% 19.21% 17.76% 15.98%
- -------------------------------------------------------------------------------------------------------------
ALLIANCE AGGRESSIVE STOCK (1.30)% 8.97% 9.67% 16.99% -- 15.88%
- -------------------------------------------------------------------------------------------------------------
Lipper Mid-Cap Growth 12.16% 16.33% 14.87% 15.44% -- 13.69%
- -------------------------------------------------------------------------------------------------------------
Benchmark 8.28% 17.77% 15.56% 16.49% -- 14.78%
- -------------------------------------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH (5.73)% -- -- -- -- 10.53%
- -------------------------------------------------------------------------------------------------------------
Lipper Small Company Growth (0.33)% -- -- -- -- 16.72%
- -------------------------------------------------------------------------------------------------------------
Benchmark 1.23% -- -- -- -- 16.58%
- -------------------------------------------------------------------------------------------------------------
BT EQUITY 500 INDEX 23.44% -- -- -- -- 23.44%
- -------------------------------------------------------------------------------------------------------------
Lipper S&P 500 Index 26.78% -- -- -- -- 26.78%
- -------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 28.58%
- -------------------------------------------------------------------------------------------------------------
BT SMALL COMPANY INDEX (3.63)% -- -- -- -- (3.63)%
- -------------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% -- -- -- -- 1.53%
- -------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- (2.54)%
- -------------------------------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX 18.47% -- -- -- -- 18.47%
- -------------------------------------------------------------------------------------------------------------
Lipper International 12.17% -- -- -- -- 12.17%
- -------------------------------------------------------------------------------------------------------------
Benchmark 20.00% -- -- -- -- 20.00%
- -------------------------------------------------------------------------------------------------------------
JPM CORE BOND 7.56% -- -- -- -- 7.56%
- -------------------------------------------------------------------------------------------------------------
Lipper Intermediate Investment Grade Debt 7.23% -- -- -- -- 7.23%
- -------------------------------------------------------------------------------------------------------------
Benchmark 8.72% -- -- -- -- 8.72%
- -------------------------------------------------------------------------------------------------------------
LAZARD LARGE CAP VALUE 18.44% -- -- -- -- 18.44%
- -------------------------------------------------------------------------------------------------------------
Lipper Capital Appreciation 24.16% -- -- -- -- 24.16%
- -------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 28.58%
- -------------------------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE (8.32)% -- -- -- -- (8.32)%
- -------------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% -- -- -- -- 1.53%
- -------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- (2.54)%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 77
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 3 (CONTINUED)
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
SINCE
PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION*
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MFS RESEARCH 22.43% -- -- -- -- 22.75%
Lipper Growth 25.82% -- -- -- -- 28.73%
Benchmark 28.58% -- -- -- -- 31.63%
MFS EMERGING GROWTH COMPANIES 32.70% -- -- -- -- 33.03%
Lipper Mid-Cap 15.97% -- -- -- -- 22.72%
Benchmark (2.54)% -- -- -- -- 14.53%
MORGAN STANLEY EMERGING MARKETS
EQUITY (28.01)% -- -- -- -- (33.62)%
Lipper Emerging Markets (30.50)% -- -- -- -- (36.28)%
Benchmark (25.34)% -- -- -- -- (28.92)%
EQ/PUTNAM GROWTH & INCOME VALUE 11.30% -- -- -- -- 16.03%
Lipper Growth & Income 15.54% -- -- -- -- 21.32%
Benchmark 28.58% -- -- -- -- 31.63%
EQ/PUTNAM INVESTORS GROWTH 34.45% -- -- -- -- 35.53%
Lipper Growth 25.82% -- -- -- -- 28.73%
Benchmark 28.58% -- -- -- -- 31.63%
EQ/PUTNAM INTERNATIONAL EQUITY 17.86% -- -- -- -- 15.94%
Lipper International 12.17% -- -- -- -- 9.06%
Benchmark 20.00% -- -- -- -- 13.43%
- -------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------
* Portfolio inception dates are shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
78 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 4
CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SINCE
PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION*
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLIANCE MONEY MARKET 3.66% 11.45% 18.71% 46.56% - 149.59%
- ---------------------------------------------------------------------------------------------------------
Lipper Money Market 4.84% 15.34% 26.25% 66.09% - 214.68%
- ---------------------------------------------------------------------------------------------------------
Benchmark 5.05% 16.35% 28.27% 69.88% - 214.45%
- ---------------------------------------------------------------------------------------------------------
ALLIANCE HIGH YIELD (6.66)% 31.56% 48.53% 145.25% - 172.86%
- ---------------------------------------------------------------------------------------------------------
Lipper High Current Yield (0.44)% 26.80% 43.00% 145.62% - 182.21%
- ---------------------------------------------------------------------------------------------------------
Benchmark 3.66% 29.90% 53.96% 186.01% - 239.69%
- ---------------------------------------------------------------------------------------------------------
ALLIANCE COMMON STOCK 27.32% 97.96% 148.48% 370.07% 2,099.77% 2,154.10%
- ---------------------------------------------------------------------------------------------------------
Lipper Growth 22.86% 84.52% 138.97% 388.00% 2,185.68% 3,490.04%
- ---------------------------------------------------------------------------------------------------------
Benchmark 28.58% 110.85% 193.91% 479.62% 2,530.43% 2,919.92%
- ---------------------------------------------------------------------------------------------------------
ALLIANCE AGGRESSIVE STOCK (1.30)% 29.40% 58.67% 380.08% - 572.32%
- ---------------------------------------------------------------------------------------------------------
Lipper Mid-Cap Growth 12.16% 58.64% 102.73% 334.88% - 448.32%
- ---------------------------------------------------------------------------------------------------------
Benchmark 8.28% 63.35% 106.12% 360.30% - 494.67%
- ---------------------------------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH (5.73)% - - - - 18.19%
- ---------------------------------------------------------------------------------------------------------
Lipper Small Company Growth (0.33)% - - - - 28.98%
- ---------------------------------------------------------------------------------------------------------
Benchmark 1.23% - - - - 29.23%
- ---------------------------------------------------------------------------------------------------------
BT EQUITY 500 INDEX 23.44% - - - - 23.44%
- ---------------------------------------------------------------------------------------------------------
Lipper S&P 500 Index 26.78% - - - - 26.78%
- ---------------------------------------------------------------------------------------------------------
Benchmark 28.58% - - - - 28.58%
- ---------------------------------------------------------------------------------------------------------
BT SMALL COMPANY INDEX (3.63)% - - - - (3.63)%
- ---------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% - - - - 1.49%
- ---------------------------------------------------------------------------------------------------------
Benchmark (2.54)% - - - - (2.54)%
- ---------------------------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX 18.47% - - - - 18.47%
- ---------------------------------------------------------------------------------------------------------
Lipper International 12.17% - - - - 12.23%
- ---------------------------------------------------------------------------------------------------------
Benchmark 20.00% - - - - 20.00%
- ---------------------------------------------------------------------------------------------------------
JPM CORE BOND 7.56% - - - - 7.56%
- ---------------------------------------------------------------------------------------------------------
Lipper Intermediate Investment
Grade Debt 7.23% - - - - 7.23%
- ---------------------------------------------------------------------------------------------------------
Benchmark 8.72% - - - - 8.72%
- ---------------------------------------------------------------------------------------------------------
LAZARD LARGE CAP VALUE 18.44% - - - - 18.44%
- ---------------------------------------------------------------------------------------------------------
Lipper Capital Appreciation 24.16% - - - - 24.09%
- ---------------------------------------------------------------------------------------------------------
Benchmark 28.58% - - - - 28.58%
- ---------------------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE (8.32)% - - - - (8.32)%
- ---------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% - - - - 1.53%
- ---------------------------------------------------------------------------------------------------------
Benchmark (2.54)% - - - - (2.54)%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 79
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 4 (CONTINUED)
CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Since
portfolio
1 year 3 years 5 years 10 years 20 years inception*
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MFS RESEARCH 22.43% -- -- -- -- 40.79%
- ----------------------------------------------------------------------------------------------------------
Lipper Growth 25.82% -- -- -- -- 52.86%
- ----------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 57.60%
- ----------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES 32.70% -- -- -- -- 60.99%
- ----------------------------------------------------------------------------------------------------------
Lipper Mid-Cap 15.97% -- -- -- -- 42.16%
- ----------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- 25.40%
- ----------------------------------------------------------------------------------------------------------
MORGAN STANLEY EMERGING
MARKETS EQUITY (28.01)% -- -- -- -- (42.83)%
- ----------------------------------------------------------------------------------------------------------
Lipper Emerging Markets (30.50)% -- -- -- -- (45.67)%
- ----------------------------------------------------------------------------------------------------------
Benchmark (25.34)% -- -- -- -- (36.71)%
- ----------------------------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME
VALUE 11.30% -- -- -- -- 28.16%
- ----------------------------------------------------------------------------------------------------------
Lipper Growth & Income 15.54% -- -- -- -- 38.49%
- ----------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 57.60%
- ----------------------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH 34.45% -- -- -- -- 66.08%
- ----------------------------------------------------------------------------------------------------------
Lipper Growth 25.82% -- -- -- -- 52.86%
- ----------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 57.60%
- ----------------------------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY 17.86% -- -- -- -- 27.98%
- ----------------------------------------------------------------------------------------------------------
Lipper International 12.17% -- -- -- -- 15.88%
- ----------------------------------------------------------------------------------------------------------
Benchmark 20.00% -- -- -- -- 23.42%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Portfolio inception dates are shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
80 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 5
YEAR-BY-YEAR RATES OF RETURN:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance Money Market 7.45% 6.50% 4.49% 1.91% 1.32%
- --------------------------------------------------------------------------------------------------------------------
Alliance High Yield 3.46% (2.70)% 22.48% 10.51% 21.19%
- --------------------------------------------------------------------------------------------------------------------
Alliance Common Stock 23.60% (9.59)% 35.69% 1.57% 22.83%
- --------------------------------------------------------------------------------------------------------------------
Alliance Aggressive Stock 41.22% 6.43% 83.89% (4.71)% 14.89%
- --------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth - - - - -
- --------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index - - - - -
- --------------------------------------------------------------------------------------------------------------------
BT Small Company Index - - - - -
- --------------------------------------------------------------------------------------------------------------------
BT International Equity Index - - - - -
- --------------------------------------------------------------------------------------------------------------------
JPM Core Bond - - - - -
- --------------------------------------------------------------------------------------------------------------------
Lazard Large Cap Value - - - - -
- --------------------------------------------------------------------------------------------------------------------
Lazard Small Cap Value - - - - -
- --------------------------------------------------------------------------------------------------------------------
MFS Research - - - - -
- --------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies - - - - -
- --------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets Equity - - - - -
- --------------------------------------------------------------------------------------------------------------------
EQ/Putnam Growth & Income Value - - - - -
- --------------------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth - - - - -
- --------------------------------------------------------------------------------------------------------------------
EQ/Putnam International Equity - - - - -
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance Money Market 2.36% 4.06% 3.64% 3.74% 3.66%
- --------------------------------------------------------------------------------------------------------------------
Alliance High Yield (4.33)% 18.01% 20.91% 16.58% (6.66)%
- --------------------------------------------------------------------------------------------------------------------
Alliance Common Stock (3.70)% 30.34% 22.28% 27.16% 27.32%
- --------------------------------------------------------------------------------------------------------------------
Alliance Aggressive Stock (5.35)% 29.54% 20.24% 9.04% (1.30)%
- --------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth - - - 25.38%+ (5.73)%
- --------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index - - - - 23.44%
- --------------------------------------------------------------------------------------------------------------------
BT Small Company Index - - - - (3.63)%
- --------------------------------------------------------------------------------------------------------------------
BT International Equity Index - - - - 18.47%
- --------------------------------------------------------------------------------------------------------------------
JPM Core Bond - - - - 7.56%
- --------------------------------------------------------------------------------------------------------------------
Lazard Large Cap Value - - - - 18.44%
- --------------------------------------------------------------------------------------------------------------------
Lazard Small Cap Value - - - - (8.32)%
- --------------------------------------------------------------------------------------------------------------------
MFS Research - - - 14.99%+ 22.43%
- --------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies - - - 21.32%+ 32.70%
- --------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets Equity - - - (20.59)%+ (28.01)%
- --------------------------------------------------------------------------------------------------------------------
EQ/Putnam Growth & Income Value - - - 15.15%+ 11.30%
- --------------------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth - - - 23.53%+ 34.45%
- --------------------------------------------------------------------------------------------------------------------
EQ/Putnam International Equity - - - 8.59%+ 17.86%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------
+ Returns for these portfolios represent less than 12 months of performance.
The returns are as of each portfolio inception date as shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 81
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMUNICATING PERFORMANCE DATA
In reports or other communications to contract owners or in advertising
material, we may describe general economic and market conditions affecting our
variable investment options and the portfolios and may compare the performance
or ranking of those options and the portfolios with:
o those of other insurance company separate accounts or mutual funds included
in the rankings prepared by Lipper Analytical Services, Inc., Morningstar,
Inc., VARDS, or similar investment services that monitor the performance of
insurance company separate accounts or mutual funds;
o other appropriate indices of investment securities and averages for peer
universes of mutual funds; or
o data developed by us derived from such indices or averages.
We also may furnish to present or prospective contract owners advertisements
or other communications that include evaluations of a variable investment
option or portfolio by nationally recognized financial publications. Examples
of such publications are:
- --------------------------------------------------------------------------------
Barron's Investment Management Weekly
Morningstar's Variable Annuity Money Management Letter
Sourcebook Investment Dealers Digest
Business Week National Underwriter
Forbes Pension & Investments
Fortune USA Today
Institutional Investor Investor's Business Daily
Money The New York Times
Kiplinger's Personal Finance The Wall Street Journal
Financial Planning The Los Angeles Times
Investment Adviser The Chicago Tribune
- --------------------------------------------------------------------------------
Lipper compiles performance data for peer universes of funds with similar
investment objectives in its Lipper Survey. Morningstar, Inc. compiles similar
data in the Morningstar Variable Annuity/Life Report (Morningstar Report).
The Lipper Survey records performance data as reported to it by over 800
mutual funds underlying variable annuity and life insurance products. It
divides these actively managed portfolios into 25 categories by portfolio
objectives. The Lipper Survey contains two different universes, which reflect
different types of fees in performance data:
o The "separate account" universe reports performance data net of investment
management fees, direct operating expenses and asset-based charges
applicable under variable life and annuity contracts, and
o The "mutual fund" universe reports performance net only of investment
management fees and direct operating expenses, and therefore reflects only
charges that relate to the underlying mutual fund.
The Morningstar Variable Annuity/Life Report consists of nearly 700 variable
life and annuity funds, all of which report their data net of investment
management fees, direct operating expenses and separate account level charges.
VARDS is a monthly reporting service that monitors approximately 2,500
variable life and variable annuity funds on performance and account
information.
YIELD INFORMATION
Current yield for the Alliance Money Market option will be based on net
changes in a hypothetical investment over a given seven-day period, exclusive
of capital changes, and then "annualized" (assuming that the same seven-day
result would occur each week for 52 weeks). Current yield for the Alliance
High Yield option will be based on net changes in a hypothetical investment
over a given 30-day period, exclusive of capital changes, and then
"annualized" (assuming that the same 30-day result would occur each month for
12 months).
"Effective yield" is calculated in a similar manner, but when annualized, any
income earned by the investment is assumed to be reinvested. The "effective
yield" will be slightly higher than the "current yield" because any earnings
are compounded weekly for the Alliance Money Market option. The current yields
and effective yields assume the deduction of all contract charges and expenses
other than the withdrawal charge, the optional baseBUILDER benefits charge,
the annual administrative charge, and any charge for
<PAGE>
- --------------------------------------------------------------------------------
82 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
taxes such as premium tax. The yields and effective yields for the Alliance
Money Market option, when used for the special dollar cost averaging program,
assume that no contract charges are deducted. For more information, see "Yield
Information for the Alliance Money Market Option and Alliance High Yield
Option" in the SAI.
<PAGE>
- --------------------------------------------------------------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 83
- --------------------------------------------------------------------------------
10
Incorporation of certain documents by reference
- --------------------------------------------------------------------------------
Equitable Life's annual report on Form 10-K for the year ended December 31,
1998, a current report on Form 8-K dated September 1, 1999, and a quarterly
report on Form 10-Q for the quarter ended June 30, 1999, are considered to be
a part of this prospectus because they are incorporated by reference.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the
SEC under the Securities Exchange Act of 1934 ("Exchange Act") will be
considered to become part of this prospectus because they are incorporated by
reference.
Any statement contained in a document that is, or becomes part of this
prospectus, will be considered changed or replaced for purposes of this
prospectus if a statement contained in this prospectus changes or is replaced.
Any statement that is considered to be a part of this prospectus because of
its incorporation will be considered changed or replaced for the purpose of
this prospectus if a statement contained in any other subsequently filed
document that is considered to be part of this prospectus changes or replaces
that statement. After that, only the statement that is changed or replaced
will be considered to be part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q, electronically according to
EDGAR under CIK No. 0000727920. The SEC maintains a Web site that contains
reports, proxy and information statements, and other information regarding
registrants that file electronically with the SEC. The address of the site is
http://www.sec.gov.
Upon written or oral request, we will provide, free of charge, to each person
to whom this prospectus is delivered, a copy of any or all of the documents
considered to be part of this prospectus because they are incorporated herein.
This does not include exhibits not specifically incorporated by reference into
the text of such documents. Requests for documents should be directed to The
Equitable Life Assurance Society of the United States, 1290 Avenue of the
Americas, New York, New York 10104. Attention: Corporate Secretary (telephone:
(212) 554-1234).
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX I: CONDENSED FINANCIAL INFORMATION A-1
- --------------------------------------------------------------------------------
Appendix I: Condensed financial information
- --------------------------------------------------------------------------------
UNIT VALUES AND NUMBER OF UNITS OUTSTANDING AT YEAR END FOR EACH VARIABLE
INVESTMENT OPTION
- --------------------------------------------------------------------------------
FOR THE YEARS ENDING
------------------------------------
DEC. 31, 1997 DEC. 31, 1998
- --------------------------------------------------------------------------------
ALLIANCE MONEY MARKET
- --------------------------------------------------------------------------------
Unit value $25.00 $25.92
- --------------------------------------------------------------------------------
Number of units outstanding (000s) 1,153 5,158
- --------------------------------------------------------------------------------
ALLIANCE HIGH YIELD
- --------------------------------------------------------------------------------
Unit value $29.96 $27.96
- --------------------------------------------------------------------------------
Number of units outstanding (000s) 1,256 4,521
- --------------------------------------------------------------------------------
ALLIANCE COMMON STOCK
- --------------------------------------------------------------------------------
Unit value $186.29 $237.18
- --------------------------------------------------------------------------------
Number of units outstanding (000s) 434 1,542
- --------------------------------------------------------------------------------
ALLIANCE AGGRESSIVE STOCK
- --------------------------------------------------------------------------------
Unit value $70.28 $69.37
- --------------------------------------------------------------------------------
Number of units outstanding (000s) 380 939
- --------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH
- --------------------------------------------------------------------------------
Unit value $12.54 $11.82
- --------------------------------------------------------------------------------
Number of units outstanding (000s) 2,521 6,101
- --------------------------------------------------------------------------------
BT EQUITY 500 INDEX
- --------------------------------------------------------------------------------
Unit value $10.00 $12.34
- --------------------------------------------------------------------------------
Number of units outstanding (000s) - 12,279
- --------------------------------------------------------------------------------
BT SMALL COMPANY INDEX
- --------------------------------------------------------------------------------
Unit value $10.00 $9.64
- --------------------------------------------------------------------------------
Number of units outstanding (000s) - 1,610
- --------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX
- --------------------------------------------------------------------------------
Unit value $10.00 $11.85
- --------------------------------------------------------------------------------
Number of units outstanding (000s) - 1,827
- --------------------------------------------------------------------------------
JPM CORE BOND
- --------------------------------------------------------------------------------
Unit value $10.00 $10.76
- --------------------------------------------------------------------------------
Number of units outstanding (000s) - 8,661
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
A-2 APPENDIX I: CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDING
---------------------------------------------
DEC. 31, 1997 DEC. 31, 1998
- ----------------------------------------------------------------------------------------------------------------------
LAZARD LARGE CAP VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Unit value $10.00 $11.84
- ----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) - 5,696
- ----------------------------------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE
- ----------------------------------------------------------------------------------------------------------------------
Unit value $10.00 $9.17
- ----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) - 4,733
- ----------------------------------------------------------------------------------------------------------------------
MFS RESEARCH
- ----------------------------------------------------------------------------------------------------------------------
Unit value $11.50 $14.08
- ----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 5,257 14,913
- ----------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES
- ----------------------------------------------------------------------------------------------------------------------
Unit value $12.13 $16.10
- ----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 3,327 9,117
- ----------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY EMERGING MARKETS EQUITY
- ----------------------------------------------------------------------------------------------------------------------
Unit value $7.94 $5.72
- ----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) - 1,805
- ----------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE
- ----------------------------------------------------------------------------------------------------------------------
Unit value $11.52 $12.82
- ----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 8,113 24,343
- ----------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH
- ----------------------------------------------------------------------------------------------------------------------
Unit value $12.35 $16.61
- ----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 2,581 10,072
- ----------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY
- ----------------------------------------------------------------------------------------------------------------------
Unit value $10.86 $12.80
- ----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 4,609 10,607
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX II: PURCHASE CONSIDERATIONS FOR QP CONTRACTS B-1
- --------------------------------------------------------------------------------
Appendix II: Purchase considerations for QP contracts
- --------------------------------------------------------------------------------
Trustees who are considering the purchase of an Equitable Accumulator QP
contract should discuss with their tax advisers whether this is an appropriate
investment vehicle for the employer's plan. Trustees should consider whether the
plan provisions permit the investment of plan assets in the QP contract, the
distribution of such an annuity, the purchase of the guaranteed minimum income
benefit, and the payment of death benefits in accordance with the requirements
of the federal income tax rules. The QP contract and this prospectus should be
reviewed in full, and the following factors, among others, should be noted.
Assuming continued plan qualification and operation, earnings on qualified plan
assets will accumulate value on a tax-deferred basis even if the plan is not
funded by the Equitable Accumulator QP contract or another annuity. Therefore,
you should purchase an Equitable Accumulator QP contract to fund a plan for the
contract's features and benefits other than tax deferral. This QP contract
accepts transfer contributions only and not regular, ongoing payroll
contributions. For 401(k) plans under defined contribution plans, no employee
after-tax contributions are accepted.
Under defined benefit plans, we will not accept rollovers from a defined
contribution plan to a defined benefit plan. We will only accept transfers from
a defined benefit plan or a change of investment vehicles in the plan. For
defined benefit plans, the maximum percentage of actuarial value of the plan
participant/employee's normal retirement benefit that can be funded by a QP
contract is 80%. The account value under a QP contract may at any time be more
or less than the lump sum actuarial equivalent of the accrued benefit for a
defined benefit plan participant/employee. Equitable Life does not guarantee
that the account value under a QP contract will at any time equal the actuarial
value of 80% of a participant/employee's accrued benefit. If overfunding of a
plan occurs, withdrawals from the QP contract may be required. A withdrawal
charge and/or market value adjustment may apply.
Further, Equitable Life will not perform or provide any plan recordkeeping
services with respect to the QP contracts. The plan's administrator will be
solely responsible for performing or providing for all such services. There is
no loan feature offered under the QP contracts, so if the plan provides for
loans and a participant/employee takes a loan from the plan, other plan assets
must be used as the source of the loan and any loan repayments must be credited
to other investment vehicles and/or accounts available under the plan.
Given that required minimum distributions must generally commence from the plan
for annuitants after age 70 1/2, trustees should consider whether the QP
contract is an appropriate purchase for annuitants approaching or over age
70 1/2.
Finally, because the method of purchasing the QP contract and the features of
the QP contract may appeal more to plan participants/employees who are older and
tend to be highly paid, and because certain features of the QP contract are
available only to plan participants/employees who meet certain minimum and/or
maximum age requirements, plan trustees should discuss with their advisers
whether the purchase of the QP contract would cause the plan to engage in
prohibited discrimination in contributions, benefits or otherwise.
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX III: MARKET VALUE ADJUSTMENT EXAMPLE C-1
- --------------------------------------------------------------------------------
Appendix III: Market value adjustment example
- --------------------------------------------------------------------------------
The example below shows how the market value adjustment would be determined and
how it would be applied to a withdrawal, assuming that $100,000 was allocated on
February 15, 2000 to a fixed maturity option with a maturity date of February
15, 2009 (nine years later) at a rate to maturity of 7.00%, resulting in a
maturity value at the maturity date of $183,846. We further assume that a
withdrawal of $50,000 is made four years later on February 15, 2004.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
ASSUMED RATE TO MATURITY ON FEBRUARY 15, 2004
------------------------------------------------
5.00% 9.00%
- --------------------------------------------------------------------------------------------------------------
AS OF FEBRUARY 15, 2004 (BEFORE WITHDRAWAL)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(1) Market adjusted amount $144,048 $ 119,487
- --------------------------------------------------------------------------------------------------------------
(2) Fixed maturity amount $131,080 $ 131,080
- --------------------------------------------------------------------------------------------------------------
(3) Market value adjustment:
(1) - (2) $ 12,968 $ (11,593)
- --------------------------------------------------------------------------------------------------------------
ON FEBRUARY 15, 2004 (AFTER WITHDRAWAL)
- --------------------------------------------------------------------------------------------------------------
(4) Portion of market value adjustment associated with withdrawal:
(3) x [$50,000/(1)] $ 4,501 $ (4,851)
- --------------------------------------------------------------------------------------------------------------
(5) Reduction in fixed maturity amount:
[$50,000 - (4)] $ 45,499 $ 54,851
- --------------------------------------------------------------------------------------------------------------
(6) Fixed maturity amount: (2) - (5) $ 85,581 $ 76,229
- --------------------------------------------------------------------------------------------------------------
(7) Maturity value $ 120,032 $ 106,915
- --------------------------------------------------------------------------------------------------------------
(8) Market adjusted amount of (7) $ 94,048 $ 69,487
- --------------------------------------------------------------------------------------------------------------
</TABLE>
You should note that under this example if a withdrawal is made when rates have
increased from 7.00% to 9.00% (right column), a portion of a negative market
value adjustment is realized. On the other hand, if a withdrawal is made when
rates have decreased from 7.00% to 5.00% (left column), a portion of a positive
market value adjustment is realized.
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX IV: GUARANTEED MINIMUM DEATH BENEFIT EXAMPLE D-1
- --------------------------------------------------------------------------------
Appendix IV: Guaranteed minimum death benefit example
- --------------------------------------------------------------------------------
The death benefit under the contracts is equal to the account value or, if
greater, the guaranteed minimum death benefit.
The following illustrates the guaranteed minimum death benefit calculation.
Assuming $100,000 is allocated to the variable investment options (with no
allocation to the Alliance Money Market option or the fixed maturity options),
no additional contributions, no transfers and no withdrawals, and no loans under
a Rollover TSA contract, the guaranteed minimum death benefit for an annuitant
age 45 would be calculated as follows:
- --------------------------------------------------------------------------------
END OF 5% ROLL UP TO AGE 80 ANNUAL RATCHET TO AGE 80
CONTRACT GUARANTEED MINIMUM GUARANTEED MINIMUM
YEAR ACCOUNT VALUE DEATH BENEFIT(1) DEATH BENEFIT
- --------------------------------------------------------------------------------
1 $105,000 $105,000(1) $105,000(3)
2 $115,500 $110,250(2) $115,500(3)
3 $129,360 $115,763(2) $129,360(3)
4 $103,488 $121,551(1) $129,360(4)
5 $113,837 $127,628(1) $129,360(4)
6 $127,497 $134,010(1) $129,360(4)
7 $127,497 $140,710(1) $129,360(4)
- --------------------------------------------------------------------------------
The account values for contract years 1 through 7 are based on hypothetical
rates of return of 5.00%, 10.00%, 12.00%, (20.00)%, 10.00%, 12.00% and 0.00%. We
are using these rates solely to illustrate how the benefit is determined. The
return rates bear no relationship to past or future investment results.
5% ROLL UP TO AGE 80
(1) At the end of contract year 1, and again at the end of contract years 4
through 7, the death benefit will be equal to the guaranteed minimum death
benefit.
(2) At the end of contract years 2 and 3, the death benefit will be equal to the
current account value since it is higher than the current guaranteed minimum
death benefit.
ANNUAL RATCHET TO AGE 80
(3) At the end of contract years 1 through 3, the guaranteed minimum death
benefit is equal to the current account value.
(4) At the end of contract years 4 through 7, the guaranteed minimum death
benefit is equal to the guaranteed minimum death benefit at the end of the
prior year since it is equal to or higher than the current account value.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Statement of additional information
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
Unit Values 2
Annuity Unit Values 2
Custodian and Independent Accountants 3
Yield Information for the Alliance Money
Market Option and Alliance High Yield Option 3
Long-Term Market Trends 5
Key Factors in Retirement Planning 8
Financial Statements 12
HOW TO OBTAIN AN EQUITABLE ACCUMULATOR STATEMENT OF ADDITIONAL INFORMATION FOR
SEPARATE ACCOUNT NO. 49
Send this request form to:
Equitable Accumulator
P.O. Box 1547
Secaucus, NJ 07096-1547
Please send me an Equitable Accumulator SAI for Separate Account No. 49 dated
October 18, 1999.
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
City State Zip
(SAI 1A(10/99))
<PAGE>
Equitable Accumulator(SM)
A combination variable and fixed deferred annuity contract
Please read and keep this prospectus for future reference. It contains important
information that you should know before purchasing or taking any other action
under your contract. Also, at the end of this prospectus you will find attached
the prospectus for EQ Advisors Trust, which contains important information about
its portfolios.
PROSPECTUS DATED OCTOBER 18, 1999
- --------------------------------------------------------------------------------
WHAT IS THE EQUITABLE ACCUMULATOR?
Equitable Accumulator is a deferred annuity contract issued by THE EQUITABLE
LIFE ASSURANCE SOCIETY OF THE UNITED STATES. It provides for the accumulation of
retirement savings and for income. The contract offers income and death benefit
protection. It also offers a number of payout options. You invest to accumulate
value on a tax-deferred basis in one or more of our variable investment options,
fixed maturity options, or the account for special dollar cost averaging
("investment options").
------------------------------------------------------------------------------
Variable investment options
------------------------------------------------------------------------------
o Alliance Money Market o JPM Core Bond
o Alliance High Yield o Lazard Large Cap Value
o Alliance Common Stock o Lazard Small Cap Value
o Alliance Aggressive Stock o MFS Growth with Income
o Alliance Small Cap Growth o MFS Research
o EQ/Alliance Premier Growth o MFS Emerging Growth
o BT Equity 500 Index Companies
o BT Small Company Index o Merrill Lynch Basic Value Equity
o BT International Equity Index o Merrill Lynch World Strategy
o Capital Guardian U.S. Equity o Morgan Stanley Emerging
o Capital Guardian Research Markets Equity
o Capital Guardian International o EQ/Putnam Growth & Income
o EQ/Evergreen Value
o EQ/Evergreen Foundation o EQ/Putnam Investors Growth
o EQ/Putnam International Equity
------------------------------------------------------------------------------
You may allocate amounts to any of the variable investment options. Each
variable investment option is a subaccount of our Separate Account No. 49.
Each variable investment option, in turn, invests in a corresponding
securities portfolio of EQ Advisors Trust. Your investment results in a
variable investment option will depend on the investment performance of the
related portfolio.
FIXED MATURITY OPTIONS. You may allocate amounts to one or more fixed maturity
options. These amounts will receive a fixed rate of interest for a specified
period. Interest is earned at a guaranteed rate set by us. We make a market
value adjustment (up or down) if you make transfers or withdrawals from a
fixed maturity option before its maturity date.
ACCOUNT FOR SPECIAL DOLLAR COST AVERAGING. This account also pays fixed
interest at guaranteed rates.
TYPES OF CONTRACTS. We offer the contracts for use as:
o A nonqualified annuity ("NQ") for after-tax contributions only.
o An individual retirement annuity ("IRA"), either traditional IRA or Roth
IRA.
We offer two versions of the traditional IRA: "Rollover IRA" and "Flexible
Premium IRA." We also offer two versions of the Roth IRA: "Roth Conversion
IRA" and "Flexible Premium Roth IRA."
o An annuity that is an investment vehicle for a qualified defined
contribution or defined benefit plan ("QP").
o An Internal Revenue Code Section 403(b) Tax-Sheltered Annuity ("TSA") --
("Rollover TSA").
A contribution of at least $5,000 is required to purchase an NQ, Rollover IRA,
Roth Conversion IRA, QP, or Rollover TSA contract. For Flexible Premium IRA or
Flexible Premium Roth IRA contracts, we require a contribution of $2,000 to
purchase a contract.
Registration statements relating to this offering have been filed with the
Securities and Exchange Commission ("SEC"). The statement of additional
information ("SAI") dated October 18, 1999 is a part of one of the
registration statements. The SAI is available free of charge. You may request
one by writing to our processing office or calling 1-800-789-7771. The SAI has
been incorporated by reference into this prospectus. This prospectus and the
SAI can also be obtained from the SEC's Web site at http://www.sec.gov. The
table of contents for the SAI appears at the back of this prospectus.
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THE CONTRACTS ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT
BANK GUARANTEED. THEY ARE SUBJECT TO INVESTMENT RISKS AND POSSIBLE LOSS OF
PRINCIPAL.
<PAGE>
- --------------------------------------------------------------------------------
2 CONTENTS OF THIS PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Contents of this prospectus
EQUITABLE ACCUMULATOR(SM)
- ------------------------------------------------------------------------
Index of key words and phrases 4
Who is Equitable Life? 5
How to reach us 6
Equitable Accumulator at a glance -- key features 8
- ------------------------------------------------------------------------
FEE TABLE 11
- ------------------------------------------------------------------------
Examples 14
Condensed financial information 15
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
1
CONTRACT FEATURES AND BENEFITS 16
- ------------------------------------------------------------------------
How you can purchase and contribute to your contract 16
Owner and annuitant requirements 20
How you can make your contributions 20
What are your investment options under the contract? 20
Allocating your contributions 24
Our baseBUILDER option 25
Guaranteed minimum death benefit 28
Your right to cancel within a certain number of days 29
- ------------------------------------------------------------------------
2
DETERMINING YOUR CONTRACT'S VALUE 30
- ------------------------------------------------------------------------
Your account value 30
Your contract's value in the variable investment options 30
Your contract's value in the fixed maturity options 30
Your contract's value in the account for special dollar
cost averaging 30
- --------------------------------------------------------------------------------
"We," "our," and "us" refer to Equitable Life.
When we address the reader of this prospectus with words such as "you" and
"your," we mean the person who has the right or responsibility that the
prospectus is discussing at that point. This is usually the contract owner.
When we use the word "contract" it also includes certificates that are issued
under group contracts in some states.
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS OF THIS PROSPECTUS 3
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------
3
TRANSFERRING YOUR MONEY AMONG
INVESTMENT OPTIONS 31
- ------------------------------------------------------------------------
Transferring your account value 31
Rebalancing your account value 31
- ------------------------------------------------------------------------
4
ACCESSING YOUR MONEY 32
- ------------------------------------------------------------------------
Withdrawing your account value 32
How withdrawals are taken from your account value 33
How withdrawals affect your guaranteed minimum
income benefit and guaranteed minimum death
benefit 33
Loans under Rollover TSA contracts 34
Surrendering your contract to receive its cash value 35
When to expect payments 35
Choosing your annuity payout options 36
- ------------------------------------------------------------------------
5
CHARGES AND EXPENSES 39
- ------------------------------------------------------------------------
Charges that Equitable Life deducts 39
Charges that EQ Advisors Trust deducts 41
Group or sponsored arrangements 41
Other distribution arrangements 42
- ------------------------------------------------------------------------
6
PAYMENT OF DEATH BENEFIT 43
- ------------------------------------------------------------------------
Your beneficiary and payment of benefit 43
How death benefit payment is made 44
Beneficiary continuation option for Rollover IRA and
Flexible Premium IRA contracts 44
- ------------------------------------------------------------------------
7
TAX INFORMATION 46
- ------------------------------------------------------------------------
Overview 46
Transfers among investment options 46
Taxation of nonqualified annuities 46
Special rules for NQ contracts issued in Puerto Rico 47
Individual retirement arrangements (IRAs) 48
Special rules for nonqualified contracts in qualified plans 58
Tax-Sheltered Annuity contracts (TSAs) 58
Federal and state income tax withholding and
information reporting 63
Impact of taxes to Equitable Life 64
- ------------------------------------------------------------------------
8
MORE INFORMATION 65
- ------------------------------------------------------------------------
About our Separate Account No. 49 65
About EQ Advisors Trust 65
About our fixed maturity options 66
About the general account 67
About other methods of payment 67
Dates and prices at which contract events occur 68
About your voting rights 69
About our year 2000 progress 70
About legal proceedings 70
About our independent accountants 70
Transfers of ownership, collateral assignments, loans,
and borrowing 70
Distribution of the contracts 71
- ------------------------------------------------------------------------
9
INVESTMENT PERFORMANCE 72
- ------------------------------------------------------------------------
Benchmarks 72
Communicating performance data 81
- ------------------------------------------------------------------------
10
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE 83
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
APPENDICES
- ------------------------------------------------------------------------
I -- Condensed financial information A-1
II -- Purchase considerations for QP contracts B-1
III -- Market value adjustment example C-1
IV -- Guaranteed minimum death benefit example D-1
- ------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
- ------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
4 INDEX OF KEY WORDS AND PHRASES
- --------------------------------------------------------------------------------
Index of key words and phrases
- --------------------------------------------------------------------------------
This index should help you locate more information on the terms used in this
prospectus.
Page
account for special dollar cost
averaging 23
account value 30
annuitant 16
annuity payout options 36
baseBUILDER 25
beneficiary 43
benefit base 26
business day 68
cash value 30
conduit IRA 52
contract date 9
contract date anniversary 9
contract year 9
contributions to Roth IRAs 55
regular contributions 55
rollover contributions 56
conversion contributions 56
direct custodian-to-custodian
transfers 56
contributions to traditional IRAs 48
regular contributions 49
rollover contributions 51
direct custodian-to-custodian
transfers 51
ERISA 34
fixed maturity amount 22
fixed maturity options 22
Flexible Premium IRA cover
Flexible Premium Roth IRA cover
guaranteed minimum death benefit 28
guaranteed minimum income benefit 26
IRA 48
IRS 46
investment options 20
loan reserve account 35
market adjusted amount 22
market value adjustment 23
maturity value 22
NQ 46
participant 20
portfolio cover
processing office 6
QP 58
rate to maturity 22
Required Beginning Date 52
Rollover IRA cover
Rollover TSA cover
Roth Conversion IRA cover
Roth IRA 55
SAI cover
SEC cover
TOPS 6
TSA 58
traditional IRA 48
unit 30
variable investment options 20
To make this prospectus easier to read, we sometimes use different words than in
the contract or supplemental materials. This is illustrated below. Although we
use different words, they have the same meaning in this prospectus as in the
contract or supplemental materials. Your registered representative can provide
further explanation about your contract.
- --------------------------------------------------------------------------------
Prospectus Contract or Supplemental Materials
- --------------------------------------------------------------------------------
fixed maturity options Guarantee Periods (Guaranteed Fixed
Interest Accounts in supplemental materials)
variable investment options Investment Funds
account value Annuity Account Value
rate to maturity Guaranteed Rates
unit Accumulation Unit
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WHO IS EQUITABLE LIFE? 5
- --------------------------------------------------------------------------------
Who is Equitable Life?
- --------------------------------------------------------------------------------
We are The Equitable Life Assurance Society of the United States ("Equitable
Life"), a New York stock life insurance corporation. We have been doing business
since 1859. Equitable Life is a subsidiary of AXA Financial, Inc. (previously,
The Equitable Companies Incorporated). The majority shareholder of AXA
Financial, Inc. is AXA, a French holding company for an international group of
insurance and related financial services companies. As a majority shareholder,
and under its other arrangements with Equitable Life and Equitable Life's
parent, AXA exercises significant influence over the operations and capital
structure of Equitable Life and its parent. No company other than Equitable
Life, however, has any legal responsibility to pay amounts that Equitable Life
owes under the contract.
AXA Financial, Inc. and its consolidated subsidiaries managed approximately
$390.8 billion in assets as of June 30, 1999. For over 100 years Equitable Life
has been among the largest insurance companies in the United States. We are
licensed to sell life insurance and annuities in all fifty states, the District
of Columbia, Puerto Rico, and the U.S. Virgin Islands. Our home office is
located at 1290 Avenue of the Americas, New York, N.Y. 10104.
<PAGE>
- --------------------------------------------------------------------------------
6 WHO IS EQUITABLE LIFE?
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOW TO REACH US
You may communicate with our processing office as listed below for any of the
following purposes:
- --------------------------------------------------------------------------------
FOR CONTRIBUTIONS SENT BY REGULAR MAIL:
- --------------------------------------------------------------------------------
Equitable Accumulator
P.O. Box 13014
Newark, NJ 07188-0014
- --------------------------------------------------------------------------------
FOR CONTRIBUTIONS SENT BY EXPRESS DELIVERY:
- --------------------------------------------------------------------------------
Equitable Accumulator
c/o Bank One, N.A.
300 Harmon Meadow Boulevard, 3rd Floor
Attn: Box 13014
Secaucus, NJ 07094
- --------------------------------------------------------------------------------
FOR ALL OTHER COMMUNICATIONS (E.G.,
REQUESTS FOR TRANSFERS, WITHDRAWALS, OR
REQUIRED NOTICES) SENT BY REGULAR MAIL:
- --------------------------------------------------------------------------------
Equitable Accumulator
P.O. Box 1547
Secaucus, NJ 07096-1547
- --------------------------------------------------------------------------------
FOR ALL OTHER COMMUNICATIONS (E.G., REQUESTS FOR TRANSFERS, WITHDRAWALS, OR
REQUIRED NOTICES) SENT BY EXPRESS DELIVERY:
- --------------------------------------------------------------------------------
Equitable Accumulator
200 Plaza Drive, 4th Floor
Secaucus, NJ 07094
- --------------------------------------------------------------------------------
REPORTS WE PROVIDE:
- --------------------------------------------------------------------------------
o written confirmation of financial transactions;
o statement of your contract values at the close of each calendar quarter
(four per year); and
o annual statement of your contract values as of the close of the contract
year.
- --------------------------------------------------------------------------------
TELEPHONE OPERATED PROGRAM SUPPORT
("TOPS") SYSTEM:
- --------------------------------------------------------------------------------
TOPS is designed to provide you with up-to-date information via touch-tone
telephone. You can obtain information on:
o your current account value;
o your current allocation percentages;
o the number of units you have in the variable investment options;
o rates to maturity for the fixed maturity options; and
o the daily unit values for the variable investment options.
You can also:
o change your allocation percentages and/or transfer among the investment
options; and
o obtain or change your personal identification number (PIN).
TOPS is normally available seven days a week, 24 hours a day, by calling toll
free 1-888-909-7770. Of course, for reasons beyond our control, the service may
sometimes be unavailable.
We have established procedures to reasonably confirm that the instructions
communicated by telephone are genuine. For example, we will require certain
personal identification information before we will act on telephone instructions
and we will provide written confirmation of your transfers. We will not be
liable for following telephone instructions we reasonably believe to be genuine.
- --------------------------------------------------------------------------------
BY INTERNET:
- --------------------------------------------------------------------------------
You can also access information about your contract on the Internet. Please
visit our Web site at http://www.equitable.com, and click on EQAccess.
<PAGE>
- --------------------------------------------------------------------------------
WHO IS EQUITABLE LIFE? 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CUSTOMER SERVICE REPRESENTATIVE:
- --------------------------------------------------------------------------------
You may also use our toll-free number (1-800-789-7771) to speak with one of our
customer service representatives. Our customer service representatives are
available on any business day from 8:30 a.m. until 5:30 p.m., Eastern time.
You should send all contributions, notices, and requests to our processing
office at the address above.
WE REQUIRE THAT THE FOLLOWING TYPES OF COMMUNICATIONS BE ON SPECIFIC FORMS WE
PROVIDE FOR THAT PURPOSE:
(1) authorization for telephone transfers by your registered representative;
(2) conversion of a traditional IRA contract to a Roth Conversion IRA or
Flexible Premium Roth IRA contract;
(3) election of the automatic investment program;
(4) election of the rebalancing program;
(5) requests for loans under Rollover TSA contracts;
(6) spousal consent for loans under Rollover TSA contracts;
(7) contract surrender and withdrawal requests;
(8) tax withholding election; and
(9) election of the beneficiary continuation option.
WE ALSO HAVE SPECIFIC FORMS THAT WE RECOMMEND YOU USE FOR THE FOLLOWING TYPES OF
REQUESTS:
(1) address changes;
(2) beneficiary changes;
(3) transfers between investment options; and
(4) requests to exercise your guaranteed minimum income benefit.
TO CANCEL OR CHANGE ANY OF THE FOLLOWING WE REQUIRE WRITTEN NOTIFICATION
GENERALLY AT LEAST SEVEN CALENDAR DAYS BEFORE THE NEXT SCHEDULED TRANSACTION:
(1) automatic investment program;
(2) general dollar cost averaging;
(3) rebalancing;
(4) special dollar cost averaging;
(5) substantially equal withdrawals;
(6) systematic withdrawals; and
(7) the date annuity payments are to begin.
You must sign and date all these requests. Any written request that is not on
one of our forms must include your name and your contract number along with
adequate details about the notice you wish to give or the action you wish us to
take.
SIGNATURES:
The proper person to sign forms, notices and requests would normally be the
owner. If there are joint owners both must sign.
<PAGE>
- --------------------------------------------------------------------------------
8 EQUITABLE ACCUMULATOR AT A GLANCE -- KEY FEATURES
- --------------------------------------------------------------------------------
Equitable Accumulator at a glance -- key features
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PROFESSIONAL Equitable Accumulator's variable investment options invest in 26 different portfolios
INVESTMENT managed by professional investment advisers.
MANAGEMENT
- --------------------------------------------------------------------------------------------------------------------------
FIXED MATURITY o 10 fixed maturity options with maturities ranging from approximately 1 to 10 years.
OPTIONS o Each fixed maturity option offers a guarantee of principal and interest rate if you hold
it to maturity.
--------------------------------------------------------------------------------------------
If you make withdrawals or transfers from a fixed maturity option before maturity, there
will be a market value adjustment due to differences in interest rates. This may increase or
decrease any value that you have left in that fixed maturity option. If you surrender your
contract, a market value adjustment may also apply.
- --------------------------------------------------------------------------------------------------------------------------
ACCOUNT FOR SPECIAL DOLLAR Available for dollar cost averaging all or a portion of your initial contribution.
COST AVERAGING
- --------------------------------------------------------------------------------------------------------------------------
TAX ADVANTAGES o On earnings inside the No tax on any dividends, interest or capital gains until you
contract make withdrawals from your contract or receive annuity
payments.
--------------------------------------------------------------------------------------------
o On transfers inside the No tax on transfers among investment options.
contract
--------------------------------------------------------------------------------------------
If you are buying a contract to fund a retirement plan that already provides tax deferral
under sections of the Internal Revenue Code (IRA, QP, and Rollover TSA), you should do so
for the contract's features and benefits other than tax deferral. In such situations, the
tax deferral of the contract does not provide additional benefits.
- --------------------------------------------------------------------------------------------------------------------------
baseBUILDER(R) baseBUILDER combines a guaranteed minimum income benefit with a guaranteed minimum
PROTECTION death benefit. This optional feature provides income protection for you while the
annuitant lives, as well as a death benefit for the beneficiary should the annuitant die.
- --------------------------------------------------------------------------------------------------------------------------
CONTRIBUTION AMOUNTS o NQ, Rollover IRA, Roth Conversion IRA, QP, and Rollover TSA contracts
o Initial minimum: $5,000
o Additional minimum: $1,000
$100 monthly and $300 quarterly under our automatic
investment program (NQ contracts)
--------------------------------------------------------------------------------------------
o Flexible Premium IRA and Flexible Premium Roth IRA contracts
o Initial minimum: $2,000
o Additional minimum: $50 ($50 under our automatic investment program)
--------------------------------------------------------------------------------------------
Maximum contribution limitations may apply.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
EQUITABLE ACCUMULATOR AT A GLANCE -- KEY FEATURES 9
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
ACCESS TO YOUR MONEY o Lump sum withdrawals
o Several withdrawal options on a periodic basis
o Loans under Rollover TSA contracts
o Contract surrender
You may incur a withdrawal charge for certain withdrawals or if you surrender your contract.
You may also incur income tax and a tax penalty.
- --------------------------------------------------------------------------------------------------------------------------
PAYOUT ALTERNATIVES o Annuity payout options
o Income Manager(Reg. TM) payout options
- --------------------------------------------------------------------------------------------------------------------------
ADDITIONAL FEATURES o Dollar cost averaging
o Automatic investment program
o Account value rebalancing (quarterly, semiannually, and annually)
o Unlimited free transfers
o Waiver of withdrawal charge for disability, terminal illness, or confinement to a nursing
home
- --------------------------------------------------------------------------------------------------------------------------
FEES AND CHARGES o Daily charges on amounts invested in variable investment options for mortality and expense
risks and administrative charges at an annual rate of 1.35%.
o Annual 0.30% benefit base charge for the optional baseBUILDER benefit. The benefit base is
described under "Contract features and benefits -- Your guaranteed minimum income benefit
under baseBUILDER." No additional charge if you want a guaranteed minimum death benefit
only.
o Under Flexible Premium IRA and Flexible Premium Roth IRA contracts, if your account value
at the end of the contract year is less than $25,000, we deduct an annual administrative
charge equal to $30 or during the first two contract years 2% of your account value, if
less. If your account value is $25,000 or more, we will not deduct the charge.
o No sales charge deducted at the time you make contributions.
o During the first seven contract years following a contribution, a charge will be deducted
from amounts that you withdraw that exceed 15% of your account value. We use the account
value on the most recent contract date anniversary to calculate the 15% amount available.
The charge begins at 7% in the first contract year following a contribution. It declines
by 1% each year to 1% in the seventh contract year. There is no withdrawal charge in the
eighth and later contract years following a contribution.
--------------------------------------------------------------------------------------------
The "contract date" is the effective date of a contract. This usually is the business day we
receive your initial contribution. Your contract date will be shown in your contract. The
12-month period beginning on your contract date and each 12-month period after that date is
a "contract year." The end of each 12-month period is your "contract date anniversary."
--------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
10 EQUITABLE ACCUMULATOR AT A GLANCE -- KEY FEATURES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
FEES AND o We deduct a charge for taxes such as premium taxes that may be imposed in your state. This
CHARGES (CONTINUED) charge is generally deducted from the amount applied to an annuity payout option.
o We generally deduct a $350 annuity administrative fee from amounts applied to purchase
certain life annuity payout options.
o Annual expenses of EQ Advisors Trust portfolios are calculated as a percentage of the
average daily net assets invested in each portfolio. These expenses include management
fees ranging from 0.25% to 1.15% annually, 12b-1 fees of 0.25% annually, and other
expenses.
- --------------------------------------------------------------------------------------------------------------------------
ANNUITANT ISSUE AGES NQ: 0-83
Rollover IRA, Roth Conversion IRA, Flexible Premium Roth IRA, and Rollover TSA: 20-83
Flexible Premium IRA: 20-70
QP: 20-75
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE IS NOT A COMPLETE DESCRIPTION OF ALL MATERIAL PROVISIONS OF THE
CONTRACT. IN SOME CASES RESTRICTIONS OR EXCEPTIONS APPLY. ALSO, ALL FEATURES OF
THE CONTRACT ARE NOT NECESSARILY AVAILABLE IN YOUR STATE OR AT CERTAIN AGES.
For more detailed information we urge you to read the contents of this
prospectus, as well as your contract. Please feel free to speak with your
registered representative, or call us, if you have any questions.
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE 11
- --------------------------------------------------------------------------------
Fee table
- --------------------------------------------------------------------------------
The fee table below will help you understand the various charges and expenses
that apply to your contract. The table reflects charges you will directly incur
under the contract, as well as charges and expenses of the portfolios that you
will bear indirectly. Charges for taxes, such as premium taxes, may also apply.
Also, an annuity administrative fee may apply when your annuity payments are to
begin. Each of the charges and expenses is more fully described under "Charges
and expenses" later in this prospectus. For a complete description of portfolio
charges and expenses, please see the attached prospectus for EQ Advisors Trust.
The fixed maturity options and the account for special dollar cost averaging are
not covered by the fee table and examples. However, the annual administrative
charge and the withdrawal charge do apply to the fixed maturity options and the
account for special dollar cost averaging. A market value adjustment (up or
down) may apply as a result of a withdrawal, transfer, or surrender of amounts
from a fixed maturity option.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
<S> <C>
CHARGES WE DEDUCT FROM YOUR VARIABLE INVESTMENT OPTIONS
EXPRESSED AS AN ANNUAL PERCENTAGE OF DAILY NET ASSETS
- ---------------------------------------------------------------------------------------------
Mortality and expense risks(1) 1.10%
Administrative(2) 0.25%
Total annual expenses 1.35%
- ---------------------------------------------------------------------------------------------
FLEXIBLE PREMIUM IRA AND FLEXIBLE PREMIUM ROTH IRA CONTRACTS
ONLY: CHARGES WE DEDUCT FROM YOUR ACCOUNT VALUE ON EACH
CONTRACT DATE ANNIVERSARY
- ---------------------------------------------------------------------------------------------
Maximum annual administrative charge(3)
If your account value on a contract date anniversary is less than $25,000 $30
If your account value on a contract date anniversary is $25,000 or more $0
- ---------------------------------------------------------------------------------------------
CHARGES WE DEDUCT FROM YOUR ACCOUNT VALUE AT THE TIME YOU
REQUEST CERTAIN TRANSACTIONS
- ---------------------------------------------------------------------------------------------
WITHDRAWAL CHARGE AS A PERCENTAGE OF CONTRIBUTIONS (deducted if Contract
you surrender your contract or make certain year
withdrawals. The withdrawal charge percentage we use is 1...................... 7.00%
determined by the contract year in which you make the 2...................... 6.00%
withdrawal or surrender your contract. For each 3...................... 5.00%
contribution, we consider the contract year in which we receive 4...................... 4.00%
that contribution to be "contract year 1")(4) 5...................... 3.00%
6...................... 2.00%
7...................... 1.00%
8+......................0.00%
- ---------------------------------------------------------------------------------------------
CHARGES WE DEDUCT FROM YOUR ACCOUNT VALUE EACH YEAR IF YOU ELECT THE
OPTIONAL BENEFIT
- ---------------------------------------------------------------------------------------------
BASEBUILDER BENEFITS CHARGE (calculated as a percentage of the benefit base.
Deducted annually on each contract date anniversary)(5) 0.30%
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
12 FEE TABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EQ ADVISORS TRUST ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS IN EACH PORTFOLIO)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
TOTAL
OTHER ANNUAL
EXPENSES EXPENSES
MANAGEMENT (AFTER EXPENSE (AFTER EXPENSE
FEES(6) 12B-1FEES(7) LIMITATION(8) LIMITATION(9)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Money Market 0.35% 0.25% 0.03% 0.63%
Alliance High Yield 0.60% 0.25% 0.04% 0.89%
Alliance Common Stock 0.36% 0.25% 0.04% 0.65%
Alliance Aggressive Stock 0.54% 0.25% 0.04% 0.83%
Alliance Small Cap Growth 0.90% 0.25% 0.06% 1.21%
EQ/Alliance Premier Growth 0.90% 0.25% 0.00% 1.15%
BT Equity 500 Index 0.25% 0.25% 0.05% 0.55%
BT Small Company Index 0.25% 0.25% 0.25% 0.75%
BT International Equity Index 0.35% 0.25% 0.40% 1.00%
Capital Guardian U.S. Equity 0.65% 0.25% 0.05% 0.95%
Capital Guardian Research 0.65% 0.25% 0.05% 0.95%
Capital Guardian International 0.75% 0.25% 0.20% 1.20%
EQ/Evergreen 0.75% 0.25% 0.05% 1.05%
EQ/Evergreen Foundation 0.63% 0.25% 0.07% 0.95%
JPM Core Bond 0.45% 0.25% 0.10% 0.80%
Lazard Large Cap Value 0.55% 0.25% 0.15% 0.95%
Lazard Small Cap Value 0.80% 0.25% 0.15% 1.20%
MFS Growth with Income 0.55% 0.25% 0.05% 0.85%
MFS Research 0.55% 0.25% 0.05% 0.85%
MFS Emerging Growth Companies 0.55% 0.25% 0.05% 0.85%
Merrill Lynch Basic Value Equity 0.55% 0.25% 0.05% 0.85%
Merrill Lynch World Strategy 0.70% 0.25% 0.25% 1.20%
Morgan Stanley Emerging Markets Equity 1.15% 0.25% 0.35% 1.75%
EQ/Putnam Growth & Income Value 0.55% 0.25% 0.05% 0.85%
EQ/Putnam Investors Growth 0.55% 0.25% 0.15% 0.95%
EQ/Putnam International Equity 0.70% 0.25% 0.25% 1.20%
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------
Notes:
(1) A portion of this charge is for providing the guaranteed minimum death
benefit.
(2) We reserve the right to increase this charge to a maximum annual rate of
0.35%.
(3) For Flexible Premium IRA and Flexible Premium Roth IRA contracts, during
the first two contract years this charge is equal to the lesser of $30 or
2% of your account value if it applies. Thereafter, the charge is $30 for
each contract year.
(4) Deducted upon a withdrawal of amounts in excess of the 15% free withdrawal
amount and upon surrender of a contract.
(5) The benefit base is described under "Contract features and benefits - Your
guaranteed minimum income benefit under baseBUILDER."
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE 13
- --------------------------------------------------------------------------------
(6) The management fees or the maximum management fees, if a maximum applies,
for each portfolio cannot be increased without a vote of that portfolio's
shareholders.
(7) Portfolio shares are all subject to fees imposed under the distribution
plan (the "Rule 12b-1 Plan") adopted by EQ Advisors Trust pursuant to Rule
12b-1 under the Investment Company Act of 1940. The 12b-1 fee will not be
increased for the life of the contracts. Prior to October 18, 1999, the
total annual expenses for the Alliance Small Cap Growth portfolio were
limited to 1.20% under an expense limitation arrangement related to that
portfolio's Rule 12b-1 Plan. The arrangement is no longer in effect. The
amounts shown have been restated to reflect the expenses that would have
been incurred in 1998, absent the expense limitation agreement.
(8) The amounts shown as "Other Expenses" will fluctuate from year to year
depending on actual expenses. See footnote (9) for any expense limitation
agreements.
On October 18, 1999, the Alliance portfolios (other than EQ/Alliance
Premier Growth) became part of the portfolios of EQ Advisors Trust. The
"Other Expenses" for these portfolios have been restated to reflect the
estimated expenses that would have been incurred had these portfolios been
portfolios of EQ Advisors Trust for the year ended December 31, 1998. The
restated expenses reflect an increase of 0.01%.
(9) Equitable Life, EQ Advisors Trust's manager, has entered into an expense
limitation agreement with respect to certain portfolios. Under this
agreement Equitable Life has agreed to waive or limit its fees and assume
other expenses. Under the expense limitation agreement, total annual
operating expenses of certain portfolios (other than interest, taxes,
brokerage commissions, capitalized expenditures, extraordinary expenses,
and 12b-1 fees) are limited as a percentage of the average daily net assets
of the following portfolios: 0.90% for EQ/Alliance Premier Growth; 0.30%
for BT Equity 500 Index; 0.50% for BT Small Company Index; 0.75% for BT
International Equity Index; 0.70% for Capital Guardian U.S. Equity and
Capital Guardian Research; 0.95% for Capital Guardian International; 0.80%
for EQ/Evergreen; 0.70% for EQ/Evergreen Foundation; 0.55% for JPM Core
Bond; 0.70% for Lazard Large Cap Value; 0.95% for Lazard Small Cap Value;
0.60% for MFS Growth with Income, MFS Research, MFS Emerging Growth
Companies, and Merrill Lynch Basic Value Equity; 0.95% for Merrill Lynch
World Strategy; 1.50% for Morgan Stanley Emerging Markets Equity; 0.60% for
EQ/Putnam Growth & Income Value; 0.70% for EQ/Putnam Investors Growth;
0.95% for EQ/Putnam International Equity. The expenses shown for the BT
International Equity Index, BT Small Company Index, EQ/Putnam Investors
Growth, and Lazard Large Cap Value portfolios reflect an increase effective
on May 1, 1999.
Absent the expense limitation, the "Other Expenses" for 1998 on an
annualized basis for each of the portfolios would have been as follows:
0.33% for BT Equity 500 Index; 1.31% for BT Small Company Index; 0.89% for
BT International Equity Index; 0.33% for JPM Core Bond; 0.40% for Lazard
Large Cap Value; 0.49% for Lazard Small Cap Value; 0.25% for MFS Research;
0.24% for MFS Emerging Growth Companies; 0.26% for Merrill Lynch Basic
Value Equity; 0.66% for Merrill Lynch World Strategy; 1.23% for Morgan
Stanley Emerging Markets Equity; 0.24% for EQ/Putnam Growth & Income Value;
0.29% for EQ/Putnam Investors Growth; 0.51% for EQ/Putnam International
Equity. For the following portfolios, the "Other Expenses" for 1999, absent
the expense limitation, are estimated to be as follows: 0.74% for
EQ/Alliance Premier Growth, Capital Guardian U.S. Equity, and Capital
Guardian Research; 1.03% for Capital Guardian International; 0.76% for
EQ/Evergreen; 0.86% for EQ/Evergreen Foundation; and 0.59% for MFS Growth
with Income. Initial seed capital was invested on December 31, 1998 for the
EQ/Evergreen, EQ/Evergreen Foundation, and MFS Growth with Income
portfolios and April 30, 1999 for the EQ/Alliance Premier Growth, Capital
Guardian U.S. Equity, Capital Guardian Research, and Capital Guardian
International portfolios and therefore expenses have been estimated.
Each portfolio may at a later date make a reimbursement to Equitable Life
for any of the management fees waived or limited and other expenses assumed
and paid by Equitable Life pursuant to the expense limitation agreement
provided that, among other things, such portfolio has reached sufficient
size to permit such reimbursement to be made and provided that the
portfolio's current annual operating expenses do not exceed the operating
expense limit determined for such portfolio. For more information see the
prospectus for EQ Advisors Trust.
<PAGE>
- --------------------------------------------------------------------------------
14 FEE TABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXAMPLES
The examples below show the expenses that a hypothetical contract owner (who has
purchased a Flexible Premium IRA or Flexible Premium Roth IRA contract and
elected baseBUILDER) would pay in the situations illustrated. We assume that a
$1,000 contribution is invested in one of the variable investment options listed
and a 5% annual return is earned on the assets in that option.(1) Since the
annual administrative charge only applies under Flexible Premium IRA and
Flexible Premium Roth IRA contracts, the charges shown in the examples would be
lower for NQ, Rollover IRA, Roth Conversion IRA, QP, and Rollover TSA contracts.
These examples should not be considered a representation of past or future
expenses for each option. Actual expenses may be greater or less than those
shown. Similarly, the annual rate of return assumed in the examples is not an
estimate or guarantee of future investment performance.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
IF YOU SURRENDER YOUR CONTRACT AT THE END
OF EACH PERIOD SHOWN, THE EXPENSES
WOULD BE:
-------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Money Market $ 93.10 $127.18 $163.89 $288.24
Alliance High Yield $ 95.68 $134.92 $176.80 $313.95
Alliance Common Stock $ 93.29 $127.77 $164.88 $290.23
Alliance Aggressive Stock $ 95.08 $133.14 $173.83 $308.07
Alliance Small Cap Growth $ 98.86 $144.42 $192.53 $344.77
EQ/Alliance Premier Growth $ 98.26 $142.63 -- --
BT Equity 500 Index $ 92.30 $124.78 $159.88 $280.19
BT Small Company Index $ 94.29 $130.75 $169.85 $300.17
BT International Equity Index $ 96.77 $138.19 $182.22 $324.65
Capital Guardian U.S. Equity $ 96.27 $136.71 -- --
Capital Guardian Research $ 96.27 $136.71 -- --
Capital Guardian International $ 98.76 $144.12 -- --
EQ/Evergreen $ 97.27 $139.68 -- --
EQ/Evergreen Foundation $ 96.27 $136.71 -- --
JPM Core Bond $ 94.78 $132.24 $172.34 $305.12
Lazard Large Cap Value $ 96.27 $136.71 $179.76 $319.80
Lazard Small Cap Value $ 98.76 $144.12 $192.03 $343.81
MFS Growth with Income $ 95.28 $133.74 -- --
MFS Research $ 95.28 $133.74 $174.83 $310.05
MFS Emerging Growth Companies $ 95.28 $133.74 $174.83 $310.05
Merrill Lynch Basic Value Equity $ 95.28 $133.74 $174.83 $310.05
Merrill Lynch World Strategy $ 98.76 $144.12 $192.03 $343.81
Morgan Stanley Emerging Markets Equity $104.22 $160.29 $218.58 $394.59
EQ/Putnam Growth & Income Value $ 95.28 $133.74 $174.83 $310.05
EQ/Putnam Investors Growth $ 96.27 $136.71 $179.76 $319.80
EQ/Putnam International Equity $ 98.76 $144.12 $192.03 $343.81
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
IF YOU SURRENDER YOUR CONTRACT AT THE END
OF EACH PERIOD SHOWN, THE EXPENSES
WOULD BE:
-------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Money Market $26.25 $ 80.65 $137.72 $293.13
Alliance High Yield $28.83 $ 88.40 $150.63 $318.85
Alliance Common Stock $26.44 $ 81.23 $138.70 $295.11
Alliance Aggressive Stock $28.23 $ 86.60 $147.65 $312.96
Alliance Small Cap Growth $32.01 $ 97.88 $166.34 $349.63
EQ/Alliance Premier Growth $31.41 $ 96.11 -- --
BT Equity 500 Index $25.45 $ 78.25 $133.71 $285.07
BT Small Company Index $27.44 $ 84.23 $143.69 $305.09
BT International Equity Index $29.92 $ 91.66 $156.05 $329.53
Capital Guardian U.S. Equity $29.42 $ 90.17 -- --
Capital Guardian Research $29.42 $ 90.17 -- --
Capital Guardian International $31.91 $ 97.59 -- --
EQ/Evergreen $30.42 $ 93.15 -- --
EQ/Evergreen Foundation $29.42 $ 90.17 -- --
JPM Core Bond $27.93 $ 85.72 $146.17 $310.01
Lazard Large Cap Value $29.42 $ 90.17 $153.58 $324.68
Lazard Small Cap Value $31.91 $ 97.59 $165.86 $348.69
MFS Growth with Income $28.43 $ 87.20 -- --
MFS Research $28.43 $ 87.20 $148.64 $314.93
MFS Emerging Growth Companies $28.43 $ 87.20 $148.64 $314.93
Merrill Lynch Basic Value Equity $28.43 $ 87.20 $148.64 $314.93
Merrill Lynch World Strategy $31.91 $ 97.59 $165.86 $348.69
Morgan Stanley Emerging Markets Equity $37.37 $113.76 $192.41 $399.49
EQ/Putnam Growth & Income Value $28.43 $ 87.20 $148.64 $314.93
EQ/Putnam Investors Growth $29.42 $ 90.17 $153.58 $324.68
EQ/Putnam International Equity $31.91 $ 97.59 $165.86 $348.69
- ---------------------------------------------------------------------------------------
</TABLE>
- -----------------
(1) The amount accumulated from the $1,000 contribution could not be paid in
the form of an annuity payout option at the end of any of the periods shown
in the examples. This is because if the amount applied to purchase an
annuity payout option is less than $2,000, or the initial payment is less
than $20, we may pay the amount to you in a single sum instead of payments
under an annuity payout option. See "Accessing your money."
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE 15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IF YOU ELECT AN ANNUITY PAYOUT OPTION:
Assuming an annuity payout option could be issued (see note (1) above), and you
elect a life annuity payout option, the expenses shown in the example for "if
you do not surrender your contract" would, in each case, be increased by $4.43
based on the average amount applied to annuity payout options in 1998. See
"Annuity administrative fee" under "Charges and expenses."
CONDENSED FINANCIAL INFORMATION
Please see Appendix I at the end of this prospectus for the unit values and the
number of units outstanding as of the end of the periods shown for each of the
variable investment options available as of December 31, 1998.
<PAGE>
- --------------------------------------------------------------------------------
16 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1
Contract features and benefits
- --------------------------------------------------------------------------------
HOW YOU CAN PURCHASE AND CONTRIBUTE TO YOUR CONTRACT
You may purchase a contract by making payments to us that we call
"contributions." We require a minimum contribution amount for each type of
contract purchased. The following table summarizes our rules regarding
contributions to your contract. All ages in the table refer to the age of the
annuitant named in the contract.
- --------------------------------------------------------------------------------
The "annuitant" is the person who is the measuring life for determining contract
benefits. The annuitant is not necessarily the contract owner.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVAILABLE
CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON
TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NQ 0 through 83 o $5,000 (initial) o After-tax money. o No additional
o $1,000 (additional) o Paid to us by check or contributions after
transfer of contract age 84.
value in a tax-deferred
exchange under Section
1035 of the Internal
Revenue Code.
- ------------------------------------------------------------------------------------------------------------------------
Flexible 20 through 70 o $2,000 (initial) o "Regular" traditional o No regular IRA
Premium IRA o $50 (additional after IRA contributions. contributions in the
the first contract year) o Rollovers from a calendar year you turn
qualified plan. age 70 1/2 and
o Rollovers from a TSA. thereafter.
o Rollovers from another o Total regular
traditional individual contributions may
retirement arrangement. exceed $2,000 for a
o Direct custodian- year.
to-custodian transfers o No additional rollover
from another or direct transfer
traditional individual contributions after
retirement arrangement. age 71.
o Rollover and direct
transfer contributions
after age 70 1/2 be
net of required
minimum distributions.
Although we accept rollover and direct transfer contributions under the Flexible Premium
IRA contract, we intend that this contract be used for ongoing regular contributions.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AVAILABLE
CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON
TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rollover IRA 20 through 83 o $5,000 (initial) o Rollovers from a o No rollover or direct
qualified plan. transfer contributions
o $1,000 (additional) o Rollovers from a TSA. after age 84.
o Rollovers from another o Contributions after
traditional individual age 7 1/2 must be net
retirement of required minimum
arrangement. distributions.
o Direct o Regular IRA
custodian-to-custodian contributions are not
transfers from another permitted.
traditional individual
retirement arrangement.
Only rollover and direct transfer contributions are permitted under the Rollover IRA
contract.
- ------------------------------------------------------------------------------------------------------------------------
Flexible 20 through 83 o $2,000 (initial) o Regular after-tax o No additional regular
Premium Roth contributions. after-tax contributions
IRA o $50 (additional after after age 84.
the first contract year) o Rollovers from another o No additional rollover
Roth IRA. or direct transfer
o Conversion rollovers contributions after
from a traditional IRA. age 84.
o Direct transfers from o Contributions are
another Roth IRA. subject to income limits
and other tax rules. See
"Tax information--
Contributions to
Roth IRAs.".
Although we accept rollover and direct transfer contributions under the Flexible Premium
Roth IRA contract, we intend that this contract be used for ongoing regular contributions.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
18 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
AVAILABLE
CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON
TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Roth 20 through 83 o $5,000 (initial) o Rollovers from another o No additional rollover
Conversion IRA o $1,000 (additional) Roth IRA. or direct transfer
o Conversion rollovers contributions after
from a traditional IRA. age 84.
o Direct transfers from o Conversion rollovers
another Roth IRA. after age 70 1/2 must be
net of required
minimum distributions
for the traditional IRA
you are rolling over.
o You cannot roll over
funds from a traditional
IRA if your adjusted
gross income is
$100,000 or more.
o Regular after-tax
contributions are
not permitted.
Only rollover and direct transfer contributions are permitted under the Roth
Conversion IRA contract.
- --------------------------------------------------------------------------------------------------------------------
QP 20 through 75 $5,000 (initial) o Only transfer o Regular ongoing
$1,000 (additional) contributions from an payroll contributions
existing qualified plan are not permitted.
trust as a change of o No additional transfer
investment vehicle contributions after
under the plan. age 76.
o The plan must be o For defined benefit
qualified under Section plans, employee
401(a) of the Internal contributions are not
Revenue Code. permitted.
o For 401(k) plans, o Contributions after age
transferred 70 1/2 must be net of
contributions may only any required minimum
include employee distributions.
pre-tax contributions.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 19
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
AVAILABLE
CONTRACT FOR ANNUITANT MINIMUM LIMITATIONS ON
TYPE ISSUE AGES CONTRIBUTIONS SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rollover TSA 20 through 83 $5,000 (initial) o Rollovers from another o No additional rollover
TSA contract or or direct transfer
$1,000 (additional) arrangement. contributions after
age 84.
o Rollovers from a
traditional IRA which o Contributions after age
was a "conduit" for 70 1/2 must be net of
TSA funds previously required minimum
rolled over. distributions.
o Direct transfers from
another contract or
arrangement under
Section 403(b) of the
Internal Revenue Code,
complying with IRS
Revenue Ruling 90-24.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See "Tax information" for a more detailed discussion of sources of contributions
and certain contribution limitations. We may refuse to accept any contribution
if the sum of all contributions under all Equitable Accumulator contracts with
the same annuitant would then total more than $1,500,000. We reserve the right
to limit aggregate contributions made after the first contract year to 150% of
first-year contributions. We may also refuse to accept any contribution if the
sum of all contributions under all Equitable Life annuity accumulation contracts
that you own would then total more than $2,500,000.
For information on when contributions are credited under your contract see
"Dates and prices at which contract events occur" under "More information" later
in this prospectus.
<PAGE>
- --------------------------------------------------------------------------------
20 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNER AND ANNUITANT REQUIREMENTS
Under NQ contracts, the annuitant can be different than the owner. A joint
owner may also be named. Only natural persons can be joint owners. This means
that an entity such as a corporation cannot be a joint owner.
Under all IRA and Rollover TSA contracts, the owner and annuitant must be the
same person.
Under QP contracts, the owner must be the trustee of the qualified plan and
the annuitant must be the plan participant/employee. See Appendix II for more
information on QP contracts.
- --------------------------------------------------------------------------------
A participant is an individual who is currently, or was formerly, participating
in an eligible employer's QP or TSA plan.
- --------------------------------------------------------------------------------
HOW YOU CAN MAKE YOUR CONTRIBUTIONS
Except as noted below, contributions must be by check drawn on a U.S. bank, in
U.S. dollars, and made payable to Equitable Life. We do not accept third-party
checks endorsed to us except for rollover contributions, tax-free exchanges or
trustee checks that involve no refund. All checks are subject to our ability
to collect the funds. We reserve the right to reject a payment if it is
received in an unacceptable form.
For your convenience, we will accept initial and additional contributions by
wire transmittal from certain broker-dealers who have agreements with us for
this purpose. Additional contributions may also be made under our automatic
investment program. These methods of payment are discussed in detail under
"More information" later in this prospectus.
Your initial contribution must generally be accompanied by an application and
any other form we need to process the payments. If any information is missing
or unclear, we will try to obtain that information. If we are unable to obtain
all of the information we require within five business days after we receive
an incomplete application or form, we will inform the registered
representative submitting the application on your behalf. We will then return
the contribution to you unless you specifically direct us to keep your
contribution until we receive the required information.
- --------------------------------------------------------------------------------
Our "business day" is any day the New York Stock Exchange is open for trading.
- --------------------------------------------------------------------------------
SECTION 1035 EXCHANGES
You may apply the value of an existing nonqualified deferred annuity contract
(or life insurance or endowment contract) to purchase an Equitable Accumulator
NQ contract in a tax-free exchange if you follow certain procedures as shown
in the form that we require you to use. Also see "Tax information" later in
this prospectus.
WHAT ARE YOUR INVESTMENT OPTIONS UNDER THE CONTRACT?
Your investment options are the variable investment options, the fixed
maturity options, and the account for special dollar cost averaging.
VARIABLE INVESTMENT OPTIONS
Your investment results in any one of the 26 variable investment options will
depend on the investment performance of the underlying portfolios. Listed
below are the currently available portfolios, their investment objectives, and
their advisers.
- --------------------------------------------------------------------------------
You can choose from among 26 variable investment options.
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS OF EQ ADVISORS TRUST
- ---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME OBJECTIVE ADVISER
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
High level of current income while preserving
Alliance Money Market assets and maintaining liquidity Alliance Capital Management L.P.
- ---------------------------------------------------------------------------------------------------------------------------
High return by maximizing current income and,
to the extent consistent with that objective,
Alliance High Yield capital appreciation Alliance Capital Management L.P.
- ---------------------------------------------------------------------------------------------------------------------------
Long-term growth of capital and increasing
Alliance Common Stock income Alliance Capital Management L.P.
- ---------------------------------------------------------------------------------------------------------------------------
Alliance Aggressive Stock Long-term growth of capital Alliance Capital Management L.P.
- ---------------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth Long-term growth of capital Alliance Capital Management L.P.
- ---------------------------------------------------------------------------------------------------------------------------
EQ/Alliance Premier Growth Long-term growth of capital Alliance Capital Management L.P.
- ---------------------------------------------------------------------------------------------------------------------------
Replicate as closely as possible (before
deduction of portfolio expenses) the total
return of the Standard & Poor's 500 Composite
Stock
BT Equity 500 Index Price Index Bankers Trust Company
- ---------------------------------------------------------------------------------------------------------------------------
Replicate as closely as possible (before
deduction of portfolio expenses) the total return
BT Small Company Index of the Russell 2000 Index Bankers Trust Company
- ---------------------------------------------------------------------------------------------------------------------------
Replicate as closely as possible (before
deduction of portfolio expenses) the total return
of the Morgan Stanley Capital International
BT International Equity Index Europe, Australia, Far East Index Bankers Trust Company
- ---------------------------------------------------------------------------------------------------------------------------
Capital Guardian U.S. Equity Long-term growth of capital Capital Guardian Trust Company
- ---------------------------------------------------------------------------------------------------------------------------
Capital Guardian Research Long-term growth of capital Capital Guardian Trust Company
- ---------------------------------------------------------------------------------------------------------------------------
Long-term growth of capital by investing
Capital Guardian International primarily in non-United States equity securities Capital Guardian Trust Company
- ---------------------------------------------------------------------------------------------------------------------------
EQ/Evergreen Capital appreciation Evergreen Asset Management Corp.
- ---------------------------------------------------------------------------------------------------------------------------
In order of priority, reasonable income,
EQ/Evergreen Foundation conservation of capital, and capital appreciation Evergreen Asset Management Corp.
- ---------------------------------------------------------------------------------------------------------------------------
High total return consistent with moderate risk
JPM Core Bond of capital and maintenance of liquidity J. P. Morgan Investment Management Inc.
- ---------------------------------------------------------------------------------------------------------------------------
Lazard Large Cap Value Capital appreciation Lazard Asset Management
- ---------------------------------------------------------------------------------------------------------------------------
Lazard Small Cap Value Capital appreciation Lazard Asset Management
- ---------------------------------------------------------------------------------------------------------------------------
Reasonable current income and long-term
MFS Growth with Income growth of capital and income Massachusetts Financial Services Company
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
22 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS OF EQ ADVISORS TRUST (CONTINUED)
- ---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME OBJECTIVE ADVISER
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MFS Research Long-term growth of capital and future income Massachusetts Financial Services Company
- ---------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Long-term capital growth Massachusetts Financial Services Company
Companies
- ---------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Basic Value Equity Capital appreciation and secondarily, income Merrill Lynch Asset Management, L.P.
- ---------------------------------------------------------------------------------------------------------------------------
Merrill Lynch World Strategy High total investment return Merrill Lynch Asset Management, L.P.
- ---------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Long-term capital appreciation Morgan Stanley Asset Management
Markets Equity
- ---------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Growth & Income Capital growth, current income is a secondary Putnam Investment Management, Inc.
Value objective
- ---------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth Long-term growth of capital and any increased Putnam Investment Management, Inc.
income that results from this growth
- ---------------------------------------------------------------------------------------------------------------------------
EQ/Putnam International Equity Capital appreciation Putnam Investment Management, Inc.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other important information about the portfolios is included in the prospectus
for EQ Advisors Trust attached at the end of this prospectus.
FIXED MATURITY OPTIONS
We offer fixed maturity options with maturity dates ranging from one to ten
years. You can allocate your contributions to one or more of these fixed
maturity options. These amounts become part of our general account assets.
They will accumulate interest at the "rate to maturity" for each fixed
maturity option. The total amount you allocate to and accumulate in each fixed
maturity option is called the "fixed maturity amount." The fixed maturity
options are not available in contracts issued in Maryland.
- -------------------------------------------------------------------------------
Fixed maturity options range from one to ten years to maturity.
- -------------------------------------------------------------------------------
The rate to maturity you will receive for each fixed maturity option is the
rate to maturity in effect for new contributions allocated to that fixed
maturity option on the date we apply your contribution. This rate will never
be less than 3%. If you make any withdrawals or transfers from a fixed
maturity option before the maturity date, we will make a "market value
adjustment" that may increase or decrease any fixed maturity amount you have
left in that fixed maturity option. We will discuss the market value
adjustment below and in greater detail later in this prospectus under "More
information."
On the maturity date of a fixed maturity option your fixed maturity amount,
assuming you have not made any withdrawals or transfers, will equal your
contribution to that fixed maturity option plus interest, at the rate to
maturity for that contribution, to the date of the calculation. This is the
fixed maturity option's "maturity value." Before maturity, the current value
we will report for your fixed maturity amounts will reflect a market value
adjustment. Your current value will reflect the market value adjustment that
we would make if you were to withdraw all of your fixed maturity amounts on
the date of the report. We call this your "market adjusted amount."
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FIXED MATURITY OPTIONS AND MATURITY DATES. We currently offer fixed maturity
options ending on February 15th for each of the maturity years 2000 through
2009. Not all of these fixed maturity options will be available for annuitant
ages 76 and older. See "Allocating your contributions" below. As fixed
maturity options expire, we expect to add maturity years so that generally 10
fixed maturity options are available at any time.
We will not accept allocations to a fixed maturity option if on the date the
contribution is to be applied:
o the fixed maturity option's maturity date is within the current calendar
year; or
o the rate to maturity is 3%; or
o for annuitants ages 76 or older, the fixed maturity option's maturity date
is later than the February 15th immediately following the date annuity
payments are to begin.
YOUR CHOICES AT THE MATURITY DATE. We will notify you on or before December
31st of the year before each of your fixed maturity options is scheduled to
mature. At that time, you may choose to have one of the following take place
on the maturity date, as long as none of the conditions listed above or in
"Allocating your contributions," below would apply:
(a) transfer the maturity value into another available fixed maturity option
or into any of the variable investment options; or
(b) withdraw the maturity value (there may be a withdrawal charge).
If we do not receive your choice on or before the fixed maturity option's
maturity date, we will automatically transfer your maturity value into the
fixed maturity option that will mature next.
MARKET VALUE ADJUSTMENT. If you make any withdrawals (including transfers,
surrender of your contract, or when we make deductions for charges) from a
fixed maturity option before it matures we will make a market value
adjustment, which will increase or decrease any fixed maturity amount you have
in that fixed maturity option. The amount of the adjustment will depend on two
factors:
(a) the difference between the rate to maturity that applies to the amount
being withdrawn and the rate to maturity in effect at that time for new
allocations to that same fixed maturity option, and
(b) the length of time remaining until the maturity date.
In general, if interest rates rise from the time that you originally allocate
an amount to a fixed maturity option to the time that you take a withdrawal,
the market value adjustment will be negative. Likewise, if interest rates drop
at the end of that time, the market value adjustment will be positive. Also,
the amount of the market value adjustment, either up or down, will be greater
the longer the time remaining until the fixed maturity option's maturity date.
Therefore, it is possible that the market value adjustment could greatly
reduce your value in the fixed maturity options, particularly in the fixed
maturity options with later maturity dates.
We provide an illustration of the market adjusted amount of specified maturity
values, an explanation of how we calculate the market value adjustment, and
information concerning our general account and investments purchased with
amounts allocated to the fixed maturity options, under "More information"
later in this prospectus. Appendix III of this prospectus provides an example
of how the market value adjustment is calculated.
ACCOUNT FOR SPECIAL DOLLAR COST AVERAGING
The account for special dollar cost averaging is part of our general account.
We pay interest at guaranteed rates in this account. We will credit interest
to the amounts that you have in the account for special dollar cost averaging
every day. We set the interest rates periodically, according to procedures
that we have. We reserve the right to change these procedures.
The account for special dollar cost averaging is available for allocation of
all or a portion of your initial contribution under the special dollar cost
averaging program. We will guarantee
<PAGE>
- --------------------------------------------------------------------------------
24 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
to pay our current interest rate that is in effect on the date that your
contribution is allocated to this account. Your guaranteed interest rate will
be shown in your contract. The rate will never be less than 3%. See
"Allocating your contributions," below for the rules and restrictions that
apply to the special dollar cost averaging program.
ALLOCATING YOUR CONTRIBUTIONS
You may choose from among three ways to allocate your contributions under your
contract: self-directed, principal assurance, or dollar cost averaging.
SELF-DIRECTED ALLOCATION
You may allocate your contributions to one or more, or all, of the variable
investment options and fixed maturity options. Allocations must be in whole
percentages and you may change your allocations at any time. However, the
total of your allocations must equal 100%. If the annuitant is age 76 or
older, you may allocate contributions to fixed maturity options if their
maturities are five years or less. Also, you may not allocate amounts to fixed
maturity options with maturity dates that are later than the February 15th
immediately following the date annuity payments are to begin.
PRINCIPAL ASSURANCE ALLOCATION
Under this allocation program you select a fixed maturity option. We specify
the portion of your initial contribution to be allocated to that fixed
maturity option in an amount that will cause the maturity value to equal the
amount of your entire initial contribution on the fixed maturity option's
maturity date. The maturity date you select generally may not be later than 10
years, or earlier than 7 years from your contract date. You allocate the rest
of your contribution to the variable investment options however you choose.
For example, if your initial contribution is $10,000, and on August 2, 1999
you chose the fixed maturity option with a maturity date of February 15, 2009,
since the rate to maturity was 5.85% on August 2, 1999, we would have
allocated $5,811.03 to that fixed maturity option and the balance to your
choice of variable investment options.
On the maturity date your value in the fixed maturity option would be $10,000.
The principal assurance allocation is only available for annuitant ages 75 or
younger when the contract is issued. If you are purchasing a Rollover IRA,
Flexible Premium IRA, QP, or Rollover TSA contract, before you select a
maturity year that would extend beyond the year in which you will reach age
70 1/2, you should consider whether your value in the variable investment
options, or your other traditional IRA or TSA funds are sufficient to meet
your required minimum distributions. See "Tax information."
DOLLAR COST AVERAGING
We offer two dollar cost averaging programs. Each program allows you to
gradually allocate amounts to the variable investment options by periodically
transferring approximately the same dollar amount to the variable investment
options you select. This will cause you to purchase more units if the unit's
value is low and fewer units if the unit's value is high. Therefore, you may
get a lower average cost per unit over the long term. These plans of
investing, however, do not guarantee that you will earn a profit or be
otected against losses.
- --------------------------------------------------------------------------------
Units measure your value in each variable investment option.
- --------------------------------------------------------------------------------
SPECIAL DOLLAR COST AVERAGING PROGRAMS. Under the special dollar cost
averaging program, you may choose to allocate all or a portion of your initial
contribution to the account for special dollar cost averaging. However, you
must allocate at least $2,000 to the account for special dollar cost averaging
for this program. In Pennsylvania we refer to this program as "enhanced rate
dollar cost averaging."
You may have your account value transferred to any of the variable investment
options. We will transfer amounts from the account for special dollar cost
averaging into the variable investment options over the time period that you
select. We offer time periods of 6 or 12 months. We may also offer
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT FEATURES AND BENEFITS 25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
other time periods. Your registered representative can provide information on
the time periods currently available or you may contact our processing office.
You may only select one time period. Each time period has a different interest
rate. Once you select a time period, you may not change it. Currently, your
account value will be transferred from the account for special dollar cost
averaging into the variable investment options on a monthly basis. We may
offer this program in the future with transfers on a different basis. We will
transfer all amounts out of the account for special dollar cost averaging by
the end of the chosen time period. The transfer date will be the same day of
the month as the contract date, but not later than the 28th day of the month.
If you choose to allocate only a portion of your initial contribution to the
account for special dollar cost averaging, the remaining balance of your
initial contribution will be allocated to the variable investment options or
fixed maturity options according to your instructions. You may not allocate
additional contributions to the account for special dollar cost averaging.
- --------------------------------------------------------------------------------
The account for special dollar cost averaging provides guaranteed interest.
- --------------------------------------------------------------------------------
The only amounts that should be transferred from the account for special
dollar cost averaging are your regularly scheduled transfers to the variable
investment options. If you request to transfer or withdraw any other amounts,
we will transfer all of the value that you have remaining in the account for
special dollar cost averaging to the investment options according to the
allocation percentages we have on file for you. As a result, you will no
longer be able to participate in the special dollar cost averaging program.
You may also ask us to cancel your participation at any time.
If the account for special dollar cost averaging is not available in your
state, we offer a special dollar cost averaging program in the Alliance Money
Market option. Under this program we will not deduct the mortality and expense
risks and administrative charges from assets in the Alliance Money Market
option. You may not allocate amounts other than your initial contribution to
this program, which is in effect only for your first contract year. We reserve
the right to discontinue offering the Alliance Money Market special dollar
cost averaging program for new contracts once the account for special dollar
cost averaging becomes available in a state. Your registered representative
can provide information about state availability. You may also contact us
directly.
GENERAL DOLLAR COST AVERAGING PROGRAM. If your value in the Alliance Money
Market option is at least $5,000, you may choose, at any time, to have a
specified dollar amount or percentage of your value transferred from that
option to the other variable investment options. You can select to have
transfers made on a monthly, quarterly, or annual basis. The transfer date
will be the same calendar day of the month as the contract date, but not later
than the 28th day of the month. You can also specify the number of transfers
or instruct us to continue making the transfers until all amounts in the
Alliance Money Market option have been transferred out.
The minimum amount that we will transfer each time is $250. The maximum amount
we will transfer is equal to your value in the Alliance Money Market option at
the time the program is elected, divided by the number of transfers scheduled
to be made.
If, on any transfer date, your value in the Alliance Money Market option is
equal to or less than the amount you have elected to have transferred, the
entire amount will be transferred. The general dollar cost averaging program
will then end. You may change the transfer amount once each contract year or
cancel this program at any time.
- --------------------------------------------------------------------------------
You may not elect dollar cost averaging if you are participating in the
rebalancing program. See "Transferring your money among investment options."
OUR baseBUILDER OPTION
The baseBUILDER option offers you a combined guaranteed minimum income benefit
and guaranteed minimum death
<PAGE>
- --------------------------------------------------------------------------------
26 CONTRACT FEATURES AND BENEFITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
benefit. The combined benefit is available if the annuitant is between the ages
of 20 and 75. There is an additional charge for this benefit. See "baseBUILDER
benefits charge" under "Charges and expenses."
- --------------------------------------------------------------------------------
baseBUILDER provides income protection if you elect an income payout while the
annuitant is alive and a death benefit if the annuitant dies.
- --------------------------------------------------------------------------------
The guaranteed minimum income benefit component of baseBUILDER is described
below under "Your guaranteed minimum income benefit under baseBUILDER." As
part of baseBUILDER you have a choice of two guaranteed minimum death benefit
options: either a "5% roll up to age 80" or an "annual ratchet to age 80." The
two options are described under "Guaranteed minimum death benefit." The
guaranteed minimum death benefit is provided under the contract even if you do
not elect baseBUILDER, and for a broader range of annuitant ages at contract
issue than those available under baseBUILDER. baseBUILDER is not currently
available in New York.
YOUR GUARANTEED MINIMUM INCOME BENEFIT UNDER baseBUILDER
The guaranteed minimum income benefit guarantees you a minimum amount of
lifetime income under our Income Manager (life annuity with a period certain)
payout annuity contract. The Income Manager (life annuity with a period
certain) payout annuity contract provides payments during a specified period
of time (called a period certain) that will continue for the rest of the
annuitant's life thereafter. If the annuitant dies before the period certain
has ended, payments will continue to the beneficiary for the time remaining in
the period certain.
- --------------------------------------------------------------------------------
We also refer to the guaranteed minimum income benefit as the "Living
Benefit."
- --------------------------------------------------------------------------------
GUARANTEED MINIMUM INCOME BENEFIT'S BENEFIT BASE. On the contract date, your
guaranteed minimum income benefit's benefit base ("benefit base") is equal to
the initial contribution. Thereafter, the benefit base will be credited with
interest each day through the annuitant's age 80. The effective annual interest
rate is 5% for amounts in the variable investment options (other than the
Alliance Money Market option) and in the special dollar cost averaging programs.
Amounts in the Alliance Money Market option, the fixed maturity options, and in
a Rollover TSA contract loan reserve account will be credited with interest at a
3% effective annual rate. No interest is credited after age 80.
If you make an additional contribution to your contract, we will increase your
current benefit base by the dollar amount of the additional contribution on
the date that the contribution is allocated to your investment options. If you
take a withdrawal from your contract, we will adjust your benefit base for the
withdrawal on the date that you make the withdrawal. See "How withdrawals
affect your guaranteed minimum income benefit and guaranteed minimum death
benefit" under "Accessing your money" for more detailed information. The
benefit base will be reduced by any withdrawal charge remaining when you
exercise your guaranteed minimum income benefit. Under Rollover TSA contracts,
we will also reduce your benefit base by the amount of any outstanding loan
plus accrued interest on the date that you exercise your guaranteed minimum
income benefit.
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Your benefit base is not an account value or a cash value and is used solely for
purposes of calculating your guaranteed minimum income benefit.
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EXERCISING YOUR BENEFIT AND INCOME YOU WILL RECEIVE. If you exercise the
guaranteed minimum income benefit, the annual lifetime income that you will
receive under the Income Manager (life annuity with a period certain) payout
annuity contract, will be the greater of (i) your guaranteed minimum income
benefit, or (ii) the income provided by applying your actual account value at
our then current annuity purchase factors.
The guaranteed minimum income benefit is based on conservative actuarial
factors. Therefore, even if your account value is less than your benefit base,
you may generate more income by applying your account value to
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CONTRACT FEATURES AND BENEFITS 27
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current annuity purchase factors. We will make this comparison for you when
the need arises.
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The guaranteed minimum income benefit should be regarded as a safety net only.
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ILLUSTRATIONS OF GUARANTEED MINIMUM INCOME BENEFIT.
The table below illustrates the guaranteed minimum income benefit amounts per
$100,000 of initial contribution, for a male annuitant age 60 (at issue) on
the contract date anniversaries indicated, assuming no additional
contributions, withdrawals, or loans under Rollover TSA contracts, and
assuming there were no allocations to the Alliance Money Market option or the
fixed maturity options.
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GUARANTEED MINIMUM
INCOME BENEFIT -- ANNUAL INCOME
CONTRACT DATE PAYABLE FOR LIFE WITH
ANNIVERSARY AT EXERCISE 10 YEAR PERIOD CERTAIN
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7 $ 8,315
10 $10,341
15 $14,924
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Under NQ, and all IRA contracts, you may exercise the guaranteed minimum
income benefit only within 30 days following the seventh or later contract
date anniversary under your contract. However, you may not exercise the
benefit before the annuitant is age 60, or after the annuitant is age 83.
There is an exception if the annuitant is between ages 20 and 44 when your
contract is issued. In this case you may exercise the benefit following the
15th or later contract date anniversary, but not after the annuitant is age
83. See "Exercise of guaranteed minimum income benefit under QP and Rollover
TSA contracts" below regarding exercising the benefit under QP and Rollover
TSA contracts.
Your contract will terminate when you exercise your guaranteed minimum income
benefit. You will then receive an Income Manager (life annuity with a period
certain) payout annuity contract. Your period certain will be based on the
annuitant's age at the time the benefit is exercised, as follows:
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LEVEL PAYMENTS*
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PERIOD CERTAIN YEARS
--------------------
ANNUITANT'S
AGE AT EXERCISE IRAS NQ
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60 to 75 10 10
76 9 10
77 8 10
78 7 10
79 7 10
80 7 10
81 7 9
82 7 8
83 7 7
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* Other forms and periods certain may also be available. For Rollover IRA and
Flexible Premium IRA contracts, please see "Required minimum distributions"
under "Individual retirement arrangements" in "Tax information," as to how
this option may be affected if exercised after age 70 1/2.
You will begin receiving payments one payment period after the payout annuity
contract is issued. For example, if you select monthly annuity payments, we
will send your first payment to you approximately one month from the date your
contract is issued.
Each year on your contract date anniversary, if you are eligible to exercise
the guaranteed minimum income benefit, we will send you an eligibility notice
illustrating how much income could be provided as of the contract date
anniversary. You may then notify us within 30 days following the contract date
anniversary if you want to exercise the guaranteed minimum income benefit. You
must return your contract to us in order to exercise this benefit. The amount
of income you actually receive will be determined when we receive your request
to exercise the benefit.
You may also apply your cash value at any time to an Income Manager (life
annuity with a period certain) payout annuity contract, and you may always
apply your account value to any of our annuity payout options. The traditional
annuity payout options are discussed under "Accessing your money." These
options differ from the Income Manager payout annuity contracts. They may
provide higher or lower income levels, but do not have all the features of the
Income Manager payout annuity contract. You may request an
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28 CONTRACT FEATURES AND BENEFITS
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illustration of the Income Manager payout annuity contract from your
registered representative.
The Income Manager (life annuity with a period certain) payout annuity
contracts are offered through our prospectus for the Income Manager payout
annuities. You may obtain a copy of the most current version from your
registered representative. You should read it carefully before you decide to
exercise your guaranteed minimum income benefit.
SUCCESSOR ANNUITANT/CONTRACT OWNER. If the successor annuitant/contract owner
(discussed under "More information" later in this prospectus) elects to
continue the contract after your death, the guaranteed minimum income benefit
will continue to be available on the contract date anniversaries specified
above based on the contract date. However, the guaranteed minimum income
benefit must be exercised based on the age of the successor annuitant/
contract owner.
EXERCISE OF GUARANTEED MINIMUM INCOME BENEFIT UNDER QP AND ROLLOVER TSA
CONTRACTS. Under QP contracts, the guaranteed minimum income benefit may be
exercised in the same manner as described above only after the trustee of the
qualified plan directly rolls over the QP contract to a Rollover IRA contract.
In this process the ownership of the QP contract is changed to the annuitant.
The rollover to a Rollover IRA contract and change of ownership may only occur
when the annuitant will no longer be a participant in the qualified plan.
Similarly, under Rollover TSA contracts the contract owner must convert the
Rollover TSA contract in a direct rollover to a Rollover IRA contract
according to our rules. The rollover to a Rollover IRA contract may only occur
when you are eligible for a rollover distribution from a TSA. This may
generally occur when you are age 59 1/2, or you are separated from service
from the employer who provided the Rollover TSA funds. See "Rollover or direct
transfer contributions" under "Tax information" later in this prospectus.
GUARANTEED MINIMUM DEATH BENEFIT
Applicable for annuitant ages 0 through 79 at issue of NQ contracts; 20
through 79 at issue of Rollover IRA, Roth Conversion IRA, Flexible Premium
Roth IRA, and Rollover TSA contracts; 20 through 70 at issue of Flexible
Premium IRA contracts; and 20 through 75 at issue of QP contracts.
You may elect either the "5% roll up to age 80" or the "annual ratchet to age
80" guaranteed minimum death benefit when you apply for a contract. Once you
have made your election, you may not change it.
5% ROLL UP TO AGE 80. On the contract date, the guaranteed minimum death
benefit equals your initial contribution. Thereafter, the guaranteed minimum
death benefit will be credited with interest each day through the annuitant's
age 80. The effective annual interest rate is 5% for amounts in the variable
investment options (other than the Alliance Money Market option) and in the
special dollar cost averaging programs. Amounts in the Alliance Money Market
option, the fixed maturity options and in a Rollover TSA contract loan reserve
account will be credited with interest at a 3% effective annual rate. No
interest is credited after the annuitant is age 80.
If you make additional contributions, we will increase your current guaranteed
minimum death benefit by the dollar amount of the additional contribution on
the date the contribution is allocated to your investment options. If you take
a withdrawal from your contract, we will adjust your guaranteed minimum death
benefit for the withdrawal on the date you take the withdrawal.
The 5% roll up to age 80 guaranteed minimum death benefit is not available in
New York.
ANNUAL RATCHET TO AGE 80. On the contract date, your guaranteed minimum death
benefit equals your initial contribution. Then, on each contract date
anniversary, we will determine your guaranteed minimum death benefit by
comparing your current guaranteed minimum death benefit to your account value
on that contract date anniversary. If your account value is higher than your
guaranteed minimum death benefit, we will increase your guaranteed minimum
<PAGE>
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CONTRACT FEATURES AND BENEFITS 29
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death benefit to equal your account value. On the other hand, if your account
value on the contract date anniversary is less than your guaranteed minimum
death benefit, we will not adjust your guaranteed minimum death benefit either
up or down.
If you make additional contributions, we will increase your current guaranteed
minimum death benefit by the dollar amount of the contribution on the date the
contribution is allocated to your investment options. If you take a withdrawal
from your contract, we will adjust your guaranteed minimum death benefit on
the date you take the withdrawal.
Applicable for annuitant ages 80 through 83 when the contract is issued.
On the contract date, your guaranteed minimum death benefit equals your
initial contribution. Thereafter, it will be increased by the dollar amount of
any additional contributions. We will adjust your guaranteed minimum death
benefit if you take any withdrawals.
-------------------------
Please see "How withdrawals affect your guaranteed minimum income benefit and
guaranteed minimum death benefit" under "Accessing your money" for information
on how withdrawals affect your guaranteed minimum death benefit. For contracts
issued in New York, the guaranteed minimum death benefit at the annuitant's
death will never be less than your value in the variable investment options,
plus the sum of the fixed maturity amounts in each fixed maturity option.
See Appendix IV for an example of how we calculate the guaranteed minimum
death benefit.
YOUR RIGHT TO CANCEL WITHIN A CERTAIN NUMBER OF DAYS
If for any reason you are not satisfied with your contract, you may return it
to us for a refund. To exercise this cancellation right you must mail the
contract directly to our processing office within 10 days after you receive
it. In some states, this "free look" period may be longer.
Generally, your refund will equal your account value under the contract and
will reflect (i) any investment gain or loss in the variable investment
options (less the daily charges we deduct), (ii) any positive or negative
market value adjustments in the fixed maturity options, and (iii) any
guaranteed interest in the account for special dollar cost averaging, through
the date we receive your contract. Some states require that we refund the full
amount of your contribution (not reflecting (i), (ii) or (iii) above). For any
IRA contract returned to us within seven days after you receive it, we are
required to refund the full amount of your contribution.
We may require that you wait six months before you may apply for a contract
with us again if:
o you cancel your contract during the free look period; or
o you change your mind before you receive your contract whether we have
received your contribution or not.
Please see "Tax information" for possible consequences of cancelling your
contract.
If you fully convert an existing traditional IRA contract to a Roth Conversion
IRA or Flexible Premium Roth IRA contract, you may cancel your Roth Conversion
IRA or Flexible Premium Roth IRA contract and return to a Rollover IRA or
Flexible Premium IRA contract, whichever applies. Our processing office, or
your registered representative, can provide you with the cancellation
instructions.
<PAGE>
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30 DETERMINING YOUR CONTRACT'S VALUE
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2
Determining your contract's value
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YOUR ACCOUNT VALUE
Your "account value" is the total of the (i) values you have in the variable
investment options, (ii) market adjusted amounts in the fixed maturity
options, and (iii) value in the account for special dollar cost averaging.
These amounts are subject to certain fees and charges discussed under "Charges
and expenses." Under Rollover TSA contracts, if you have any outstanding loan,
your account value will include any amount in the loan reserve account.
Your contract also has a "cash value." At any time before annuity payments
begin, your contract's cash value is equal to the account value, less the
annual administrative charge under Flexible Premium IRA and Flexible Premium
Roth IRA contracts, and less any withdrawal charge that may apply if you
surrender your contract. The 15% free withdrawal amount does not apply if you
surrender your contract. If you have a Rollover TSA contract with an
outstanding loan, your cash value is also reduced by the amount of any
outstanding loan plus accrued interest. Please see "Surrendering your contract
to receive its cash value" under "Accessing your money."
YOUR CONTRACT'S VALUE IN THE VARIABLE INVESTMENT OPTIONS
Each variable investment option invests in shares of a corresponding
portfolio. Your value in each variable investment option is measured by
"units." The value of your units will increase or decrease as though you had
invested it in the corresponding portfolio's shares directly. Your value,
however, will be reduced by the amount of the fees and charges that we deduct
under the contract.
The unit value for each variable investment option depends on the investment
performance of that option, minus daily charges for mortality and expense
risks and administrative expenses. On any day, your value in any variable
investment option equals the number of units credited to that option, adjusted
for any units deducted from your contract under that option, multiplied by
that day's value for one unit. The number of your contract units in any
variable investment option does not change unless you make additional
contributions, make a withdrawal, or transfer amounts among investment
options, or we transfer your loan amount to the loan reserve account under a
TSA contract. In addition, when we deduct the baseBUILDER benefits charge and
any withdrawal charge the number of units credited to your contract will be
reduced. Your units are also reduced under Flexible Premium IRA and Flexible
Premium Roth IRA contracts when we deduct the annual administrative charge. A
description of how unit values are calculated is found in the SAI.
YOUR CONTRACT'S VALUE IN THE FIXED MATURITY OPTIONS
Your value in each fixed maturity option at any time before the maturity date
is the market adjusted amount in each option. This is equivalent to your fixed
maturity amount increased or decreased by the market value adjustment. Your
value, therefore, may be higher or lower than your contributions (less
withdrawals) accumulated at the rate to maturity. At the maturity date, your
value in the fixed maturity option will equal its maturity value.
YOUR CONTRACT'S VALUE IN THE ACCOUNT FOR SPECIAL DOLLAR COST AVERAGING
Your value in the account for special dollar cost averaging at any time will
equal your initial contribution allocated to that option, plus interest, less
the sum of all amounts that have been transferred to the variable investment
options you have selected.
<PAGE>
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TRANSFERRING YOUR MONEY AMONG INVESTMENT OPTIONS 31
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3
Transferring your money among investment options
- --------------------------------------------------------------------------------
TRANSFERRING YOUR ACCOUNT VALUE
At any time before the date annuity payments are to begin, you can transfer
some or all of your account value among the investment options, subject to the
following:
o You may not transfer any amount to the account for special dollar cost
averaging.
o You may not transfer to a fixed maturity option that matures in the current
calendar year, or that has a rate to maturity of 3%.
o If the annuitant is 76 or older, you must limit your transfers to fixed
maturity options to those with maturities of five years or less. Also, the
maturity dates may be no later than the February 15th immediately following
the date annuity payments are to begin.
o If you make transfers out of a fixed maturity option other than at its
maturity date the transfer may cause a market value adjustment.
You may request a transfer in writing or by telephone using TOPS. You must
send in all written transfer requests directly to our processing office.
Transfer requests should specify:
(1) the contract number,
(2) the dollar amounts or percentages of your current account value to be
transferred, and
(3) the investment options to and from which you are transferring.
We may, at any time, restrict the use of market timers and other agents acting
under a power of attorney who are acting on behalf of more than one contract
owner. Any agreements to use market timing services to make transfers are
subject to our rules in effect at that time.
We will confirm all transfers in writing.
REBALANCING YOUR ACCOUNT VALUE
We currently offer a rebalancing program that you can use to automatically
reallocate your account value among the variable investment options. You must
tell us:
(a) the percentage you want invested in each variable investment option (whole
percentages only), and
(b) how often you want the rebalancing to occur (quarterly, semiannually, or
annually on a contract year basis. Rebalancing will occur on the same day of
the month as the contract date).
While your rebalancing program is in effect, we will transfer amounts among
each variable investment option so that the percentage of your account value
that you specify is invested in each option at the end of each rebalancing
date. Your entire account value in the variable investment options must be
included in the rebalancing program.
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Rebalancing does not assure a profit or protect against loss. You should
periodically review your allocation percentages as your needs change. You may
want to discuss the rebalancing program with your registered representative or
other financial adviser before electing the program.
- --------------------------------------------------------------------------------
You may elect the rebalancing program at any time. You may also change your
allocation instructions or cancel the program at any time. If you request a
transfer while the rebalancing program is in effect, we will process the
transfer as requested and then cancel the rebalancing program.
You may not elect the rebalancing program if you are participating in a dollar
cost averaging program. Rebalancing is not available for amounts you have
allocated in the fixed maturity options.
<PAGE>
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32 ACCESSING YOUR MONEY
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4
Accessing your money
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WITHDRAWING YOUR ACCOUNT VALUE
You have several ways to withdraw your account value before annuity payments
begin. The table below shows the methods available under each type of
contract. More information follows the table. For the tax consequences of
withdrawals, see "Tax information."
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METHOD OF WITHDRAWAL
- --------------------------------------------------------------------------------
SUBSTANTIALLY MINIMUM
CONTRACT LUMP SUM SYSTEMATIC EQUAL DISTRIBUTION
- --------------------------------------------------------------------------------
NQ Yes Yes No No
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Rollover IRA Yes Yes Yes Yes
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Flexible
Premium IRA Yes Yes Yes Yes
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Roth Conversion
IRA Yes Yes Yes No
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Flexible
Premium
Roth IRA Yes Yes Yes No
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QP Yes No No Yes
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Rollover TSA Yes* No No Yes
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* For some Rollover TSA contracts, your ability to take withdrawals, loans or
surrender your contract may be limited. You must provide withdrawal
restriction information when you apply for a contract. See "Tax
information -- Tax Sheltered Annuity contracts (TSAs)."
LUMP SUM WITHDRAWALS
(All contracts)
You may take lump sum withdrawals from your account value at any time.
(Rollover TSA contracts may have restrictions.) The minimum amount you may
withdraw is $1,000. If you request to withdraw more than 90% of a contract's
current cash value we will treat it as a request to surrender the contract for
its cash value. See "Surrendering your contract to receive its cash value"
below.
Lump sum withdrawals in excess of the 15% free withdrawal amount may be
subject to a withdrawal charge. Under Rollover TSA contracts, if a loan is
outstanding, you may only take lump sum withdrawals as long as the cash value
remaining after any withdrawal equals at least 10% of the outstanding loan
plus accrued interest.
SYSTEMATIC WITHDRAWALS
(NQ and all IRA contracts)
You may take systematic withdrawals of a particular dollar amount or a
particular percentage of your account value.
You may take systematic withdrawals on a monthly, quarterly, or annual basis
as long as the withdrawals do not exceed the following percentages of your
account value: 1.2% monthly, 3.6% quarterly, and 15.0% annually. The minimum
amount you may take in each systematic withdrawal is $250. If the amount
withdrawn would be less than $250 on the date a withdrawal is to be taken, we
will not make a payment and we will terminate your systematic withdrawal
election.
We will make the withdrawals on any day of the month that you select as long
as it is not later than the 28th day of the month. If you do not select a
date, we will make the withdrawals on the same calendar day of the month as
the contract date. You must wait at least 28 days after your contract is
issued before your systematic withdrawals can begin.
You may elect to take systematic withdrawals at any time. If you own an IRA
contract, you may elect this withdrawal method only if you are between ages
59 1/2 and 70 1/2. You may not elect the systematic withdrawal method if you
have balances in the account for special dollar cost averaging.
You may change the payment frequency, or the amount or percentage of your
systematic withdrawals, once each contract year. However, you may not change
the amount or percentage in any contract year in which you have already taken
a lump sum withdrawal. You can cancel the systematic withdrawal option at any
time.
Systematic withdrawals are not subject to a withdrawal charge, except to the
extent that, when added to a lump sum withdrawal previously taken in the same
contract year, the systematic withdrawal exceeds the 15% free withdrawal
amount.
<PAGE>
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ACCESSING YOUR MONEY 33
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SUBSTANTIALLY EQUAL WITHDRAWALS
(All IRA contracts)
The substantially equal withdrawals option allows you to receive distributions
from your account value without triggering the 10% additional federal tax
penalty, which normally applies to distributions made before age 59 1/2. See
"Tax information." Once you begin to take substantially equal withdrawals, you
should not stop them or change the pattern of your withdrawals until the later
of age 591|M/2 or five full years after the first withdrawal. If you stop or
change the withdrawals or take a lump sum withdrawal, you may be liable for
the 10% federal tax penalty that would have otherwise been due on prior
withdrawals made under this option and for any interest on those withdrawals.
You may elect to take substantially equal withdrawals at any time before age
59 1/2. We will make the withdrawal on any day of the month that you select
as long as it is not later than the 28th day of the month. You may not elect
to receive the first payment in the same contract year in which you took a
lump sum withdrawal. We will calculate the amount of your substantially equal
withdrawals. The payments will be made monthly, quarterly, or annually as you
select. These payments will continue until we receive written notice from you
to cancel this option or you take a lump sum withdrawal. You may elect to
start receiving substantially equal withdrawals again, but the payments may
not restart in the same contract year in which you took a lump sum withdrawal.
We will calculate the new withdrawal amount.
You may not elect substantially equal withdrawals if you have balances in the
account for special dollar cost averaging.
Substantially equal withdrawals are not subject to a withdrawal charge.
MINIMUM DISTRIBUTION WITHDRAWALS
(Rollover IRA, Flexible Premium IRA, QP, and Rollover TSA
contracts only - See "Tax information")
We offer the minimum distribution withdrawal option to help you meet required
minimum distributions under federal income tax rules. You may elect this
option in the year in which you reach age 70 1/2. The minimum amount we will
pay out is $250. You may elect the method you want us to use to calculate your
minimum distribution withdrawals from the choices we offer. Currently, minimum
distribution withdrawal payments will be made annually.
We do not impose a withdrawal charge on minimum distribution withdrawals
except if when added to a lump sum withdrawal previously taken in the same
contract year, the minimum distribution withdrawal exceeds the 15% free
withdrawal amount.
We will calculate your annual payment based on your account value at the end
of the prior calendar year based on the method you choose.
Under Rollover TSA contracts, you may not elect minimum distribution
withdrawals if a loan is outstanding.
- --------------------------------------------------------------------------------
For Rollover IRA, Flexible Premium IRA, QP, and Rollover TSA contracts, we
will send a form outlining the distribution options available before you reach
age 70 1/2 (if you have not begun your annuity payments before that time).
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HOW WITHDRAWALS ARE TAKEN FROM YOUR ACCOUNT VALUE
Unless you specify otherwise, we will subtract your withdrawals on a pro rata
basis from your value in the variable investment options. If there is
insufficient value or no value in the variable investment options, any
additional amount of the withdrawal required or the total amount of the
withdrawal will be withdrawn from the fixed maturity options in order of the
earliest maturity date(s) first. A market value adjustment may apply.
HOW WITHDRAWALS AFFECT YOUR GUARANTEED MINIMUM INCOME BENEFIT AND GUARANTEED
MINIMUM DEATH BENEFIT
Withdrawals will reduce your guaranteed benefits on either a dollar-for-dollar
basis or on a pro rata basis as explained below:
<PAGE>
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34 ACCESSING YOUR MONEY
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INCOME BENEFIT
Benefit base -- Your current benefit base will be reduced on a dollar-for-dollar
basis as long as the sum of your withdrawals in a contract year is 5% or less of
the guaranteed minimum death benefit on the most recent contract date
anniversary. Once you take a withdrawal that causes the sum of your withdrawals
in a contract year to exceed 5% of the guaranteed minimum death benefit on the
most recent contract date anniversary, that withdrawal and any subsequent
withdrawals in that same contract year will reduce your current benefit base on
a pro rata basis.
DEATH BENEFIT
5% roll up to age 80 - If you elect the 5% roll up to age 80 guaranteed
minimum death benefit, your current guaranteed minimum death benefit will be
reduced on a dollar-for-dollar basis as long as the sum of your withdrawals in
a contract year is 5% or less of the guaranteed minimum death benefit on the
most recent contract date anniversary. Once you take a withdrawal that causes
the sum of your withdrawals in a contract year to exceed 5% of the guaranteed
minimum death benefit on the most recent contract date anniversary, that
withdrawal and any subsequent withdrawals in that same contract year will
reduce your current guaranteed minimum death benefit on a pro rata basis.
Annual ratchet to age 80 - If you elect the annual ratchet to age 80 guaranteed
minimum death benefit, each withdrawal will always reduce your current
guaranteed minimum death benefit on a pro rata basis.
Annuitant issue ages 80 through 83 - If your contract was issued when the
annuitant was between ages 80 and 83, each withdrawal will always reduce your
current guaranteed minimum death benefit on a pro rata basis.
------------------------
Reduction on a dollar-for-dollar basis means that your current benefit will be
reduced by the dollar amount of the withdrawal. Reduction on a pro rata basis
means that we calculate the percentage of your current account value that is
being withdrawn and we reduce your current benefit by that same percentage.
For example, if your account value is $30,000 and you withdraw $12,000, you
have withdrawn 40% of your account value. If your guaranteed minimum death
benefit was $40,000 before the withdrawal, it would be reduced by $16,000
($40,000 x.40) and your new guaranteed minimum death benefit after the
withdrawal would be $24,000 ($40,000 - $16,000).
The timing of your withdrawals and whether they exceed the 5% threshold
described above can have a significant impact on your guaranteed minimum
income benefit or guaranteed minimum death benefit.
LOANS UNDER ROLLOVER TSA CONTRACTS
You may take loans from a Rollover TSA unless restricted by the employer who
provided the Rollover TSA funds. If you cannot take a loan, or cannot take a
loan without approval from the employer who provided the funds, we will have
this information in our records based on what you and the employer who
provided the funds told us when you purchased your contract. The employer must
also tell us whether special employer plan rules of the Employee Retirement
Income Security Act of 1974 ("ERISA") apply. We will not permit you to take a
loan while you are taking minimum distribution withdrawals.
You should read the terms and conditions on our loan request form carefully
before taking out a loan. Under Rollover TSA contracts subject to ERISA, you
may only take a loan with the written consent of your spouse. Your contract
contains further details of the loan provision. Also, see "Tax information"
for general rules applicable to loans.
We will permit you to have only one loan outstanding at a time. The minimum
loan amount is $1,000. The maximum amount is $50,000 or, if less, 50% of your
account value, subject to any limits under the federal income tax rules. The
term of a loan is five years. However, if you use the loan to acquire your
primary residence, the term is 10 years. The term may not extend beyond the
earliest of:
(1) the date annuity payments begin,
(2) the date the contract terminates, and
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ACCESSING YOUR MONEY 35
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(3) the date a death benefit is paid (the outstanding loan will be deducted
from the death benefit amount).
Interest will accrue daily on your outstanding loan at a rate we set. The loan
interest rate will be equal to the Moody's Corporate Bond Yield Averages for
Baa bonds for the calendar month ending two months before the first day of the
calendar quarter in which the rate is determined.
LOAN RESERVE ACCOUNT. On the date your loan is processed, we will transfer the
amount of your loan to the loan reserve account. Unless you specify otherwise,
we will subtract your loan on a pro rata basis from your value in the variable
investment options. If there is insufficient value or no value in the variable
investment options, any additional amount of the loan will be subtracted from
the fixed maturity options in order of the earliest maturity date(s) first. A
market value adjustment may apply.
We will credit interest to the amount in the loan reserve account at a rate of
2% lower than the loan interest rate that applies for the time your loan is
outstanding. On each contract date anniversary after the date the loan is
processed, we will transfer the amount of interest earned in the loan reserve
account to the variable investment options on a pro rata basis. When you make
a loan repayment, unless you specify otherwise, we will transfer the dollar
amount of the loan repaid from the loan reserve account to the investment
options according to the allocation percentages we have on our records.
SURRENDERING YOUR CONTRACT TO RECEIVE ITS CASH VALUE
You may surrender your contract to receive its cash value at any time while
the annuitant is living and before you begin to receive annuity payments.
(Rollover TSA contracts may have restrictions.) For a surrender to be
effective, we must receive your written request and your contract at our
processing office. We will determine your cash value on the date we receive
the required information. All benefits under the contract will terminate as of
that date.
You may receive your cash value in a single sum payment or apply it to one or
more of the annuity payout options. See "Choosing your annuity payout options"
below. We will usually pay the cash value within seven calendar days, but we
may delay payment as described in "When to expect payments" below. For the tax
consequences of surrenders, see "Tax information."
WHEN TO EXPECT PAYMENTS
Generally, we will fulfill requests for payments out of the variable
investment options within seven calendar days after the date of the
transaction to which the request relates. These transactions may include
applying proceeds to a variable annuity, payment of a death benefit, payment
of any amount you withdraw (less any withdrawal charge) and, upon surrender,
payment of the cash value. We may postpone such payments or applying proceeds
for any period during which:
(1) the New York Stock Exchange is closed or restricts trading,
(2) sales of securities or determination of the fair value of a variable
investment option's assets is not reasonably practicable because of an
emergency, or
(3) the SEC, by order, permits us to defer payment to protect people remaining
in the variable investment options.
We can defer payment of any portion of your value in the fixed maturity
options and the account for special dollar cost averaging (other than for
death benefits) for up to six months while you are living. We also may defer
payments for a reasonable amount of time (not to exceed 15 days) while we are
waiting for a contribution check to clear.
All payments are made by check and are mailed to you (or the payee named in a
tax-free exchange) by U.S. mail, unless you request that we use an express
delivery service at your expense.
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36 ACCESSING YOUR MONEY
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CHOOSING YOUR ANNUITY PAYOUT OPTIONS
Equitable Accumulator offers you several choices for receiving retirement
income. Each choice enables you to receive fixed or, in some cases, variable
annuity payments.
You can choose from among the six different annuity payout options listed
below. Restrictions apply, depending on the type of contract you own.
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Annuity payout options Life annuity
Life annuity -- period
certain
Life annuity -- refund
certain
Period certain annuity
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Income Manager payout Life annuity with a period
options certain
Period certain annuity
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ANNUITY PAYOUT OPTIONS
You can choose from among the following annuity payout options:
o Life annuity: An annuity that guarantees payments for the rest of the
annuitant's life. Payments end with the last monthly payment before the
annuitant's death. Because there is no continuation of benefits following the
annuitant's death with this payout option, it provides the highest monthly
payment of any of the life annuity options, so long as the annuitant is
living.
o Life annuity -- period certain: An annuity that guarantees payments for the
rest of the annuitant's life. If the annuitant dies before the end of a
selected period of time ("period certain"), payments continue to the
beneficiary for the balance of the period certain. A life annuity with a
period certain of 10 years is the normal form of annuity under the contracts.
The period certain cannot extend beyond the annuitant's life expectancy.
o Life annuity -- refund certain: An annuity that guarantees payments for the
rest of the annuitant's life. If the annuitant dies before the amount applied
to purchase the annuity option has been recovered, payments to the beneficiary
will continue until that amount has been recovered. This payout option is
available only as a fixed annuity.
o Period certain annuity: An annuity that guarantees payments for a specific
period of time, usually 5, 10, 15, or 20 years. This option does not guarantee
payments for the rest of the annuitant's life. It does not permit any
repayment of the unpaid principal, so you cannot elect to receive part of the
payments as a single sum payment with the rest paid in monthly annuity
payments. Currently, this payout option is available only as a fixed annuity.
All of the above payout options are available as fixed annuities. With fixed
annuities, we guarantee fixed annuity payments that will be based either on
the tables of guaranteed annuity payments in your contract or on our then
current annuity rates, whichever is more favorable for you.
The life annuity, life annuity -- period certain, and life annuity -- refund
certain payout options are available on a single life or joint and survivor
life basis. The joint and survivor life annuity guarantees payments for the
rest of the annuitant's life and, after the annuitant's death, payments
continue to the survivor.
The following annuity payout options are available as variable annuities:
o Life annuity (except in New York)
o Life annuity -- period certain
o Joint and survivor life annuity (100% to survivor)
o Joint and survivor life period certain annuity (100% to survivor)
Variable annuities may be funded through your choice of variable investment
options investing in portfolios of EQ Advisors Trust. The contract also offers
a fixed annuity option that can be elected in combination with the variable
annuity payout options. The amount of each variable annuity payment will
fluctuate, depending upon the performance of the variable investment options,
and whether the actual rate
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ACCESSING YOUR MONEY 37
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of investment return is higher or lower than an assumed base rate. Please see
"Annuity Unit Values" in the SAI.
We may offer other payout options not outlined here. Your registered
representative can provide details.
SELECTING AN ANNUITY PAYOUT OPTION
When you select a payout option, we will issue you a separate written
agreement confirming your right to receive annuity payments. We require you to
return your contract before annuity payments begin.
For NQ and IRA contracts, unless you choose a different payout option, we will
pay annuity payments under a life annuity with a period certain of 10 years.
The only payout options available under QP contracts and Rollover TSA
contracts are the life annuity 10 year period certain and the joint and
survivor life annuity 10 year period certain. You choose whether these
payments will be either fixed or variable.
You can choose the date annuity payments begin but it may not be earlier than
one year from the contract date. You can change the date your annuity payments
are to begin anytime before that date as long as you do not choose a date
later than the 28th day of any month. Also, that date may not be later than
the contract date anniversary that follows the annuitant's 90th birthday. This
may be different in some states.
Before your annuity payments are to begin, we will notify you by letter that
the annuity payout options are available. Once you have selected a payout
option and payments have begun, no change can be made other than transfers (if
permitted in the future) among the variable investment options if a variable
annuity is selected.
The amount of the annuity payments will depend on:
(1) the amount applied to purchase the annuity;
(2) the type of annuity chosen, and whether it is fixed or variable. If you
choose a variable annuity, we will use an assumed base rate of either 5% or
3 1/2% to calculate the level of payments. We provide information about the
assumed base rate in the SAI;
(3) in the case of a life annuity, the annuitant's age (or the annuitant's and
joint annuitant's ages); and
(4) in certain instances, the sex of the annuitant(s).
In no event will you ever receive payments under a fixed option or an initial
payment under a variable option of less than the minimum amounts guaranteed by
the contract.
The amount we apply to provide annuity payments will depend on the type of
payout option you select. If you select a payout option that provides for
payments for the rest of the annuitant's life, then we will apply your account
value. If you select a payout option that provides for payments for a period
certain, then we will apply your cash value. However, if the period certain is
more than five years, we will apply not less than 95% of the account value.
Amounts in the fixed maturity options that are applied to a payout option
before a maturity date will result in a market value adjustment.
If, at the time you elect a payout option, the amount to be applied is less
than $2,000 or the initial payment under the form elected is less than $20
monthly, we reserve the right to pay the account value in a single sum rather
than as payments under the payout option chosen.
INCOME MANAGER PAYOUT OPTIONS
For NQ and IRA contracts, two Income Manager payout options are also
available. These are the Income Manager (life annuity with a period certain)
and the Income Manager (period certain).
For QP contracts, the Income Manager payout options are available only after
the trustee of the qualified plan directly rolls over the QP contract to a
Rollover IRA contract. In this process the ownership of the QP contract is
changed to the annuitant. The rollover to a Rollover IRA contract and the
change of ownership may only occur when the annuitant will no longer be a
participant in the qualified plan.
For Rollover TSA contracts, the Income Manager payout annuity options are
available only after the Rollover TSA
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38 ACCESSING YOUR MONEY
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contract is rolled over to a Rollover IRA contract. This may generally occur
when you are age 59 1/2, or you have separated from service with the employer
who provided the Rollover TSA funds.
The Income Manager (life annuity with a period certain) provides guaranteed
payments for the annuitant's life or for the annuitant's life and the life of
a joint annuitant. The Income Manager (period certain) provides payments for a
specified period. The contract owner and annuitant must meet the issue age and
payment requirements. Both Income Manager annuities provide guaranteed level
payments (NQ and IRA contracts). The Income Manager (life annuity with a
period certain) also provides guaranteed increasing payments (NQ contracts
only).
If you apply only part of the account value of your contract to either of the
Income Manager payout annuities we will consider it a withdrawal and may
deduct a withdrawal charge. We will not deduct a withdrawal charge if you
apply all of your account value at a time when the dollar amount of the
withdrawal charge is greater than 2% of remaining contributions (after
withdrawals). However, a new withdrawal charge schedule will apply under the
Income Manager annuity. For purposes of the withdrawal charge schedule, the
year in which your account value is applied under the Income Manager annuity
will be "contract year 1." In addition, we will not deduct a withdrawal charge
if you apply all of your account value from your Equitable Accumulator
contract when the dollar amount of the withdrawal charge under such contract
is 2% or less. This means that no withdrawal charge schedule will apply under
the Income Manager payout annuity contract.
You should consider the timing of your purchase as it relates to the potential
for withdrawal charges under the Income Manager annuity. No additional
contributions will be permitted under an Income Manager (life annuity with a
period certain).
You also may apply your account value to an Income Manager (period certain)
annuity once withdrawal charges are no longer in effect under your contract.
No withdrawal charges will apply under that Income Manager annuity.
The Income Manager annuities are described in a separate prospectus. Copies of
the most current version are available from your registered representative. To
purchase an Income Manager annuity we also require the return of your
contract.
We will issue an Income Manager annuity to put one of the payout annuities
into effect. Depending upon your circumstances, this may be done on a tax-free
basis. Please consult your tax adviser.
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CHARGES AND EXPENSES 39
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5
Charges and expenses
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CHARGES THAT EQUITABLE LIFE DEDUCTS
We deduct the following charges each day from the net assets of each variable
investment option. These charges are reflected in the unit values of each
variable investment option:
o A mortality and expense risks charge
o An administrative charge
We deduct the following charges from your account value. When we deduct these
charges from your variable investment options, we reduce the number of units
credited to your contract:
o On each contract date anniversary -- an annual administrative charge, if
applicable (Flexible Premium IRA and Flexible Premium Roth IRA contracts
only).
o At the time you make certain withdrawals or surrender your contract -- a
withdrawal charge.
o If you elect the optional benefit -- a charge for the optional baseBUILDER
benefit.
o At the time annuity payments are to begin -- charges for state premium and
other applicable taxes. An annuity administrative fee may also apply.
More information about these charges appears below. We will not increase these
charges for the life of your contract, except as noted. We may reduce certain
charges under group or sponsored arrangements. See "Group or sponsored
arrangements" below.
To help with your retirement planning, we may offer other annuities with
different charges, benefits, and features. Please contact your registered
representative for more information.
MORTALITY AND EXPENSE RISKS CHARGE
We deduct a daily charge from the net assets in each variable investment
option to compensate us for mortality and expense risks, including the
guaranteed minimum death benefit. The daily charge is equivalent to an annual
rate of 1.10% of the net assets in each variable investment option.
The mortality risk we assume is the risk that annuitants as a group will live
for a longer time than our actuarial tables predict. If that happens, we would
be paying more in annuity income than we planned. We also assume a risk that
the mortality assumptions reflected in our guaranteed annuity payment tables,
shown in each contract, will differ from actual mortality experience. Lastly,
we assume a mortality risk to the extent that at the time of death, the
guaranteed minimum death benefit exceeds the cash value of the contract. The
expense risk we assume is the risk that it will cost us more to issue and
administer the contracts than we expect.
ADMINISTRATIVE CHARGE
We deduct a daily charge from the net assets in each variable investment
option. The charge, together with the annual administrative charge described
below, is to compensate us for administrative expenses under the contracts.
The daily charge is equivalent to an annual rate of 0.25% of the net assets in
each variable investment option. We reserve the right under the contracts to
increase this charge to an annual rate of 0.35%.
ANNUAL ADMINISTRATIVE CHARGE (FLEXIBLE PREMIUM IRA AND FLEXIBLE PREMIUM
ROTH IRA CONTRACTS ONLY)
Under Flexible Premium IRA and Flexible Premium Roth IRA contracts, we deduct
an administrative charge from your account value on each contract date
anniversary. We deduct the charge if your account value on the last business
day of the contract year is less than $25,000. If your account value on such
date is $25,000 or more, we do not deduct the charge. During the first two
contract years, the charge is equal to $30 or, if less, 2% of your account
value. The charge is $30 for contract years three and later.
We will deduct this charge from your value in the variable investment options
on a pro rata basis. If there is not enough value in the variable investment
options, we will deduct all or a portion of the charge from the fixed maturity
options in order of the earliest maturity date(s) first. If you surrender your
contract during the contract year we will deduct a pro rata portion of the
charge.
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40 CHARGES AND EXPENSES
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WITHDRAWAL CHARGE
A withdrawal charge applies in two circumstances: (1) if you make one or more
withdrawals during a contract year that, in total, exceed the 15% free
withdrawal amount, described below, or (2) if you surrender your contract to
receive its cash value.
The withdrawal charge equals a percentage of the contributions withdrawn. The
percentage that applies depends on how long each contribution has been
invested in the contract. We determine the withdrawal charge separately for
each contribution according to the following table:
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CONTRACT YEAR
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1 2 3 4 5 6 7 8+
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Percentage of
contribution 7% 6% 5% 4% 3% 2% 1% 0%
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For purposes of calculating the withdrawal charge, we treat the contract year
in which we receive a contribution as "contract year 1." Amounts withdrawn up
to the free withdrawal amount are not considered withdrawal of any
contribution. We also treat contributions that have been invested the longest
as being withdrawn first. We treat contributions as withdrawn before earnings
for purposes of calculating the withdrawal charge. However, federal income tax
rules treat earnings under your contract as withdrawn first. See "Tax
information."
In order to give you the exact dollar amount of the withdrawal you request, we
deduct the amount of the withdrawal and the withdrawal charge from your
account value. Any amount deducted to pay withdrawal charges is also subject
to a withdrawal charge. We deduct the charge in proportion to the amount of
the withdrawal subtracted from each investment option. The withdrawal charge
helps cover our sales expenses.
The withdrawal charge does not apply in the circumstances described below.
15% FREE WITHDRAWAL AMOUNT. Each contract year you can withdraw up to 15% of
your account value without paying a withdrawal charge. The 15% free withdrawal
amount is determined using your account value on the most recent contract date
anniversary, minus any other withdrawals made during the contract year. The
15% free withdrawal amount does not apply if you surrender your contract.
Note the following special rule for NQ contracts issued to a charitable
remainder trust, the free withdrawal amount will equal the greater of: (1) the
current account value, less contributions that have not been withdrawn
(earnings in the contract), and (2) the 15% free withdrawal amount defined
above.
MINIMUM DISTRIBUTIONS. The withdrawal charge does not apply to withdrawals
taken under our minimum distribution withdrawal option. However, those
withdrawals are counted towards the 15% free withdrawal amount if you also
make a lump sum withdrawal in any contract year.
DISABILITY, TERMINAL ILLNESS OR CONFINEMENT TO NURSING HOME. The withdrawal
charge also does not apply if:
o The annuitant has qualified to receive Social Security disability benefits
as certified by the Social Security Administration; or
o We receive proof satisfactory to us (including certification by a licensed
physician) that the annuitant's life expectancy is six months or less; or
o The annuitant has been confined to a nursing home for more than 90 days (or
such other period, as required in your state) as verified by a licensed
physician. A nursing home for this purpose means one that is (a) approved by
Medicare as a provider of skilled nursing care service, or (b) licensed as a
skilled nursing home by the state or territory in which it is located (it must
be within the United States, Puerto Rico, or U.S. Virgin Islands) and meets
all of the following:
-- its main function is to provide skilled, intermediate, or custodial
nursing care;
-- it provides continuous room and board to three or more persons;
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CHARGES AND EXPENSES 41
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- -- it is supervised by a registered nurse or licensed practical nurse;
- -- it keeps daily medical records of each patient;
- -- it controls and records all medications dispensed; and
- -- its primary service is other than to provide housing for residents.
We reserve the right to impose a withdrawal charge, in accordance with your
contract and applicable state law, if the disability is caused by a
preexisting condition or a condition that began within 12 months of the
contract date. Some states may not permit us to waive the withdrawal charge
in the above circumstances, or may limit the circumstances for which the
withdrawal charge may be waived. Your registered representative can provide
more information or you may contact our processing office.
baseBUILDER BENEFITS CHARGE
If you elect the baseBUILDER combined guaranteed minimum income benefit and
guaranteed minimum death benefit, we deduct a charge annually from your
account value on each contract date anniversary. The charge is equal to 0.30%
of the benefit base in effect on the contract date anniversary.
We will deduct this charge from your value in the variable investment options
on a pro rata basis. If there is not enough value in the variable investment
options, we will deduct all or a portion of the charge from the fixed maturity
options in order of the earliest maturity date(s) first. A market value
adjustment may apply.
CHARGES FOR STATE PREMIUM AND OTHER APPLICABLE TAXES
We deduct a charge for applicable taxes such as premium taxes that may be
imposed in your state. Generally, we deduct the charge from the amount applied
to provide an annuity payout option. The current tax charge that might be
imposed varies by state and ranges from 0% to 3.5% (1% in Puerto Rico and 5%
in the U.S. Virgin Islands).
ANNUITY ADMINISTRATIVE FEE
We generally deduct a fee of up to $350 from the amount to be applied to
purchase a life annuity payout option.
CHARGES THAT EQ ADVISORS TRUST DEDUCTS
EQ Advisors Trust deducts charges for the following types of fees and
expenses:
o Management fees ranging from 0.25% to 1.15%.
o 12b-1 fees of 0.25%.
o Operating expenses, such as trustees' fees, independent auditors' fees,
legal counsel fees, administrative service fees, custodian fees, and liability
insurance.
o Investment-related expenses, such as brokerage commissions.
These charges are reflected in the daily share price of each portfolio. Since
shares of EQ Advisors Trust are purchased at their net asset value, these fees
and expenses are, in effect, passed on to the variable investment options and
are reflected in their unit values. For more information about these charges,
please refer to the prospectus for EQ Advisors Trust following this
prospectus.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce the withdrawal
charge or the mortality and expense risks charge, or change the minimum
initial contribution requirements. We also may change the guaranteed minimum
income benefit and the guaranteed minimum death benefit, or offer variable
investment options that invest in shares of EQ Advisors Trust that are not
subject to the 12b-1 fee. Group arrangements include those in which a trustee
or an employer, for example, purchases contracts covering a group of
individuals on a group basis. Group arrangements are not available for IRA
contracts. Sponsored arrangements include those in which an employer allows us
to sell contracts to its employees or retirees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group or sponsoring
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42 CHARGES AND EXPENSES
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organization, among other factors. We take all these factors into account when
reducing charges. To qualify for reduced charges, a group or sponsored
arrangement must meet certain requirements, such as requirements for size and
number of years in existence. Group or sponsored arrangements that have been
set up solely to buy contracts or that have been in existence less than six
months will not qualify for reduced charges.
We also may establish different rates to maturity for the fixed maturity
options under different classes of contracts for group or sponsored
arrangements.
We will make these and any similar reductions according to our rules in effect
when we approve a contract for issue. We may change these rules from time to
time. Any variation will reflect differences in costs or services and will not
be unfairly discriminatory.
Group or sponsored arrangements may be governed by federal income tax rules,
ERISA, or both. We make no representations with regard to the impact of these
and other applicable laws on such programs. We recommend that employers,
trustees, and others purchasing or making contracts available for purchase
under such programs seek the advice of their own legal and benefits advisers.
OTHER DISTRIBUTION ARRANGEMENTS
We may reduce or eliminate charges when sales are made in a manner that result
in savings of sales and administrative expenses, such as sales through persons
who are compensated by clients for recommending investments and who receive no
commission or reduced commissions in connection with the sale of the
contracts. We will not permit a reduction or elimination of charges where it
would be unfairly discriminatory.
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PAYMENT OF DEATH BENEFIT 43
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6
Payment of death benefit
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YOUR BENEFICIARY AND PAYMENT OF BENEFIT
You designate your beneficiary when you apply for your contract. You may
change your beneficiary at any time. The change will be effective on the date
the written request for the change is received in our processing office. We
are not responsible for any beneficiary change request that we do not receive.
We will send you a written confirmation when we receive your request. Under
jointly owned contracts, the surviving owner is considered the beneficiary,
and will take the place of any other beneficiary. You may be limited as to the
beneficiary you can designate in a Rollover TSA contract. In a QP contract,
the beneficiary must be the trustee.
The death benefit is equal to your account value, or, if greater, the
guaranteed minimum death benefit. The guaranteed minimum death benefit is part
of your contract, whether you select the combined baseBUILDER benefit or not.
We determine the amount of the death benefit as of the date we receive
satisfactory proof of the annuitant's death and any required instructions for
the method of payment. Under Rollover TSA contracts we will deduct the amount
of any outstanding loan plus accrued interest from the amount of the death
benefit.
EFFECT OF THE ANNUITANT'S DEATH
If the annuitant dies before the annuity payments begin, we will pay the death
benefit to your beneficiary.
Generally, the death of the annuitant terminates the contract. However, a
beneficiary who is the surviving spouse of the owner/annuitant can choose to
be treated as the successor owner/annuitant and continue the contract. Only a
spouse can be a successor owner/annuitant. A successor owner/annuitant, can
only be named under NQ and IRA contracts.
For Rollover IRA and Flexible Premium IRA contracts, a beneficiary who is not
a surviving spouse may be able to have limited ownership as discussed under
"Beneficiary continuation option for Rollover IRA and Flexible Premium IRA
contracts" below.
WHEN AN NQ CONTRACT OWNER DIES BEFORE THE ANNUITANT
Under certain conditions the owner can change after the original owner's
death. When you are not the annuitant under an NQ contract and you die before
annuity payments begin, the beneficiary named to receive the death benefit
upon the annuitant's death will automatically become the successor owner. If
you do not want the beneficiary to be the successor owner, you should name a
specific successor owner. You may name a successor owner at any time by
sending satisfactory notice to our processing office. If the contract is
jointly owned and the first owner to die is not the annuitant, the surviving
owner becomes the sole contract owner. This person will be considered the
successor owner for purposes of the distribution rules described in this
section. The surviving owner automatically takes the place of any other
beneficiary designation.
Unless the surviving spouse of the owner who has died (or in the case of a
joint ownership situation, the surviving spouse of the first owner to die) is
the successor owner for this purpose, the entire interest in the contract must
be distributed under the following rules:
o The cash value of the contract must be fully paid to the designated
beneficiary (new owner) by December 31st of the fifth calendar year after your
death (or in a joint ownership situation, the death of the first owner to
die).
o The successor owner may instead elect to receive the cash value as a life
annuity (or payments for a period certain of not longer than the new owner's
life expectancy). Payments must begin no later than December 31st following
the calendar year of the non-annuitant owner's death. Unless this alternative
is elected, we will pay any cash value on December 31st of the fifth calendar
year following the year of your death (or the death of the first owner to
die).
o If the surviving spouse is the successor owner or joint owner, the spouse
may elect to continue the contract. No distributions are required as long as
the surviving spouse and annuitant are living.
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44 PAYMENT OF DEATH BENEFIT
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HOW DEATH BENEFIT PAYMENT IS MADE
We will pay the death benefit to the beneficiary in the form of the annuity
payout option you have chosen. If you have not chosen an annuity payout option
as of the time of the annuitant's death, the beneficiary will receive the
death benefit in a single sum. However, subject to any exceptions in the
contract, our rules and any applicable requirements under federal income tax
rules, the beneficiary may elect to apply the death benefit to one or more
annuity payout options we offer at the time. See "Choosing your annuity payout
options" under "Accessing your money" earlier in this prospectus. Please note
that if you are both the contract owner and the annuitant, you may elect only
a life annuity or an annuity that does not extend beyond the life expectancy
of the beneficiary.
SUCCESSOR OWNER AND ANNUITANT
If you are both the contract owner and the annuitant, and your spouse is the
sole beneficiary or the joint owner, then your spouse may elect to receive the
death benefit or continue the contract as successor owner/annuitant.
If your surviving spouse decides to continue the contract, then on the
contract date anniversary following your death, we will increase the account
value to equal your current guaranteed minimum death benefit, if it is higher
than the account value. In determining whether the guaranteed minimum death
benefit will continue to grow, we will use your surviving spouse's age (as of
the contract date anniversary).
BENEFICIARY CONTINUATION OPTION FOR ROLLOVER IRA AND FLEXIBLE PREMIUM IRA
CONTRACTS
Upon your death under a Rollover IRA or Flexible Premium IRA contract, a
nonspouse beneficiary may generally elect to keep the contract in your name
and receive distributions under the contract instead of the death benefit
being paid in a single sum.
If you die AFTER the "Required Beginning Date" (see "Tax information") for
required minimum distributions, the contract will continue if:
(a) you were receiving minimum distribution withdrawals from this contract; and
(b) the pattern of minimum distribution withdrawals you chose was based in
part on the life of the designated beneficiary.
The withdrawals will then continue to be paid to the beneficiary on the same
basis as you chose before your death. We will be able to tell your beneficiary
whether this option is available to them. You should contact our processing
office for further information.
If you die BEFORE the Required Beginning Date (and therefore you were not
taking minimum distribution withdrawals under the contract), an eligible
beneficiary may take minimum distribution withdrawals under the contract. We
will increase the account value to equal the death benefit if the death
benefit is greater than the account value. That amount will be used to provide
the withdrawals. If the eligible beneficiary elects as described in the next
paragraph, these withdrawals will begin by December 31st of the calendar year
following your death. These withdrawals will be based on the beneficiary's
life expectancy. If there is more than one beneficiary, the shortest life
expectancy is used. An eligible beneficiary can choose instead to continue the
contract in your name without having to take annual withdrawals. If the
beneficiary chooses this option, all amounts must be distributed from the
contract by December 31 of the fifth calendar year following your death.
The designated beneficiary must be a natural person and of legal age at the
time of election. The beneficiary must elect this option within 30 days
following the date we receive proof of your death. The death benefit will be
paid to the beneficiary according to our standard procedures, unless an
election is made within 30 days to: (1) receive the death benefit; (2)
continue the contract and take annual withdrawals as described above; or (3)
defer payment of the account value for up to five years.
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PAYMENT OF DEATH BENEFIT 45
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While the contract continues in your name, the beneficiary may make transfers
among the investment options. However, additional contributions will not be
permitted and the guaranteed minimum income benefit and the death benefit
(including the guaranteed minimum death benefit) provisions will no longer be
in effect. Although the only withdrawals that will be permitted are minimum
distribution withdrawals, the beneficiary may choose at any time to withdraw
all of the account value and no withdrawal charges will apply.
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46 TAX INFORMATION
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7
Tax information
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OVERVIEW
In this part of the prospectus, we discuss the current federal income tax
rules that generally apply to Equitable Accumulator contracts owned by United
States taxpayers. The tax rules can differ, depending on the type of contract,
whether NQ, Rollover IRA, Flexible Premium IRA, Roth Conversion IRA, Flexible
Premium Roth IRA, QP, or Rollover TSA. Therefore, we discuss the tax aspects
of each type of contract separately.
Federal income tax rules include the United States laws in the Internal
Revenue Code, and Treasury Department Regulations and Internal Revenue Service
("IRS") interpretations of the Internal Revenue Code. These tax rules may
change. We cannot predict whether, when, or how these rules could change. Any
change could affect contracts purchased before the change.
We cannot provide detailed information on all tax aspects of the contracts.
Moreover, the tax aspects that apply to a particular person's contract may
vary depending on the facts applicable to that person. We do not discuss state
income and other state taxes, federal income tax, and withholding rules for
non-U.S. taxpayers, or federal gift and estate taxes. Transfers of the
contract, rights under the contract, or payments under the contract may be
subject to gift or estate taxes. You should not rely only on this document,
but should consult your tax adviser before your purchase.
If you are buying a contract to fund a retirement plan that already provides
tax deferral under sections of the Internal Revenue Code (IRA, QP, and
Rollover TSA), you should do so for the contract's features and benefits other
than tax deferral. In such situations, the tax deferral of the contract does
not provide additional benefits.
TRANSFERS AMONG INVESTMENT OPTIONS
You can make transfers among investment options inside the contract without
triggering taxable income.
TAXATION OF NONQUALIFIED ANNUITIES
CONTRIBUTIONS
You may not deduct the amount of your contributions to a nonqualified annuity
contract.
CONTRACT EARNINGS
Generally, you are not taxed on contract earnings until you receive a
distribution from your contract, whether as a withdrawal or as an annuity
payment. However, earnings are taxable, even without a distribution:
o if a contract fails investment diversification requirements as specified in
federal income tax rules (these rules are based on or are similar to those
specified for mutual funds under the securities laws);
o if you transfer a contract, for example, as a gift to someone other than
your spouse (or former spouse);
o if you use a contract as security for a loan (in this case, the amount
pledged will be treated as a distribution); and
o if the owner is other than an individual (such as a corporation,
partnership, trust, or other non-natural person).
All nonqualified deferred annuity contracts that Equitable Life and its
affiliates issue to you during the same calendar year are linked together and
treated as one contract for calculating the taxable amount of any distribution
from any of those contracts.
ANNUITY PAYMENTS
Once annuity payments begin, a portion of each payment is taxable as ordinary
income. You get back the remaining portion without paying taxes on it. This is
your "investment in the contract." Generally, your investment in the contract
equals the contributions you made, less any amounts you previously withdrew
that were not taxable.
For fixed annuity payments, the tax-free portion of each payment is determined
by (1) dividing your investment in the contract by the total amount you are
expected to receive out of the contract, and (2) multiplying the result by the
amount
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of the payment. For variable annuity payments, your investment in the contract
divided by the number of expected payments is your tax-free portion of each
payment.
Once you have received the amount of your investment in the contract, all
payments after that are fully taxable. If payments under a life annuity stop
because the annuitant dies, there is an income tax deduction for any
unrecovered investment in the contract.
PAYMENTS MADE BEFORE ANNUITY PAYMENTS BEGIN
If you make withdrawals before annuity payments begin under your contract,
they are taxable to you as ordinary income if there are earnings in the
contract. Generally, earnings are your account value less your investment in
the contract. If you withdraw an amount which is more than the earnings in the
contract as of the date of the withdrawal, the balance of the distribution is
treated as a return of your investment in the contract and is not taxable.
CONTRACTS PURCHASED THROUGH EXCHANGES
You may purchase your NQ contract through an exchange of another contract.
Normally, exchanges of contracts are taxable events. The exchange will not be
taxable under Section 1035 of the Internal Revenue Code if:
o the contract that is the source of the funds you are using to purchase the
NQ contract is another nonqualified deferred annuity contract or life
insurance or endowment contract.
o the owner and the annuitant are the same under the source contract and the
Equitable Accumulator NQ contract. If you are using a life insurance or
endowment contract the owner and the insured must be the same on both sides of
the exchange transaction.
The tax basis of the source contract carries over to the Equitable Accumulator
NQ contract.
SURRENDERS
If you surrender or cancel the contract, the distribution is taxable as
ordinary income (not capital gain) to the extent it exceeds your investment in
the contract.
DEATH BENEFIT PAYMENTS MADE TO A BENEFICIARY AFTER YOUR DEATH
For the rules applicable to death benefits, see "Payment of death benefit"
earlier in this prospectus. The tax treatment of a death benefit taken as a
single sum is generally the same as the tax treatment of a withdrawal from or
surrender of your contract. The tax treatment of a death benefit taken as
annuity payments is generally the same as the tax treatment of annuity
payments under your contract.
EARLY DISTRIBUTION PENALTY TAX
If you take distributions before you are age 59 1/2 a penalty tax of 10% of
the taxable portion of your distribution applies in addition to the income
tax. The extra penalty tax does not apply to pre-age 59 1/2 distributions
made:
o on or after your death; or
o because you are disabled (special federal income tax definition); or
o in the form of substantially equal periodic annuity payments for your life
(or life expectancy) or the joint lives (or joint life expectancy) of you and
a beneficiary.
SPECIAL RULES FOR NQ CONTRACTS ISSUED IN PUERTO RICO
Under current law we treat income from NQ contracts as U.S. source. A
Puerto Rico resident is subject to U.S. taxation on such U.S. source income.
Only Puerto Rico source income of Puerto Rico residents is excludable from
U.S. taxation. Income from NQ contracts is also subject to Puerto Rico tax.
The calculation of the taxable portion of amounts distributed from a contract
may differ in the two jurisdictions. Therefore, you might have to file both
U.S. and Puerto Rico tax returns, showing different amounts of income from the
contract for each tax return. Puerto Rico generally provides a credit against
Puerto Rico tax for U.S. tax paid. Depending on your personal situation and
the timing of the different tax liabilities, you may not be able to take full
advantage of this credit.
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INDIVIDUAL RETIREMENT ARRANGEMENTS (IRAS)
GENERAL
"IRA" stands for individual retirement arrangement. There are two basic types
of such arrangements, individual retirement accounts and individual retirement
annuities. In an individual retirement account, a trustee or custodian holds the
assets for the benefit of the IRA owner. The assets can include mutual funds and
certificates of deposit. In an individual retirement annuity, an insurance
company issues an annuity contract that serves as the IRA.
There are two basic types of IRAs, as follows:
o Traditional IRAs, typically funded on a pre-tax basis including SEP-IRAs and
SIMPLE-IRAs, issued and funded in connection with employer-sponsored
retirement plans; and
o Roth IRAs, first available in 1998, funded on an after-tax basis.
Regardless of the type of IRA, your ownership interest in the IRA cannot be
forfeited. You or your beneficiaries who survive you are the only ones who can
receive the IRA's benefits or payments.
You can hold your IRA assets in as many different accounts and annuities as you
would like, as long as you meet the rules for setting up and making
contributions to IRAs. However, if you own multiple IRAs, you may be required
to combine IRA values or contributions for tax purposes. For further information
about individual retirement arrangements, you can read Internal Revenue Service
Publication 590 ("Individual Retirement Arrangements (IRAs)"). This publication
is usually updated annually, and can be obtained from any IRS district office or
the IRS Web site (http://www.irs.ustreas.gov).
Equitable Life designs its traditional IRA contracts to qualify as
individual retirement annuities under Section 408(b) of the Internal
Revenue Code. You may purchase the contract as a traditional IRA or Roth
IRA. The traditional IRAs we offer are the Rollover IRA and Flexible
Premium IRA. The versions of the Roth IRA available are the Roth
Conversion IRA and Flexible Premium Roth IRA. This prospectus contains
the information that the IRS requires you to have before you purchase an
IRA. This section of the prospectus covers some of the special tax rules
that apply to IRAs. The next section covers Roth IRAs. Education IRAs are
not discussed in this prospectus because they are not available in
individual retirement annuity form.
The Equitable Accumulator IRA contract has been approved by the IRS as to
form for use as a traditional IRA. We have submitted the Roth IRA version
for formal IRS approval. This IRS approval is a determination only as to
the form of the annuity. It does not represent a determination of the
merits of the annuity as an investment. The IRS approval does not address
every feature possibly available under the Equitable Accumulator IRA
contract.
CANCELLATION
You can cancel an Equitable Accumulator IRA contract by following the
directions under "Your right to cancel within a certain number of days" under
"Contract features and benefits" earlier in the prospectus. You can cancel an
Equitable Accumulator Roth Conversion IRA contract issued as a result of a
full conversion of an Equitable Accumulator Rollover IRA or Flexible Premium
IRA contract by following the instructions in the request for full conversion
form. The form is available from our processing office or your registered
representative. If you cancel an IRA contract, we may have to withhold tax,
and we must report the transaction to the IRS. A contract cancellation could
have an unfavorable tax impact.
TRADITIONAL INDIVIDUAL RETIREMENT ANNUITIES
(TRADITIONAL IRAS)
CONTRIBUTIONS TO TRADITIONAL IRAS. Individuals may make three different types
of contributions to a traditional IRA:
o regular contributions out of earned income or compensation; or
o tax-free "rollover" contributions; or
o direct custodian-to-custodian transfers from other traditional IRAs ("direct
transfers").
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Regular traditional IRA, direct transfer, and rollover contributions may be
made to a Flexible Premium IRA contract. We only permit direct transfer and
rollover contributions under a Rollover IRA contract. See "Rollovers and
transfers" below.
REGULAR CONTRIBUTIONS TO TRADITIONAL IRAS
LIMITS ON CONTRIBUTIONS. Generally, $2,000 is the maximum amount that you may
contribute to all IRAs (including Roth IRAs) in any taxable year. When your
earnings are below $2,000, your earned income or compensation for the year is
the most you can contribute. This $2,000 limit does not apply to rollover
contributions or direct custodian-to-custodian transfers into a traditional
IRA. You cannot make regular traditional IRA contributions for the tax year in
which you reach age 70 1/2 or any tax year after that.
SPECIAL RULES FOR SPOUSES. If you are married and file a joint income tax
return, you and your spouse may combine your compensation to determine the
amount of regular contributions you are permitted to make to traditional IRAs
(and Roth IRAs discussed below). Even if one spouse has no compensation or
compensation under $2,000, married individuals filing jointly can contribute
up to $4,000 for any taxable year to any combination of traditional IRAs and
Roth IRAs. (Any contributions to Roth IRAs reduce the ability to contribute to
traditional IRAs and vice versa.) The maximum amount may be less if earned
income is less and the other spouse has made IRA contributions. No more than a
combined total of $2,000 can be contributed annually to either spouse's
traditional and Roth IRAs. Each spouse owns his or her traditional IRAs and
Roth IRAs even if the other spouse funded the contributions. A working spouse
age 70 1/2 or over can contribute up to the lesser of $2,000 or 100% of
"earned income" to a traditional IRA for a nonworking spouse until the year in
which the nonworking spouse reaches age 70 1/2.
DEDUCTIBILITY OF CONTRIBUTIONS. The amount of traditional IRA contributions
that you can deduct for a tax year depends on whether you are covered by an
employer-sponsored tax-favored retirement plan, as defined under special
federal income tax rules. Your Form W-2 will indicate whether or not you are
covered by such a retirement plan.
IF YOU ARE NOT COVERED BY A RETIREMENT PLAN DURING ANY PART OF THE YEAR, you
can make fully deductible contributions to your traditional IRAs for each tax
year up to $2,000 or, if less, your earned income.
IF YOU ARE COVERED BY A RETIREMENT PLAN DURING ANY PART OF THE YEAR, and your
adjusted gross income (AGI) is BELOW THE LOWER DOLLAR FIGURE IN A PHASE-OUT
RANGE, you can make fully deductible contributions to your traditional IRAs.
For each tax year, your fully deductible contribution can be up to $2,000 or,
if less, your earned income.
IF YOU ARE COVERED BY A RETIREMENT PLAN DURING ANY PART OF THE YEAR, and your
AGI falls within a phase-out range, you can make PARTIALLY DEDUCTIBLE
CONTRIBUTIONS to your traditional IRAs.
IF YOU ARE COVERED BY A RETIREMENT PLAN DURING ANY PART OF THE YEAR, and your
AGI falls ABOVE THE HIGHER FIGURE IN THE PHASE-OUT RANGE, you may not deduct
any of your regular contributions to your traditional IRAs.
If you are single and covered by a retirement plan during any part of the
taxable year, the deduction for traditional IRA contributions phases out with
AGI between $31,000 and $41,000 in 1999. This range will increase every year
until 2005 when the range is $50,000-$60,000.
If you are married and file a joint return, and you are covered by a
retirement plan during any part of the taxable year, the deduction for
traditional IRA contributions phases out with AGI between $51,000 and $61,000
in 1999. This range will increase every year until 2007 when the range is
$80,000-$100,000.
Married individuals filing separately and living apart at all times are not
considered married for purposes of this deductible contribution calculation.
Generally, the active participation in an employer-sponsored retirement plan
of an
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individual is determined independently for each spouse. Where spouses have
"married filing jointly" status, however, the maximum deductible traditional
IRA contribution for an individual who is not an active participant (but whose
spouse is an active participant) is phased out for taxpayers with AGI of
between $150,000 and $160,000.
To determine the deductible amount of the contribution in 1999, you determine
AGI and subtract $31,000 if you are single, or $51,000 if you are married and
file a joint return with your spouse. The resulting amount is your excess AGI.
You then determine the limit on the deduction for traditional IRA
contributions using the following formula:
($10,000-excess AGI) times $2,000 (or earned Equals the adjusted
divided by $10,000 x income, if less) = deductible
contribution
limit
NONDEDUCTIBLE REGULAR CONTRIBUTIONS. If you are not eligible to deduct part or
all of the traditional IRA contribution, you may still make nondeductible
contributions on which earnings will accumulate on a tax-deferred basis. The
combined deductible and nondeductible contributions to your traditional IRA
(or the nonworking spouse's traditional IRA) may not, however, exceed the
maximum $2,000 per person limit. See "Excess contributions" below. You must
keep your own records of deductible and nondeductible contributions in order
to prevent double taxation on the distribution of previously taxed amounts.
See "Withdrawals, payments and transfers of funds out of traditional IRAs"
below.
If you are making nondeductible contributions in any taxable year, or you have
made nondeductible contributions to a traditional IRA in prior years and are
receiving distributions from any traditional IRA, you must file the required
information with the IRS. Moreover, if you are making nondeductible
traditional IRA contributions, you must retain all income tax returns and
records pertaining to such contributions until interests in all traditional
IRAs are fully distributed.
WHEN YOU CAN MAKE REGULAR CONTRIBUTIONS. If you file your tax returns on a
calendar year basis like most taxpayers, you have until the April 15 return
filing deadline (without extensions) of the following calendar year to make
your regular traditional IRA contributions for a tax year.
EXCESS CONTRIBUTIONS
Excess contributions to IRAs are subject to a 6% excise tax for the year in
which made and for each year after until withdrawn. The following are excess
contributions to IRAs:
o regular contributions of more than $2,000; or
o regular contributions of more than earned income for the year, if that
amount is under $2,000; or
o regular contributions to a traditional IRA made after you reach age 70 1/2;
or
o rollover contributions of amounts which are not eligible to be rolled over.
For example, after-tax contributions to a qualified plan or minimum
distributions required to be made after age 70 1/2.
You can avoid the excise tax by withdrawing an excess contribution (rollover
or regular) before the due date (including extensions) for filing your federal
income tax return for the year. If it is an excess regular traditional IRA
contribution, you cannot take a tax deduction for the amount withdrawn. You do
not have to include the excess contribution withdrawn as part of your income.
It is also not subject to the 10% additional penalty tax on early
distributions, discussed below under "Early distribution penalty tax." You do
have to withdraw any earnings that are attributed to the excess contribution.
The withdrawn earnings would be included in your gross income and could be
subject to the 10% penalty tax.
Even after the due date for filing your return, you may withdraw an excess
rollover contribution, without income inclusion or 10% penalty, if:
(1) the rollover was from a qualified retirement plan to a traditional IRA;
(2) the excess contribution was due to incorrect information that the plan
provided; and
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(3) you took no tax deduction for the excess contribution.
RECHARACTERIZATIONS
Amounts that have been contributed as traditional IRA funds may subsequently
be treated as Roth IRA funds. Special federal income tax rules allow you to
change your mind again and have amounts that are subsequently treated as Roth
IRA funds, once again treated as traditional IRA funds. You do this by using
the forms we prescribe. This is referred to as having "recharacterized" your
contribution.
ROLLOVERS AND TRANSFERS
Rollover contributions may be made to a traditional IRA from these sources:
o qualified plans;
o TSAs (including Internal Revenue Code Section 403(b)(7) custodial accounts);
and
o other traditional IRAs.
Any amount contributed to a traditional IRA after you reach age 70 1/2 must
be net of your required minimum distribution for the year in which the
rollover or direct transfer contribution is made.
ROLLOVERS FROM QUALIFIED PLANS OR TSAS
There are two ways to do rollovers:
o Do it yourself
You actually receive a distribution that can be rolled over and you roll it
over to a traditional IRA within 60 days after the date you receive the funds.
The distribution from your qualified plan or TSA will be net of 20% mandatory
federal income tax withholding. If you want, you can replace the withheld
funds yourself and roll over the full amount.
o Direct rollover
You tell your qualified plan trustee or TSA issuer/custodian/fiduciary to send
the distribution directly to your traditional IRA issuer. Direct rollovers are
not subject to mandatory federal income tax withholding.
All distributions from a TSA or qualified plan are eligible rollover
distributions, unless the distribution is:
o only after-tax contributions you made to the plan; or
o "required minimum distributions" after age 70 1/2 or separation from service;
or
o substantially equal periodic payments made at least annually for your life
(or life expectancy) or the joint lives (or joint life expectancies) of you
and your designated beneficiary; or
o a hardship withdrawal; or
o substantially equal periodic payments made for a specified period of 10 years
or more; or
o corrective distributions that fit specified technical tax rules; or
o loans that are treated as distributions; or
o a death benefit payment to a beneficiary who is not your surviving spouse; or
o a qualified domestic relations order distribution to a beneficiary who
is not your current spouse or former spouse.
ROLLOVERS FROM TRADITIONAL IRAS TO TRADITIONAL IRAS
You may roll over amounts from one traditional IRA to one or more of your
other traditional IRAs if you complete the transaction within 60 days after
you receive the funds. You may make such a rollover only once in every
12-month period for the same funds. Trustee-to-trustee or custodian-to-custodian
direct transfers are not rollover transactions. You can make these more
frequently than once in every 12-month period.
The surviving spouse beneficiary of a deceased individual can roll over or
directly transfer an inherited traditional IRA to one or more other
traditional IRAs. Also, in some cases, traditional IRAs can be transferred on
a tax-free basis between spouses or former spouses as a result of a
court-ordered divorce or separation decree.
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WITHDRAWALS, PAYMENTS AND TRANSFERS OF FUNDS OUT OF TRADITIONAL IRAS
NO FEDERAL INCOME TAX LAW RESTRICTIONS ON WITHDRAWALS. You can withdraw any or
all of your funds from a traditional IRA at any time. You do not need to wait
for a special event like retirement.
TAXATION OF PAYMENTS. Earnings in traditional IRAs are not subject to federal
income tax until you or your beneficiary receive them. Taxable payments or
distributions include withdrawals from your contract, surrender of your
contract, and annuity payments from your contract. Death benefits are also
taxable. Except as discussed below, the total amount of any distribution from
a traditional IRA must be included in your gross income as ordinary income.
If you have ever made nondeductible IRA contributions to any traditional IRA
(it does not have to be to this particular traditional IRA contract), those
contributions are recovered tax free when you get distributions from any
traditional IRA. You must keep permanent tax records of all of your
nondeductible contributions to traditional IRAs. At the end of any year in
which you have received a distribution from any traditional IRA, you calculate
the ratio of your total nondeductible traditional IRA contributions (less any
amounts previously withdrawn tax free) to the total account balances of all
traditional IRAs you own at the end of the year plus all traditional IRA
distributions made during the year. Multiply this by all distributions from
the traditional IRA during the year to determine the nontaxable portion of
each distribution.
In addition, a distribution is not taxable if:
o the amount received is a withdrawal of excess contributions, as described
under "Excess contributions" above; or
o the entire amount received is rolled over to another traditional IRA (see
"Rollovers and transfers" above); or
o in certain limited circumstances, where the traditional IRA acts as a
"conduit," you roll over the entire amount into a qualified plan or TSA that
accepts rollover contributions. To get this conduit traditional IRA treatment:
o the source of funds you used to establish the traditional IRA must have been
a rollover contribution from a qualified plan; and
o the entire amount received from the traditional IRA (including any earnings
on the rollover contribution) must be rolled over into another qualified plan
within 60 days of the date received.
Similar rules apply in the case of a TSA.
However, you may lose conduit treatment if you make an eligible rollover
distribution contribution to a traditional IRA and you commingle this
contribution with other contributions. In that case, you may not be able to
roll over these eligible rollover distribution contributions and earnings to
another qualified plan or TSA at a future date. The Rollover IRA contract can
be used as a conduit IRA if amounts are not commingled.
Distributions from a traditional IRA are not eligible for favorable five-year
averaging (or, in some cases, ten-year averaging and long-term capital gain
treatment) available to certain distributions from qualified plans.
REQUIRED MINIMUM DISTRIBUTIONS
LIFETIME REQUIRED MINIMUM DISTRIBUTIONS. You must start taking annual
distributions from your traditional IRAs beginning at age 70 1/2.
WHEN YOU HAVE TO TAKE THE FIRST REQUIRED MINIMUM DISTRIBUTION. The first
required minimum distribution is for the calendar year in which you turn age
70 1/2. You have the choice to take this first required minimum distribution
during the calendar year you actually reach age 70 1/2, or to delay taking it
until the first three-month period in the next calendar year (January 1 --
April 1). Distributions must start no later than your Required Beginning Date,
which is April 1st of the calendar year after the calendar year in which you
turn age 70 1/2. If you choose to delay taking the first annual minimum
distribution, then you will have to take two minimum distributions in that
year -- the delayed
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one for the first year and the one actually for that year. Once minimum
distributions begin, they must be made at some time each year.
HOW YOU CAN CALCULATE REQUIRED MINIMUM DISTRIBUTIONS. There are two approaches
to taking required minimum distributions -- "account-based" or "annuity-based."
Account-based method. If you choose an account-based method, you divide the
value of your traditional IRA as of December 31st of the past calendar year by
a life expectancy factor from IRS tables. This gives you the required minimum
distribution amount for that particular IRA for that year. The required
minimum distribution amount will vary each year as the account value and your
life expectancy factors change.
You have a choice of life expectancy factors, depending on whether you choose
a method based only on your life expectancy, or the joint life expectancies of
you and another individual. You can decide to "recalculate" your life
expectancy every year by using your current life expectancy factor. You can
decide instead to use the "term certain" method, where you reduce your life
expectancy by one every year after the initial year. If your spouse is your
designated beneficiary for the purpose of calculating annual account-based
required minimum distributions, you can also annually recalculate your
spouse's life expectancy if you want. If you choose someone who is not your
spouse as your designated beneficiary for the purpose of calculating annual
account-based required minimum distributions, you have to use the term certain
method of calculating that person's life expectancy. If you pick a nonspouse
designated beneficiary, you may also have to do another special calculation.
You can later apply your traditional IRA funds to a life annuity-based payout.
You can only do this if you already chose to recalculate your life expectancy
annually (and your spouse's life expectancy if you select a spousal joint
annuity). For example, if you anticipate exercising your guaranteed minimum
income benefit or selecting any other form of life annuity payout after you
are age 70 1/2, you must have elected to recalculate life expectancies.
Annuity-based method. If you choose an annuity-based method, you do not have
to do annual calculations. You apply the account value to an annuity payout
for your life or the joint lives of you and a designated beneficiary, or for a
period certain not extending beyond applicable life expectancies.
DO YOU HAVE TO PICK THE SAME METHOD TO CALCULATE YOUR REQUIRED MINIMUM
DISTRIBUTIONS FOR ALL OF YOUR TRADITIONAL IRAS AND OTHER RETIREMENT PLANS? No.
If you want, you can choose a different method and a different beneficiary for
each of your traditional IRAs and other retirement plans. For example, you can
choose an annuity payout from one IRA, a different annuity payout from a
qualified plan, and an account-based annual withdrawal from another IRA.
WILL WE PAY YOU THE ANNUAL AMOUNT EVERY YEAR FROM YOUR TRADITIONAL IRA BASED
ON THE METHOD YOU CHOOSE? No, unless you affirmatively select an annuity
payout option or an account-based withdrawal option such as our minimum
distribution withdrawal option. Because the options we offer do not cover
every option permitted under federal income tax rules, you may prefer to do
your own required minimum distribution calculations for one or more of your
traditional IRAs.
WHAT IF YOU TAKE MORE THAN YOU NEED TO FOR ANY YEAR? The required minimum
distribution amount for your traditional IRAs is calculated on a year-by-year
basis. There are no carry-back or carry-forward provisions. Also, you cannot
apply required minimum distribution amounts you take from your qualified plans
to the amounts you have to take from your traditional IRAs and vice versa.
However, the IRS will let you calculate the required minimum distribution for
each traditional IRA that you maintain, using the method that you picked for
that particular IRA. You can add these required minimum distribution amount
calculations together. As long as the total amount you take out every year
satisfies your overall traditional IRA required minimum distribution amount,
you may choose to take your annual required minimum distribution from any one
or more traditional IRAs that you own.
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WHAT IF YOU TAKE LESS THAN YOU NEED TO FOR ANY YEAR?
Your IRA could be disqualified, and you could have to pay tax on the entire
value. Even if your IRA is not disqualified, you could have to pay a 50%
penalty tax on the shortfall (required amount for traditional IRAs less amount
actually taken). It is your responsibility to meet the required minimum
distribution rules. We will remind you when our records show that your age
70 1/2 is approaching. If you do not select a method with us, we will assume
you are taking your required minimum distribution from another traditional IRA
that you own.
WHAT ARE THE REQUIRED MINIMUM DISTRIBUTION PAYMENTS AFTER YOU DIE? If you die
after either (a) the start of annuity payments, or (b) your Required Beginning
Date, your beneficiary must receive payment of the remaining values in the
contract at least as rapidly as under the distribution method before your
death. In some circumstances, your surviving spouse may elect to become the
owner of the traditional IRA and halt distributions until he or she reaches
age 70 1/2.
If you die before your Required Beginning Date and before annuity payments
begin, federal income tax rules require complete distribution of your entire
value in the contract within five years after your death. Payments to a
designated beneficiary over the beneficiary's life or over a period certain
that does not extend beyond the beneficiary's life expectancy are also
permitted, if these payments start within one year of your death. A surviving
spouse beneficiary can also (a) delay starting any payments until you would
have reached age 70 1/2 or (b) roll over your traditional IRA into his or her
own traditional IRA.
SUCCESSOR ANNUITANT AND OWNER
If your spouse is the sole primary beneficiary and elects to become the
successor annuitant and owner, no death benefit is payable until your
surviving spouse's death.
PAYMENTS TO A BENEFICIARY AFTER YOUR DEATH
IRA death benefits are taxed the same as IRA distributions.
BORROWING AND LOANS ARE PROHIBITED TRANSACTIONS
You cannot get loans from a traditional IRA. You cannot use a traditional IRA
as collateral for a loan or other obligation. If you borrow against your IRA
or use it as collateral, its tax-favored status will be lost as of the first
day of the tax year in which this prohibited event occurs. If this happens,
you must include the value of the traditional IRA in your federal gross
income. Also, the early distribution penalty tax of 10% will apply if you have
not reached age 59 1/2 before the first day of that tax year.
EARLY DISTRIBUTION PENALTY TAX
A penalty tax of 10% of the taxable portion of a distribution applies to
distributions from a traditional IRA made before you reach age 59 1/2. The
extra penalty tax does not apply to pre-age 59 1/2 distributions made:
o on or after your death; or
o because you are disabled (special federal income tax definition); or
o used to pay certain extraordinary medical expenses (special federal income
tax definition); or
o used to pay medical insurance premiums for unemployed individuals (special
federal income tax definition); or
o used to pay certain first-time home buyer expenses (special federal income
tax definition; $10,000 lifetime total limit for these distributions from all
your traditional and Roth IRAs); or
o used to pay certain higher education expenses (special federal income tax
definition); or
o in the form of substantially equal periodic payments made at least annually
over your life (or your life expectancy), or over the joint lives of you and
your beneficiary (or your joint life expectancy) using an IRS-approved
distribution method.
To meet this last exception, you could elect to apply your contract value to
an Income Manager (life annuity with a period certain) payout annuity contract
(level payments version). You could also elect the substantially equal
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withdrawals option. We will calculate the substantially equal annual payments
under a method we select based on guidelines issued by the IRS (currently
contained in IRS Notice 89-25, Question and Answer 12). Although substantially
equal withdrawals and Income Manager payments are not subject to the 10%
penalty tax, they are taxable as discussed in "Withdrawals, payments and
transfers of funds out of traditional IRAs" above. Once substantially equal
withdrawals or Income Manager annuity payments begin, the distributions should
not be stopped or changed until the later of your reaching age 59 1/2 or five
years after the date of the first distribution, or the penalty tax, including
an interest charge for the prior penalty avoidance, may apply to all prior
distributions under either option. Also, it is possible that the IRS could
view any additional withdrawal or payment you take from your contract as
changing your pattern of substantially equal withdrawals or Income Manager
payments for purposes of determining whether the penalty applies.
ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRAS)
This section of the prospectus covers some of the special tax rules that apply
to Roth IRAs. If the rules are the same as those that apply to the traditional
IRA, we will refer you to the same topic under "traditional IRAs."
The Equitable Accumulator Roth IRA contract is designed to qualify as a Roth
individual retirement annuity under Sections 408A and 408(b) of the Internal
Revenue Code.
CONTRIBUTIONS TO ROTH IRAS
Individuals may make four different types of contributions to a Roth IRA:
o regular after-tax contributions out of earnings; or
o taxable rollover contributions from traditional IRAs ("conversion"
contributions); or
o tax-free rollover contributions from other Roth IRAs; or
o tax-free direct custodian-to-custodian transfers from other Roth IRAs
("direct transfers").
Regular after-tax, direct transfer, and rollover contributions may be made to
a Flexible Premium Roth IRA contract. We only permit direct transfer and
rollover contributions under the Roth Conversion IRA contract. See "Rollovers
and direct transfers" below. If you use the forms we require, we will also
accept traditional IRA funds which are subsequently recharacterized as Roth
IRA funds following special federal income tax rules.
REGULAR CONTRIBUTIONS TO ROTH IRAS
LIMITS ON REGULAR CONTRIBUTIONS. Generally, $2,000 is the maximum amount that
you may contribute to all IRAs (including Roth IRAs) in any taxable year. This
$2,000 limit does not apply to rollover contributions or direct
custodian-to-custodian transfers into a Roth IRA. Any contributions to Roth
IRAs reduce your ability to contribute to traditional IRAs and vice versa.
When your earnings are below $2,000, your earned income or compensation for
the year is the most you can contribute. If you are married and file a joint
income tax return, you and your spouse may combine your compensation to
determine the amount of regular contributions you are permitted to make to
Roth IRAs and traditional IRAs. See the discussion above under traditional
IRAs.
With a Roth IRA, you can make regular contributions when you reach 70 1/2, as
long as you have sufficient earnings. But, you cannot make contributions for
any year that:
o your federal income tax filing status is "married filing jointly" and your
adjusted gross income is over $160,000; or
o your federal income tax filing status is "single" and your adjusted gross
income is over $110,000.
However, you can make regular Roth IRA contributions in reduced amounts when:
o your federal income tax filing status is "married filing jointly" and your
adjusted gross income is between $150,000 and $160,000; or
o your federal income tax filing status is "single" and your adjusted gross
income is between $95,000 and $110,000.
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If you are married and filing separately and your adjusted gross income is
between $0 and $10,000 the amount of regular contributions you are permitted
to make is phased out. If your adjusted gross income is more than $10,000 you
cannot make regular Roth IRA contributions.
WHEN YOU CAN MAKE CONTRIBUTIONS. Same as traditional IRAs.
DEDUCTIBILITY OF CONTRIBUTIONS. Roth IRA contributions are not tax deductible.
ROLLOVERS AND DIRECT TRANSFERS
WHAT IS THE DIFFERENCE BETWEEN ROLLOVER AND DIRECT TRANSFER TRANSACTIONS? You
may make rollover contributions to a Roth IRA from only two sources:
o another Roth IRA ("tax-free rollover contribution"); or
o another traditional IRA, including a SEP-IRA or SIMPLE-IRA, in a taxable
conversion rollover ("conversion contribution").
You may not make contributions to a Roth IRA from a qualified plan under
Section 401(a) of the Internal Revenue Code, or a TSA under Section 403(b) of
the Internal Revenue Code. You may make direct transfer contributions to a
Roth IRA only from another Roth IRA.
The difference between a rollover transaction and a direct transfer
transaction is the following: in a rollover transaction you actually take
possession of the funds rolled over, or are considered to have received them
under tax law in the case of a change from one type of plan to another. In a
direct transfer transaction, you never take possession of the funds, but
direct the first Roth IRA custodian, trustee, or issuer to transfer the first
Roth IRA funds directly to Equitable Life, as the Roth IRA issuer. You can
make direct transfer transactions only between identical plan types (for
example, Roth IRA to Roth IRA). You can also make rollover transactions
between identical plan types. However, you can only use rollover transactions
between different plan types (for example, traditional IRA to Roth IRA).
You may make both Roth IRA to Roth IRA rollover transactions and Roth IRA to
Roth IRA direct transfer transactions. This can be accomplished on a
completely tax-free basis. However, you may make Roth IRA to Roth IRA rollover
transactions only once in any 12-month period for the same funds.
Trustee-to-trustee or custodian-to-custodian direct transfers can be made more
frequently than once a year. Also, if you send us the rollover contribution to
apply it to a Roth IRA, you must do so within 60 days after you receive the
proceeds from the original IRA to get rollover treatment.
The surviving spouse beneficiary of a deceased individual can roll over or
directly transfer an inherited Roth IRA to one or more other Roth IRAs. In
some cases, Roth IRAs can be transferred on a tax-free basis between spouses
or former spouses as a result of a court-ordered divorce or separation decree.
CONVERSION CONTRIBUTIONS TO ROTH IRAS
In a conversion rollover transaction, you withdraw (or are considered to have
withdrawn) all or a portion of funds from a traditional IRA you maintain and
convert it to a Roth IRA within 60 days after you receive (or are considered
to have received) the traditional IRA proceeds. Unlike a rollover from a
traditional IRA to another traditional IRA, the conversion rollover
transaction is not tax-free. Instead, the distribution from the traditional
IRA is generally fully taxable. For this reason, we are required to withhold
10% federal income tax from the amount converted unless you elect out of such
withholding. If you have ever made nondeductible regular contributions to any
traditional IRA -- whether or not it is the traditional IRA you are converting
- -- a pro rata portion of the distribution is tax free.
There is, however, no early distribution penalty tax on the traditional IRA
withdrawal that you are converting to a Roth IRA, even if you are under age
59 1/2.
You cannot make conversion contributions to a Roth IRA for any taxable year in
which your adjusted gross income exceeds $100,000. For this purpose, your
adjusted gross
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income is computed without the gross income stemming from the traditional IRA
conversion. You also cannot make conversion contributions to a Roth IRA for
any taxable year in which your federal income tax filing status is "married
filing separately."
Finally, you cannot make conversion contributions to a Roth IRA to the extent
that the funds in your traditional IRA are subject to the annual required
minimum distribution rule applicable to traditional IRAs beginning at age
70 1/2.
WITHDRAWALS, PAYMENTS AND TRANSFERS OF FUNDS OUT OF ROTH IRAS
NO FEDERAL INCOME TAX LAW RESTRICTIONS ON WITHDRAWALS. You can withdraw any or
all of your funds from a Roth IRA at any time; you do not need to wait for a
special event like retirement.
DISTRIBUTIONS FROM ROTH IRAS
Distributions include withdrawals from your contract, surrender of your
contract, and annuity payments from your contract. Death benefits are also
distributions.
The following distributions from Roth IRAs are free of income tax:
o Rollover from a Roth IRA to another Roth IRA;
o Direct transfer from a Roth IRA to another Roth IRA;
o Qualified distributions from a Roth IRA; and
o Return of excess contributions or amounts recharacterized to a traditional
IRA.
QUALIFIED DISTRIBUTIONS FROM ROTH IRAS. Qualified distributions from Roth IRAs
made because of one of the following four qualifying events or reasons are not
includable in income:
o you reach age 59 1/2; or
o you die; or
o you become disabled (special federal income tax definition); or
o your distribution is a "qualified first-time homebuyer distribution"
(special federal income tax definition; $10,000 lifetime total limit for
these distributions from all of your traditional and Roth IRAs).
You also have to meet a five-year aging period. A qualified distribution is
any distribution made after the five-taxable- year period beginning with the
first taxable year for which you made any contribution to any Roth IRA
(whether or not the one from which the distribution is being made). It is not
possible to have a tax-free qualified distribution before the year 2003
because of the five-year aging requirement.
NONQUALIFIED DISTRIBUTIONS FROM ROTH IRAS. Nonqualified distributions from
Roth IRAs are distributions that do not meet the qualifying event and
five-year aging period tests described above. Such distributions are
potentially taxable as ordinary income. Nonqualified distributions receive
return-of-investment-first treatment. Only the difference between the amount
of the distribution and the amount of contributions to all of your Roth IRAs
is taxable. You have to reduce the amount of contributions to all of your Roth
IRAs to reflect any previous tax-free recoveries.
You must keep your own records of regular and conversion contributions to all
Roth IRAs to assure appropriate taxation. You may have to file information on
your contributions to and distributions from any Roth IRA on your tax return.
You may have to retain all income tax returns and records pertaining to such
contributions and distributions until your interests in all Roth IRAs are
distributed.
Like traditional IRAs, taxable distributions from a Roth IRA are not entitled
to the special favorable five-year averaging method (or, in certain cases,
favorable ten-year averaging and long-term capital gain treatment) available
in certain cases to distributions from qualified plans.
REQUIRED MINIMUM DISTRIBUTIONS AT DEATH
Same as traditional IRA under "What are the required minimum distribution
payments after you die?" Lifetime required minimum distributions do not apply.
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PAYMENTS TO A BENEFICIARY AFTER YOUR DEATH
Distributions to a beneficiary generally receive the same tax treatment as if
the distribution had been made to you.
BORROWING AND LOANS ARE PROHIBITED TRANSACTIONS
Same as traditional IRA.
EXCESS CONTRIBUTIONS
Same as traditional IRA, except that regular contributions made after age
70 1/2 are not excess contributions.
Excess rollover contributions to Roth IRAs are contributions not eligible to
be rolled over (for example, conversion contributions from a traditional IRA
if your adjusted gross income is in excess of $100,000 in the conversion
year).
You can withdraw or recharacterize any contribution to a Roth IRA before the
due date (including extensions) for filing your federal income tax return for
the tax year. If you do this, you must also withdraw or recharacterize any
earnings attributable to the contribution.
EARLY DISTRIBUTION PENALTY TAX
Same as traditional IRA.
For Roth IRAs, special penalty rules may apply to amounts withdrawn
attributable to 1998 conversion rollovers.
SPECIAL RULES FOR NONQUALIFIED CONTRACTS IN QUALIFIED PLANS
Under QP contracts your plan administrator or trustee notifies you as to tax
consequences. See Appendix II.
TAX-SHELTERED ANNUITY CONTRACTS (TSAS)
GENERAL
This section of the prospectus covers some of the special tax rules that apply
to TSA contracts under Section 403(b) of the Internal Revenue Code (TSAs). If
the rules are the same as those that apply to another kind of contract, for
example, traditional IRAs, we will refer you to the same topic under
"traditional IRAs."
CONTRIBUTIONS TO TSAS
There are two ways you can make contributions to this Equitable Accumulator
Rollover TSA contract:
o a rollover from another TSA contract or arrangement that meets the
requirements of Section 403(b) of the Internal Revenue Code, or
o a full or partial direct transfer of assets ("direct transfer") from another
contract or arrangement that meets the requirements of Section 403(b) of the
Internal Revenue Code by means of IRS Revenue Ruling 90-24.
With appropriate written documentation satisfactory to us, we will accept
rollover contributions from "conduit IRAs" for TSA funds.
If you make a direct transfer, you must fill out our transfer form.
EMPLOYER-REMITTED CONTRIBUTIONS. The Equitable Accumulator Rollover TSA
contract does not accept employer-remitted contributions. However, we provide
the following discussion as part of our description of restrictions on the
distribution of funds directly transferred, which include employer-remitted
contributions to other TSAs.
Employer-remitted contributions to TSAs made through the employer's payroll
are subject to annual limits. (Tax-free transfer or tax-deferred rollover
contributions from another 403(b) arrangement are not subject to these annual
contribution limits.) Commonly, some or all of the contributions made to a TSA
are made under a salary reduction agreement between the employee and the
employer. These contributions are called "salary reduction" or "elective
deferral" contributions. However, a TSA can also be wholly or partially funded
through nonelective employer contributions or after-tax employee
contributions. Amounts attributable to salary reduction contributions to TSAs
are generally subject to withdrawal restrictions. Also, all amounts
attributable to investments in a 403(b)(7) custodial account are subject to
withdrawal restrictions discussed below.
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ROLLOVER OR DIRECT TRANSFER CONTRIBUTIONS. You may make rollover contributions
to your Equitable Accumulator Rollover TSA contract from TSAs under Section
403(b) of the Internal Revenue Code. Generally, you may make a rollover
contribution to a TSA when you have a distributable event from an existing TSA
as a result of your:
o termination of employment with the employer who provided the TSA funds; or
o reaching age 59 1/2 even if you are still employed; or
o disability (special federal income tax definition).
A transfer occurs when changing the funding vehicle, even if there is no
distributable event. Under a direct transfer, you do not receive a
distribution. We accept direct transfers of TSA funds under Revenue Ruling
90-24 only if:
o you give us acceptable written documentation as to the source of the funds,
and
o the Equitable Accumulator contract receiving the funds has provisions at
least as restrictive as the source contract.
Before you transfer funds to an Equitable Accumulator Rollover TSA contract,
you may have to obtain your employer's authorization or demonstrate that you
do not need employer authorization. For example, the transferring TSA may be
subject to Title I of ERISA, if the employer makes matching contributions to
salary reduction contributions made by employees. In that case, the employer
must continue to approve distributions from the plan or contract.
Your contribution to the Equitable Accumulator Rollover TSA must be net of the
required minimum distribution for the tax year in which we issue the contract
if:
o you are or will be at least age 70 1/2 in the current calendar year, and
o you have separated from service with the employer who provided the funds to
purchase the TSA you are transferring or rolling over to the Equitable
Accumulator Rollover TSA.
This rule applies regardless of whether the source of funds is a:
o rollover by check of the proceeds from another TSA; or
o direct rollover from another TSA; or
o direct transfer under Revenue Ruling 90-24 from another TSA.
Further, you must use the same elections regarding recalculation of your life
expectancy (and if applicable, your spouse's life expectancy) if you have
already begun to receive required minimum distributions from or with respect
to the TSA from which you are making your contribution to the Equitable
Accumulator Rollover TSA. You must also elect or have elected a minimum
distribution calculation method requiring recalculation of your life
expectancy (and if applicable, your spouse's life expectancy) if you elect an
annuity payout for the funds in this contract subsequent to this year.
DISTRIBUTIONS FROM TSAS
GENERAL. Depending on the terms of the employer plan and your employment
status, you may have to get your employer's consent to take a loan or
withdrawal. Your employer will tell us this when you establish the TSA through
a direct transfer.
WITHDRAWAL RESTRICTIONS. If this is a Revenue Ruling 90-24 direct transfer, we
will treat all amounts transferred to this contract and any future earnings on
the amount transferred as not eligible for withdrawal until one of the
following events happens:
o you are separated from service with the employer who provided the funds to
purchase the TSA you are transferring to the Equitable Accumulator Rollover
TSA;
o you reach age 59 1/2; or
o you die; or
o you become disabled (special federal income tax definition); or
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o you take a hardship withdrawal (special federal income tax definition).
If any portion of the funds directly transferred to your TSA contract is
attributable to amounts that you invested in a 403(b)(7) custodial account,
such amounts, including earnings, are subject to withdrawal restrictions. With
respect to the portion of the funds that were never invested in a 403(b)(7)
custodial account, these restrictions apply to the salary reduction (elective
deferral) contributions to a TSA annuity contract you made and any earnings on
them. These restrictions do not apply to the amount directly transferred to
your TSA contract that represents your December 31, 1988 account balance
attributable to salary reduction contributions to a TSA annuity contract and
earnings. To take advantage of this grandfathering you must properly notify us
in writing at our processing office of your December 31, 1988 account balance
if you have qualifying amounts transferred to your TSA contract.
THIS PARAGRAPH APPLIES ONLY TO PARTICIPANTS IN A TEXAS OPTIONAL RETIREMENT
PROGRAM. Texas Law permits withdrawals only after one of the following
distributable events occur:
(1) the requirements for minimum distribution (discussed under "Required
minimum distributions" below) are met; or
(2) death; or
(3) retirement; or
(4) termination of employment in all Texas public institutions of higher
education.
For you to make a withdrawal, we must receive a properly completed written
acknowledgement from the employer. If a distributable event occurs before you
are vested, we will refund to the employer any amounts provided by an
employer's first-year matching contribution. We reserve the right to change
these provisions without your consent, but only to the extent necessary to
maintain compliance with applicable law. Loans are not permitted under Texas
Optional Retirement Programs.
TAX TREATMENT OF DISTRIBUTIONS. Amounts held under TSAs are generally not
subject to federal income tax until benefits are distributed. Distributions
include withdrawals from your TSA contract and annuity payments from your TSA
contract. Death benefits paid to a beneficiary are also taxable distributions.
Unless an exception applies, amounts distributed from TSAs are includable in
gross income as ordinary income. Distributions from TSAs may be subject to 20%
federal income tax withholding. See "Federal and state income tax withholding
and information reporting" below. In addition, TSA distributions may be
subject to additional tax penalties.
If you have made after-tax contributions, you will have a tax basis in your
TSA contract, which will be recovered tax-free. Since we do not track your
investment in the contract, if any, it is your responsibility to determine how
much of the distribution is taxable.
DISTRIBUTIONS BEFORE ANNUITY PAYMENTS BEGIN. On a total surrender, the amount
received in excess of the investment in the contract is taxable. We will
report the total amount of the distribution. The amount of any partial
distribution from a TSA prior to the annuity starting date is generally
taxable, except to the extent that the distribution is treated as a withdrawal
of after-tax contributions. Distributions are normally treated as pro rata
withdrawals of after-tax contributions and earnings on those contributions.
ANNUITY PAYMENTS. If you elect an annuity payout option, you will recover any
investment in the contract as each payment is received by dividing the
investment in the contract by an expected return determined under an IRS table
prescribed for qualified annuities. The amount of each payment not excluded
from income under this exclusion ratio is fully taxable. The full amount of
the payments received after your investment in the contract is recovered is
fully taxable. If you (and your beneficiary under a joint and survivor
annuity) die before recovering the full investment in the contract, a
deduction is allowed on your (or your beneficiary's) final tax return.
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PAYMENTS TO A BENEFICIARY AFTER YOUR DEATH
Death benefit distributions from a TSA generally receive the same tax
treatment as distributions during your lifetime. In some instances,
distributions from a TSA made to your surviving spouse may be rolled over to a
traditional IRA.
LOANS FROM TSAS
You may take loans from a TSA unless restricted by the employer (for example,
under an employer plan subject to ERISA). If you cannot take a loan, or cannot
take a loan without approval from the employer who provided the funds, we will
have this information in our records based on what you and the employer who
provided the TSA funds told us when you purchased your contract.
Loans are generally not treated as a taxable distribution. If the amount of
the loan exceeds permissible limits under federal income tax rules when made,
the amount of the excess is treated (solely for tax purposes) as a taxable
distribution. Additionally, if the loan is not repaid at least quarterly,
amortizing (paying down) interest and principal, the amount not repaid when
due will be treated as a taxable distribution. Under Proposed Treasury
Regulations the entire unpaid balance of the loan is includable in income in
the year of the default.
TSA loans are subject to federal income tax limits and may also be subject to
the limits of the plan from which the funds came. Federal income tax rule
requirements apply even if the plan is not subject to ERISA. For example,
loans offered by TSAs are subject to the following conditions:
o The amount of a loan to a participant, when combined with all other loans to
the participant from all qualified plans of the employer, cannot exceed the
lesser of (1) the greater of $10,000 or 50% of the participant's
nonforfeitable accrued benefits and (2) $50,000 reduced by the excess (if any)
of the highest outstanding loan balance over the previous twelve months over
the outstanding loan balance of plan loans on the date the loan was made.
o In general, the term of the loan cannot exceed five years unless the loan is
used to acquire the participant's primary residence. Equitable Accumulator
Rollover TSA contracts have a term limit of 10 years for loans used to acquire
the participant's primary residence.
o All principal and interest must be amortized in substantially level payments
over the term of the loan, with payments being made at least quarterly.
The amount borrowed and not repaid may be treated as a distribution if:
o the loan does not qualify under the conditions above;
o the participant fails to repay the interest or principal when due; or
o in some instances, the participant separates from service with the employer
who provided the funds or the plan is terminated.
In this case, the participant may have to include the unpaid amount due as
ordinary income. In addition, the 10% early distribution penalty tax may
apply. The amount of the unpaid loan balance is reported to the IRS on Form
1099-R as a distribution.
TAX-DEFERRED ROLLOVERS AND DIRECT TRANSFERS
You may roll over any "eligible rollover distribution" from a TSA into another
eligible retirement plan, either directly or within 60 days of your receiving
the distribution. To the extent rolled over, a distribution remains
tax-deferred.
You may roll over a distribution from a TSA to another TSA or to a traditional
IRA. A spousal beneficiary may roll over death benefits only to a traditional
IRA.
The taxable portion of most distributions will be eligible for rollover,
except as specifically excluded under federal income tax rules. Distributions
that you cannot roll over generally include periodic payments for life or for
a period of 10 years or more, hardship withdrawals, and required minimum
distributions under federal income tax rules.
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Direct transfers of TSA funds from one TSA to another under Revenue Ruling 90-24
are not distributions.
REQUIRED MINIMUM DISTRIBUTIONS
Same as traditional IRA with these differences:
WHEN YOU HAVE TO TAKE THE FIRST REQUIRED MINIMUM DISTRIBUTION. The minimum
distribution rules force TSA participants to start calculating and taking
annual distributions from their TSAs by a required date. Generally, you must
take the first required minimum distribution for the calendar year in which
you turn age 70 1/2. You may be able to delay the start of required minimum
distributions for all or part of your account balance until after age 70 1/2,
as follows:
o For TSA participants who have not retired from service with the employer who
provided the funds for the TSA by the calendar year the participant turns age
70 1/2, the required beginning date for minimum distributions is extended to
April 1 following the calendar year of retirement.
o TSA plan participants may also delay the start of required minimum
distributions to age 75 of the portion of their account value attributable to
their December 31, 1986 TSA account balance, even if retired at age 70 1/2.
We will know whether or not you qualify for this exception because it will
only apply to people who establish their Equitable Accumulator Rollover TSA by
direct Revenue Ruling 90-24 transfers. If you do not give us the amount of
your December 31, 1986 account balance that is being transferred to the
Equitable Accumulator Rollover TSA on the form used to establish the TSA, you
do not qualify.
SPOUSAL CONSENT RULES
This will only apply to you if you establish your Equitable Accumulator
Rollover TSA by direct Revenue Ruling 90-24 transfer. Your employer will tell
us on the form used to establish the TSA whether or not you need to get
spousal consent for loans, withdrawals, or other distributions. If you do, you
will need such consent if you are married when you request a withdrawal under
the TSA contract. In addition, unless you elect otherwise with the written
consent of your spouse, the retirement benefits payable under the plan must be
paid in the form of a qualified joint and survivor annuity. A qualified joint
and survivor annuity is payable for the life of the annuitant with a survivor
annuity for the life of the spouse in an amount not less than one-half of the
amount payable to the annuitant during his or her lifetime. In addition, if
you are married, the beneficiary must be your spouse, unless your spouse
consents in writing to the designation of another beneficiary.
If you are married and you die before annuity payments have begun, payments
will be made to your surviving spouse in the form of a life annuity unless at
the time of your death a contrary election was in effect. However, your
surviving spouse may elect, before payments begin, to receive payments in any
form permitted under the terms of the TSA contract and the plan of the
employer who provided the funds for the TSA.
EARLY DISTRIBUTION PENALTY TAX
A penalty tax of 10% of the taxable portion of a distribution applies to
distributions from a TSA before you reach age 59 1/2. This is in addition to
any income tax. There are exceptions to the extra penalty tax. No penalty tax
applies to pre-age 59 1/2 distributions made:
o on or after your death; or
o because you are disabled (special federal income tax definition); or
o to pay for certain extraordinary medical expenses (special federal income tax
definition); or
o if you are separated from service, any form of payout after you are age 55; or
o only if you are separated from service, a payout in the form of
substantially equal periodic payments made at least annually over your life
(or your life expectancy), or over the joint lives of you and your beneficiary
(or your joint life expectancy) using an IRS-approved distribution method.
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FEDERAL AND STATE INCOME TAX WITHHOLDING AND INFORMATION REPORTING
We must withhold federal income tax from distributions from annuity contracts.
You may be able to elect out of this income tax withholding in some cases.
Generally, we do not have to withhold if your distributions are not taxable.
The rate of withholding will depend on the type of distribution and, in
certain cases, the amount of your distribution. Any income tax withheld is a
credit against your income tax liability. If you do not have sufficient income
tax withheld or do not make sufficient estimated income tax payments, you may
incur penalties under the estimated income tax rules.
You must file your request not to withhold in writing before the payment or
distribution is made. Our processing office will provide forms for this
purpose. You cannot elect out of withholding unless you provide us with your
correct Taxpayer Identification Number and a United States residence address.
You cannot elect out of withholding if we are sending the payment out of the
United States.
You should note the following special situations:
o We might have to withhold on amounts we pay under a free look or
cancellation.
o We are generally required to withhold on conversion rollovers of traditional
IRAs to Roth IRAs, as it is considered a withdrawal from the traditional IRA
and is taxable.
o We are required to withhold on the gross amount of a distribution from a
Roth IRA unless you elect out of withholding. This may result in tax being
withheld even though the Roth IRA distribution is not taxable in whole or in
part.
Special withholding rules apply to foreign recipients and United States
citizens residing outside the United States. We do not discuss these rules
here. Certain states have indicated that state income tax withholding will
also apply to payments from the contracts made to residents. In some states,
you may elect out of state withholding, even if federal withholding applies.
Generally, an election out of federal withholding will also be considered an
election out of state withholding. If you need more information concerning a
particular state or any required forms, call our processing office at the
toll-free number.
FEDERAL INCOME TAX WITHHOLDING ON PERIODIC ANNUITY PAYMENTS
We withhold differently on "periodic" and "non-periodic" payments. For a
periodic annuity payment, for example, unless you specify a different number
of withholding exemptions, we withhold assuming that you are married and
claiming three withholding exemptions. If you do not give us your correct
Taxpayer Identification Number, we withhold as if you are single with no
exemptions.
Based on the assumption that you are married and claiming three withholding
exemptions, if you receive less than $14,700 in periodic annuity payments in
1999, your payments will generally be exempt from federal income tax
withholding. You could specify a different choice of withholding exemption or
request that tax be withheld. Your withholding election remains effective
unless and until you revoke it. You may revoke or change your withholding
election at any time.
FEDERAL INCOME TAX WITHHOLDING ON NON-PERIODIC ANNUITY PAYMENTS (WITHDRAWALS)
For a non-periodic distribution (total surrender or partial withdrawal), we
generally withhold at a flat 10% rate. We apply that rate to the taxable
amount in the case of nonqualified contracts, and to the payment amount in the
case of IRAs and Roth IRAs.
You cannot elect out of withholding if the payment is an eligible rollover
distribution from a qualified plan or TSA. If a non-periodic distribution from
a qualified plan or TSA is not an eligible rollover distribution then the 10%
withholding rate applies.
MANDATORY WITHHOLDING FROM TSA AND QUALIFIED PLAN DISTRIBUTIONS
Unless you have the distribution go directly to the new plan, eligible
rollover distributions from qualified plans and TSAs are subject to mandatory
20% withholding. An eligible
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rollover distribution from a TSA can be rolled over to another TSA or a
traditional IRA. An eligible rollover distribution from a qualified plan can
be rolled over to another qualified plan or traditional IRA. All distributions
from a TSA or qualified plan are eligible rollover distributions unless they
are on the following list of exceptions:
o any after-tax contributions you made to the plan; or
o any distributions which are required minimum distributions after age 70 1/2
or separation from service; or
o hardship withdrawals; or
o substantially equal periodic payments made at least annually for your life
(or life expectancy) or the joint lives (or joint life expectancy) of you and
your designated beneficiary; or
o substantially equal periodic payments made for a specified period of 10
years or more; or
o corrective distributions that fit specified technical tax rules; or
o loans that are treated as distributions; or
o a death benefit payment to a beneficiary who is not your surviving spouse; or
o a qualified domestic relations order distribution to a beneficiary who is
not your current spouse or former spouse.
A death benefit payment to your surviving spouse, or a qualified domestic
relations order distribution to your current or former spouse, may be a
distribution subject to mandatory 20% withholding.
IMPACT OF TAXES TO EQUITABLE LIFE
The contracts provide that we may charge Separate Account No. 49 for taxes. We
do not now, but may in the future set up reserves for such taxes.
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ABOUT OUR SEPARATE ACCOUNT NO. 49
Each variable investment option is a subaccount of our Separate Account No.
49. We established Separate Account No. 49 in 1996 under special provisions of
the New York Insurance Law. These provisions prevent creditors from any other
business we conduct from reaching the assets we hold in our variable
investment options for owners of our variable annuity contracts. We are the
legal owner of all of the assets in Separate Account No. 49 and may withdraw
any amounts that exceed our reserves and other liabilities with respect to
variable investment options under our contracts. The results of Separate
Account No. 49's operations are accounted for without regard to Equitable
Life's other operations.
Separate Account No. 49 is registered under the Investment Company Act of
1940 and is classified by that act as a "unit investment trust." The SEC,
however, does not manage or supervise Equitable Life or Separate Account No. 49.
Each subaccount (variable investment option) within Separate Account No. 49
invests solely in class IB shares issued by the corresponding portfolio of EQ
Advisors Trust.
We reserve the right subject to compliance with laws that apply:
(1) to add variable investment options to, or to remove variable investment
options from, Separate Account No. 49, or to add other separate accounts;
(2) to combine any two or more variable investment options;
(3) to transfer the assets we determine to be the shares of the class of
contracts to which the contracts belong from any variable investment option
to another variable investment option;
(4) to operate Separate Account No. 49 or any variable investment option as a
management investment company under the Investment Company Act of 1940 (in
which case, charges and expenses that otherwise would be assessed against an
underlying mutual fund would be assessed against Separate Account No. 49 or
a variable investment option directly);
(5) to deregister Separate Account No. 49 under the Investment Company Act of
1940;
(6) to restrict or eliminate any voting rights as to Separate Account No. 49;
and
(7) to cause one or more variable investment options to invest some or all of
their assets in one or more other trusts or investment companies.
ABOUT EQ ADVISORS TRUST
EQ Advisors Trust is registered under the Investment Company Act of 1940. It
is classified as an "open-end management investment company," more commonly
called a mutual fund. EQ Advisors Trust issues different shares relating to
each portfolio.
Equitable Life serves as the investment manager of EQ Advisors Trust. As such,
Equitable Life oversees the activities of the investment advisers with respect
to EQ Advisors Trust and is responsible for retaining or discontinuing the
services of those advisers. (Prior to September 1999 EQ Financial Consultants,
Inc., the predecessor to AXA Advisors, LLC and a subsidiary of Equitable Life,
served as investment manager to EQ Advisors Trust.)
EQ Advisors Trust commenced operations on May 1, 1997. For periods prior to
October 18, 1999 the Alliance portfolios (other than EQ/Alliance Premier
Growth) were part of The Hudson River Trust. On October 18, 1999, these
portfolios became corresponding portfolios of EQ Advisors Trust.
EQ Advisors Trust does not impose sales charges or "loads" for buying and
selling its shares. All dividends and other distributions on shares are
reinvested in full. The Board of Trustees of EQ Advisors Trust may establish
additional portfolios or eliminate existing portfolios at any time. More
detailed information about EQ Advisors Trust, its investment objectives,
policies, restrictions, risks, expenses, the Rule 12b-1 Plan relating to its
Class IB shares, and other aspects of its operations, appears in the
prospectus for EQ Advisors Trust attached at the end of this prospectus, or in
its SAI which is available upon request.
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ABOUT OUR FIXED MATURITY OPTIONS
RATES TO MATURITY AND PRICE PER $100 OF MATURITY VALUE
We can determine the amount required to be allocated to one or more fixed
maturity options in order to produce specified maturity values. For example,
we can tell you how much you need to allocate per $100 of maturity value.
The rates to maturity for new allocations as of August 2, 1999 and the
related price per $100 of maturity value were as follows:
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FIXED MATURITY
OPTIONS
WITH FEBRUARY 15TH RATE TO MATURITY PRICE
MATURITY DATE OF AS OF PER $100 OF
MATURITY YEAR AUGUST 2, 1999 MATURITY VALUE
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2000 3.47% $98.18
2001 4.51% $93.42
2002 5.01% $88.31
2003 5.40% $83.00
2004 5.47% $78.51
2005 5.59% $73.96
2006 5.69% $69.61
2007 5.72% $65.72
2008 5.82% $61.67
2009 5.85% $58.11
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HOW WE DETERMINE THE MARKET VALUE ADJUSTMENT
We use the following procedure to calculate the market value adjustment (up or
down) we make if you withdraw all of your value from a fixed maturity option
before its maturity date.
(1) We determine the market adjusted amount on the date of the withdrawal as
follows:
(a) We determine the fixed maturity amount that would be payable on the
maturity date, using the rate to maturity for the fixed maturity option.
(b) We determine the period remaining in your fixed maturity option (based
on the withdrawal date) and convert it to fractional years based on a
365-day year. For example, three years and 12 days becomes 3.0329.
(c) We determine the current rate to maturity that applies on the
withdrawal date to new allocations to the same fixed maturity option.
(d) We determine the present value of the fixed maturity amount payable at
the maturity date, using the period determined in (b) and the rate
determined in (c).
(2) We determine the fixed maturity amount as of the current date.
(3) We subtract (2) from the result in (1)(d). The result is the market
value adjustment applicable to such fixed maturity option, which may be
positive or negative.
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Your market adjusted amount is the present value of the maturity value
discounted at the rate to maturity in effect for new contributions to that
same fixed maturity option on the date of the calculation.
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If you withdraw only a portion of the amount in a fixed maturity option, the
market value adjustment will be a percentage of the market value adjustment
that would have applied if you had withdrawn the entire value in that fixed
maturity option. This percentage is equal to the percentage of the value in
the fixed maturity option that you are withdrawing. Any withdrawal charges
that are deducted from a fixed maturity option will result in a market value
adjustment calculated in the same way. See Appendix III for an example.
For purposes of calculating the rate to maturity for new allocations to a
fixed maturity option (see (1)(c) above), we use the rate we have in effect
for new allocations to that fixed maturity option. We use this rate even if
new allocations to that option would not be accepted at that time. This rate
will not be less than 3%. If we do not have a rate to maturity in effect for a
fixed maturity option to which the "current rate to maturity" in (1)(c) would
apply, we will use the rate at the next closest maturity date. If we are no
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longer offering new fixed maturity options, the "current rate to maturity"
will be determined in accordance with our procedures then in effect. We
reserve the right to add up to 0.25% to the current rate in (1)(c) above for
purposes of calculating the market value adjustment only.
INVESTMENTS UNDER THE FIXED MATURITY OPTIONS
Amounts allocated to the fixed maturity options are held in a "nonunitized"
separate account we have established under the New York Insurance Law. This
separate account provides an additional measure of assurance that we will make
full payment of amounts due under the fixed maturity options. Under New York
Insurance Law, the portion of the separate account's assets equal to the
reserves and other contract liabilities relating to the contracts are not
chargeable with liabilities from any other business we may conduct. We own the
assets of the separate account, as well as any favorable investment
performance on those assets. You do not participate in the performance of the
assets held in this separate account. We may, subject to state law that
applies, transfer all assets allocated to the separate account to our general
account. We guarantee all benefits relating to your value in the fixed
maturity options, regardless of whether assets supporting fixed maturity
options are held in a separate account or our general account.
We have no specific formula for establishing the rates to maturity for the
fixed maturity options. We expect the rates to be influenced by, but not
necessarily correspond to, among other things, the yields that we can expect
to realize on the separate account's investments from time to time. Our
current plans are to invest in fixed-income obligations, including corporate
bonds, mortgage-backed and asset-backed securities, and government and agency
issues having durations in the aggregate consistent with those of the fixed
maturity options.
Although the above generally describes our plans for investing the assets
supporting our obligations under the fixed maturity options under the
contracts, we are not obligated to invest those assets according to any
particular plan except as we may be required to by state insurance laws. We
will not determine the rates to maturity we establish by the performance of
the nonunitized separate account.
ABOUT THE GENERAL ACCOUNT
Our general account supports all of our policy and contract guarantees,
including those that apply to the fixed maturity options and the account for
special dollar cost averaging, as well as our general obligations.
The general account is subject to regulation and supervision by the Insurance
Department of the State of New York and to the insurance laws and regulations
of all jurisdictions where we are authorized to do business. Because of
exemptions and exclusionary provisions that apply, interests in the general
account have not been registered under the Securities Act of 1933, nor is the
general account an investment company under the Investment Company Act of
1940. However, the market value adjustment interests under the contracts are
registered under the Securities Act of 1933.
We have been advised that the staff of the SEC has not reviewed the portions
of this prospectus that relate to the general account (other than market value
adjustment interests). The disclosure with regard to the general account,
however, may be subject to certain provisions of the federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
ABOUT OTHER METHODS OF PAYMENT
WIRE TRANSMITTALS
We accept initial contributions sent by wire to our processing office by
agreement with certain broker-dealers. The transmittals must be accompanied by
information we require to allocate your contribution. Wire orders not
accompanied by complete information may be retained as described under "How
you can make your contributions" under "Contract features and benefits."
Even if we accept the wire order and essential information, a contract
generally will not be issued until we receive and accept a properly completed
application. In certain cases we
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may issue a contract based on information forwarded electronically. In these
cases, you must sign our Acknowledgement of Receipt form.
Where we require a signed application, no financial transactions will be
permitted until we receive the signed application and have issued the
contract. Where we require an Acknowledgement of Receipt form, financial
transactions are only permitted if you request them in writing, sign the
request and have it signature guaranteed, until we receive the signed
Acknowledgement of Receipt form.
After your contract has been issued, additional contributions may be
transmitted by wire.
AUTOMATIC INVESTMENT PROGRAM -- FOR NQ, FLEXIBLE PREMIUM IRA, AND FLEXIBLE
PREMIUM ROTH IRA CONTRACTS ONLY
You may use our automatic investment program, or "AIP," to have a specified
amount automatically deducted from a checking account, money market account,
or credit union checking account and contributed as an additional contribution
into an NQ, Flexible Premium IRA or Flexible Premium Roth IRA contract on a
monthly or quarterly basis. AIP is not available for Rollover IRA, Roth
Conversion IRA, QP, or Rollover TSA contracts.
For NQ contracts, the minimum amounts we will deduct are $100 monthly and $300
quarterly. Under Flexible Premium IRA and Flexible Premium Roth IRA contracts,
the minimum amount is $50. AIP additional contributions may be allocated to
any of the variable investment options and available fixed maturity options,
but not the account for special dollar cost averaging. You choose the day of
the month you wish to have your account debited. However, you may not choose a
date later than the 28th day of the month.
You may cancel AIP at any time by notifying our processing office. We are not
responsible for any debits made to your account before the time written notice
of cancellation is received at our processing office.
DATES AND PRICES AT WHICH CONTRACT EVENTS OCCUR
We describe below the general rules for when, and at what prices, events under
your contract will occur. Other portions of this prospectus describe
circumstances that may cause exceptions. We generally do not repeat those
exceptions below.
BUSINESS DAY
Our business day is any day the New York Stock Exchange is open for trading.
We calculate unit values for our variable investment options as of the end of
each business day. This usually is 4:00 p.m., Eastern time. Contributions will
be applied and any other transaction requests will be processed when they are
received along with all the required information.
o If your contribution, transfer, or any other transaction request, containing
all the required information, reaches us on a non-business day or after 4:00
p.m. on a business day, we will use the next business day.
o A loan request under your Rollover TSA contract will be processed on the
first business day of the month following the date on which the properly
completed loan request form is received.
o If your transaction is set to occur on the same day of the month as the
contract date and that date is the 29th, 30th or 31st of the month, then the
transaction will occur on the 1st day of the next month.
o When a charge is to be deducted on a contract date anniversary that is a
non-business day, we will deduct the charge on the next business day.
CONTRIBUTIONS AND TRANSFERS
Contributions allocated to the variable investment options are invested at the
value next determined after the close of the business day.
o Contributions allocated to a fixed maturity option will receive the rate
to maturity in effect for that fixed maturity option on that business day.
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o Initial contributions allocated to the account for special dollar cost
averaging receive the interest rate in effect on that business day. At certain
times, we may offer the opportunity to lock in the interest rate for an
initial contribution to be received under Section 1035 exchanges and trustee
to trustee transfers. Your registered representative can provide information
or you can call our processing office.
o Transfers to or from variable investment options will be made at the value
next determined after the close of the business day.
o Transfers to a fixed maturity option will be based on the rate to maturity
in effect for that fixed maturity option on the business day of the transfer.
ABOUT YOUR VOTING RIGHTS
As the owner of the shares of EQ Advisors Trust we have the right to vote on
certain matters involving the portfolios, such as:
o the election of trustees;
o the formal approval of independent auditors selected for EQ Advisors Trust;
or
o any other matters described in the prospectus for EQ Advisors Trust or
requiring a shareholders' vote under the Investment Company Act of 1940.
We will give contract owners the opportunity to instruct us how to vote the
number of shares attributable to their contracts if a shareholder vote is
taken. If we do not receive instructions in time from all contract owners, we
will vote the shares of a portfolio for which no instructions have been
received in the same proportion as we vote shares of that portfolio for which
we have received instructions. We will also vote any shares that we are
entitled to vote directly because of amounts we have in a portfolio in the
same proportions that contract owners vote.
VOTING RIGHTS OF OTHERS
Currently, we control EQ Advisors Trust. EQ Advisors Trust shares are sold to
our separate accounts and an affiliated qualified plan trust. In addition,
shares of EQ Advisors Trust are held by separate accounts of insurance
companies both affiliated and unaffiliated with us. Shares held by these
separate accounts will probably be voted according to the instructions of the
owners of insurance policies and contracts issued by those insurance
companies. While this will dilute the effect of the voting instructions of the
contract owners, we currently do not foresee any disadvantages because of
this. The Board of Trustees of EQ Advisors Trust intends to monitor events in
order to identify any material irreconcilable conflicts that may arise and to
determine what action, if any, should be taken in response. If we believe that
a response to any of those events insufficiently protects our contract owners,
we will see to it that appropriate action is taken.
SEPARATE ACCOUNT NO. 49 VOTING RIGHTS
If actions relating to Separate Account No. 49 require contract owner
approval, contract owners will be entitled to one vote for each unit they have
in the variable investment options. Each contract owner who has elected a
variable annuity payout option may cast the number of votes equal to the
dollar amount of reserves we are holding for that annuity in a variable
investment option divided by the annuity unit value for that option. We will
cast votes attributable to any amounts we have in the variable investment
options in the same proportion as votes cast by contract owners.
CHANGES IN APPLICABLE LAW
The voting rights we describe in this prospectus are created under applicable
federal securities laws. To the extent that those laws or the regulations
published under those laws eliminate the necessity to submit matters for
approval by persons having voting rights in separate accounts of insurance
companies, we reserve the right to proceed in accordance with those laws or
regulations.
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ABOUT OUR YEAR 2000 PROGRESS
Equitable Life relies upon various computer systems in order to administer
your contract and operate the investment options. Some of these systems belong
to service providers who are not affiliated with Equitable Life.
In 1995, Equitable Life began addressing the question of whether its computer
systems would recognize the year 2000 before, on or after January 1, 2000, and
Equitable Life has identified those of its systems critical to business
operations that were not year 2000 compliant. Equitable Life has completed the
work of modifying or replacing non-compliant systems and has confirmed,
through testing that its systems are year 2000 compliant. Equitable Life has
contacted third-party vendors and service providers to seek confirmation that
they are acting to address the year 2000 issue with the goal of avoiding any
material adverse effect on services provided to contract owners and on
operations of the investment options. All third-party vendors and service
providers considered critical to Equitable Life's business, and substantially
all vendors and service providers considered non-critical, have provided us
confirmation of their year 2000 compliance or a satisfactory plan for
compliance. If confirmation is not received from any of the remaining
non-critical vendors or service providers, the vendor or service provider will
be replaced, eliminated, or be the subject of contingency plans. Additionally,
Equitable Life has supplemented its existing business continuity and disaster
recovery plans to cover certain categories of contingencies that could arise
as a result of year 2000 related failures.
There are many risks associated with year 2000 issues, including the risk that
Equitable Life's computer systems will not operate as intended. Additionally,
there can be no assurance that the systems of third parties will be year 2000
compliant. Any significant unresolved difficulty related to the year 2000
compliance initiatives could result in an interruption in, or a failure of,
normal business operations and, accordingly, could have a material adverse
effect on our ability to administer your contract and operate the investment
options.
To the fullest extent permitted by law, the foregoing year 2000 discussion is
a "Year 2000 Readiness Disclosure" within the meaning of The Year 2000
Information and Readiness Disclosure Act (P.L. 105-271) (1998).
ABOUT LEGAL PROCEEDINGS
Equitable Life and its affiliates are parties to various legal proceedings. In
our view, none of these proceedings is likely to have a material adverse
effect upon Separate Account No. 49, our ability to meet our obligations under
the contracts, or the distribution of the contracts.
ABOUT OUR INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Equitable Life incorporated in this
prospectus by reference to the Annual Report on Form 10-K at December 31, 1998
and 1997, and for the three years ended December 31, 1998, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
TRANSFERS OF OWNERSHIP, COLLATERAL ASSIGNMENTS, LOANS, AND BORROWING
You can transfer ownership of an NQ contract at any time before annuity
payments begin. We will continue to treat you as the owner until we receive
notification of any change at our processing office. You cannot assign your NQ
contract as collateral or security for a loan. Loans are also not available
under your NQ contract. In some cases, an assignment or change of ownership
may have adverse tax consequences. See "Tax information" earlier in this
prospectus.
You cannot assign or transfer ownership of an IRA, QP, or Rollover TSA
contract except by surrender to us. Loans are not available and you cannot
assign IRA and QP contracts as security for a loan or other obligation. If the
employer that provided the funds does not restrict them, loans are available
under a Rollover TSA contract.
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For limited transfers of ownership after the owner's death see "Beneficiary
continuation option for Rollover IRA and Flexible Premium IRA contracts" in
"Payment of death benefit" earlier in this prospectus. You may direct the
transfer of the values under your IRA, QP, or Rollover TSA contract to another
similar arrangement. Under federal income tax rules, in the case of such a
transfer, we will impose a withdrawal charge, if one applies.
DISTRIBUTION OF THE CONTRACTS
Equitable Distributors, Inc. ("EDI"), an indirect, wholly owned subsidiary of
Equitable Life, is the distributor of the contracts and has responsibility for
sales and marketing functions for Separate Account No. 49. EDI serves as the
principal underwriter of Separate Account No. 49. EDI also acts as distributor
for other Equitable Life annuity products with different features, expenses,
and fees. EDI is registered with the SEC as a broker-dealer and is a member of
the National Association of Securities Dealers, Inc. EDI's principal business
address is 1290 Avenue of the Americas, New York, New York 10104. Under a
distribution agreement between EDI, Equitable Life, and certain of Equitable
Life's separate accounts, including Separate Account No. 49, Equitable Life
paid EDI distribution fees of $35,452,793 for 1998, $9,566,343 for 1997, and
$87,157 for 1996, as the distributor of certain contracts, including these
contracts, and as the principal underwriter of several Equitable Life separate
accounts, including Separate Account No. 49.
The contracts will be sold by registered representatives of EDI, as well as by
affiliated and unaffiliated broker-dealers with which EDI has entered into
selling agreements. Broker-dealer sales compensation will generally not exceed
an amount equal to 7% of total contributions made under the contracts. EDI may
also receive compensation and reimbursement for its marketing services under
the terms of its distribution agreement with Equitable Life. Broker-dealers
receiving sales compensation will generally pay a portion of it to their
registered representatives as commissions related to sales of the contracts.
The offering of the contracts is intended to be continuous.
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72 INVESTMENT PERFORMANCE
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We provide the following tables to show five different measurements of the
investment performance of the variable investment options and/or the portfolios
in which they invest. We include these tables because they may be of general
interest to you. THE RESULTS SHOWN REFLECT PAST PERFORMANCE. THEY DO NOT
INDICATE HOW THE VARIABLE INVESTMENT OPTIONS MAY PERFORM IN THE FUTURE. THEY
ALSO DO NOT REPRESENT THE RESULTS EARNED BY ANY PARTICULAR INVESTOR. YOUR
RESULTS WILL DIFFER.
Table 1 shows the average annual total return of the variable investment
options. Average annual total return is the annual rate of growth that would
be necessary to achieve the ending value of a contribution invested in the
variable investment options for the periods shown.
Table 2 shows the growth of a hypothetical $1,000 investment in the variable
investment options over the periods shown. Both Tables 1 and 2 take into
account all fees and charges under the contract, including the withdrawal
charge, the optional baseBUILDER benefits charge, the annual administrative
charge under Flexible Premium IRA and Flexible Premium Roth IRA contracts, but
do not reflect the charges for any applicable taxes such as premium taxes or
any applicable annuity administrative fee.
Tables 3, 4, and 5 show the rates of return of the variable investment options
on an annualized, cumulative, and year-by-year basis. These tables take into
account all fees and charges under the contract, but do not reflect the
withdrawal charge, the optional baseBUILDER benefits charge, the annual
administrative charge or the charges for any applicable taxes such as premium
taxes or any applicable annuity administrative fee. If the charges were
reflected they would effectively reduce the rates of return shown.
In all cases the results shown are based on the actual historical investment
experience of the portfolios in which the variable investment options invest.
In some cases, the results shown relate to periods when the variable
investment options and/or the contracts were not available. In those cases, we
adjusted the results of the portfolios to reflect the charges under the
contracts that would have applied had the investment options and/or contracts
been available. The contracts were first offered on May 1, 1997.
For the "Alliance" portfolios (other than EQ/Alliance Premier Growth), we have
adjusted the results prior to October 1996, when Class IB shares for these
portfolios were not available, to reflect the 12b-1 fees currently imposed.
Finally, the results shown for the Alliance Money Market and Alliance Common
Stock options for periods before March 22, 1985 reflect the results of the
variable investment options that preceded them. The "Since portfolio
inception" figures for these options are based on the date of inception of the
preceding variable investment options. We have adjusted these results to
reflect the maximum investment advisory fee payable for the portfolios, as
well as an assumed charge of 0.06% for direct operating expenses.
EQ Advisors Trust commenced operations on May 1, 1997. For periods prior to
October 18, 1999 the Alliance portfolios (other than EQ/Alliance Premier
Growth) were part of The Hudson River Trust. On October 18, 1999, these
portfolios became corresponding portfolios of EQ Advisors Trust. In each case,
the performance shown is for the indicated EQ Advisors Trust portfolio and any
predecessors that it may have had.
All rates of return presented are time-weighted and include reinvestment of
investment income, including interest and dividends.
BENCHMARKS
Tables 3 and 4 compare the performance of variable investment
options to market indices that serve as benchmarks. Market indices are
not subject to any charges for investment advisory fees, brokerage
commission or other operating expenses typically associated with a
managed portfolio. Also, they do not reflect other contract charges such
as the mortality and expense risks charge, administrative charges, or any
withdrawal or optional benefit charge. Comparisons with these benchmarks,
therefore, may be of limited use. We include them because they are widely
known and may help you to understand the universe of securities from
which each portfolio is likely to select its holdings. Benchmark data
reflect the reinvestment of dividend income. The benchmarks include:
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ALLIANCE MONEY MARKET: Salomon Brothers Three-Month T-Bill
Index.
ALLIANCE HIGH YIELD: Merrill Lynch High Yield Master Index.
ALLIANCE COMMON STOCK: Standard & Poor's 500 Index.
ALLIANCE AGGRESSIVE STOCK: 50% Russell 2000 Index and 50%
Standard & Poor's Mid-Cap Total Return Index.
ALLIANCE SMALL CAP GROWTH: Russell 2000 Growth Index.
EQ/ALLIANCE PREMIER GROWTH: Standard & Poor's 500 Index.
BT EQUITY 500 INDEX: Standard & Poor's 500 Index.
BT SMALL COMPANY INDEX: Russell 2000 Index.
BT INTERNATIONAL EQUITY INDEX: Morgan Stanley Capital
International Europe, Australia, Far East Index.
CAPITAL GUARDIAN U.S. EQUITY: Standard & Poor's 500 Index.
CAPITAL GUARDIAN RESEARCH: Standard & Poor's 500 Index.
CAPITAL GUARDIAN INTERNATIONAL: Morgan Stanley Capital
International Europe, Australia, Far East Index.
EQ/EVERGREEN: Russell 2000 Index.
EQ/EVERGREEN FOUNDATION: 60% Standard & Poor's 500
Index/40% Lehman Brothers Aggregate Bond Index.
JPM CORE BOND: Salomon Brothers Broad Investment Grade Bond.
LAZARD LARGE CAP VALUE: Standard & Poor's 500 Index.
LAZARD SMALL CAP VALUE: Russell 2000 Index.
MFS GROWTH WITH INCOME: Standard & Poor's 500 Index.
MFS RESEARCH: Standard & Poor's 500 Index.
MFS EMERGING GROWTH COMPANIES: Russell 2000 Index.
MERRILL LYNCH BASIC VALUE EQUITY: Standard & Poor's 500 Index.
MERRILL LYNCH WORLD STRATEGY: 36% Standard & Poor's 500
Index/24% Morgan Stanley Capital International Europe,
Australia, Far East Index/21% Salomon Brothers U.S. Treasury
Bond 1 Year+ 14% Salomon Brothers World Government Bond
(excluding U.S.)/ and 5% Three-Month U.S. Treasury Bill.
MORGAN STANLEY EMERGING MARKETS EQUITY: Morgan Stanley
Capital International Emerging Markets Free Price Return Index.
EQ/PUTNAM GROWTH & INCOME VALUE: Standard & Poor's 500
Index.
EQ/PUTNAM INVESTORS GROWTH: Standard & Poor's 500 Index.
EQ/PUTNAM INTERNATIONAL EQUITY: Morgan Stanley Capital
International Europe, Australia, Far East Index.
- -------------------------------------------------------------------
LIPPER SURVEY. The Lipper Variable Insurance Products Performance Analysis
Survey (Lipper Survey) records the performance of a large group of variable
annuity products, including managed separate accounts of insurance companies.
According to Lipper Analytical Services, Inc. (Lipper), the data are presented
net of investment management fees, direct operating expenses and asset-based
charges applicable under annuity contracts. Lipper data provide a more
accurate picture than market benchmarks of the Equitable Accumulator
performance relative to other variable annuity products.
<PAGE>
- --------------------------------------------------------------------------------
74 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 1
AVERAGE ANNUAL TOTAL RETURN UNDER A CONTRACT SURRENDERED ON DECEMBER 31, 1998:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
LENGTH OF INVESTMENT PERIOD
--------------------------------------------------------------------------
SINCE SINCE
1 3 5 10 OPTION PORTFOLIO
VARIABLE INVESTMENT OPTIONS YEAR YEARS YEARS YEARS INCEPTION* INCEPTION**
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Money Market (3.64)% 1.59% 2.40% 3.35% 0.59% 4.74%
- ---------------------------------------------------------------------------------------------------------------------------
Alliance High Yield (13.96)% 7.72% 7.28% 8.93% 1.60% 8.27%
- ---------------------------------------------------------------------------------------------------------------------------
Alliance Common Stock 20.02% 24.05% 19.18% 16.35% 17.73% 14.23%
- ---------------------------------------------------------------------------------------------------------------------------
Alliance Aggressive Stock (8.60)% 7.09% 8.76% 16.79% 0.53% 15.54%
- ---------------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth (13.03)% -- -- -- 5.51% 5.51%
- ----------------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index 16.14% -- -- -- 16.14% 16.14%
- ----------------------------------------------------------------------------------------------------------------------------
BT Small Company Index (10.93)% -- -- -- (10.93)% (10.93)%
- ----------------------------------------------------------------------------------------------------------------------------
BT International Equity Index 11.17% -- -- -- 11.17% 11.17%
- ----------------------------------------------------------------------------------------------------------------------------
JPM Core Bond 0.26% -- -- -- 0.26% 0.26%
- ----------------------------------------------------------------------------------------------------------------------------
Lazard Large Cap Value 11.14% -- -- -- 11.14% 11.14%
- ----------------------------------------------------------------------------------------------------------------------------
Lazard Small Cap Value (15.62%) -- -- -- (15.62)% (15.62)%
- ----------------------------------------------------------------------------------------------------------------------------
MFS Research 15.13% -- -- -- 15.64% 15.64%
- ----------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies 25.40% -- -- -- 24.05% 24.05%
- ----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Basic Value Equity (2.78)% -- -- -- 9.86% 9.86%
- ----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch World Strategy (1.92)% -- -- -- 1.19% 1.19%
- ----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets Equity (35.31)% -- -- -- (35.31)% (28.99)%
- ----------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Growth & Income Value 4.00% -- -- -- 10.08% 10.08%
- ----------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth 27.15% -- -- -- 26.08% 26.08%
- ----------------------------------------------------------------------------------------------------------------------------
EQ/Putnam International Equity 10.56% -- -- -- 9.98% 9.98%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The variable investment option inception dates are: Alliance Money
Market, Alliance High Yield, Alliance Common Stock, and Alliance
Aggressive Stock (October 16, 1996); Alliance Small Cap Growth, MFS
Research, MFS Emerging Growth Companies, Merrill Lynch Basic Value
Equity, Merrill Lynch World Strategy, EQ/Putnam Growth & Income Value,
EQ/Putnam Investors Growth, and EQ/Putnam International Equity (May 1,
1997); BT Equity 500 Index, BT Small Company Index, BT International
Equity Index, JPM Core Bond, Lazard Large Cap Value, Lazard Small Cap
Value, and Morgan Stanley Emerging Markets Equity (December 31, 1997).
The inception dates for the variable investment options that became
available on or after December 31, 1998, and are therefore not shown in
this table are: EQ/Evergreen, EQ/Evergreen Foundation, and MFS Growth
with Income (December 31, 1998); EQ/Alliance Premier Growth, Capital
Guardian U.S. Equity, Capital Guardian Research, and Capital Guardian
International (April 30, 1999).
** The inception dates for the portfolios underlying the Alliance variable
investment options shown in the tables are for portfolios of The Hudson
River Trust, the assets of which became assets of corresponding
portfolios of EQ Advisors Trust on October 18, 1999. The portfolio
inception dates are: Alliance Money Market (July 13, 1981); Alliance High
Yield (January 2, 1987); Alliance Common Stock (January 13, 1976);
Alliance Aggressive Stock (January 27, 1986); Alliance Small Cap Growth,
MFS Research, MFS Emerging Growth Companies, Merrill Lynch Basic Value
Equity, Merrill Lynch World Strategy, EQ/Putnam Growth & Income Value,
EQ/Putnam Investors Growth, and EQ/Putnam International Equity
(May 1, 1997); BT Equity 500 Index, BT Small Company Index, BT
International Equity Index, JPM Core Bond, Lazard Large Cap Value, and
Lazard Small Cap Value (December 31, 1997); and Morgan Stanley Emerging
Markets Equity (August 20, 1997). The inception dates for the portfolios
that became available on or after December 31, 1998 and are therefore not
shown in the tables are: EQ/Evergreen, EQ/Evergreen Foundation, and MFS
Growth with Income (December 31, 1998); EQ/Alliance Premier Growth, Capital
Guardian U.S. Equity, Capital Guardian Research, and Capital Guardian
International (April 30, 1999).
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 75
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 1
GROWTH OF $1,000 UNDER A CONTRACT SURRENDERED ON DECEMBER 31, 1998:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
LENGTH OF INVESTMENT PERIOD
---------------------------------------------------------------------
SINCE
1 3 5 10 PORTFOLIO
VARIABLE INVESTMENT OPTIONS YEAR YEARS YEARS YEARS INCEPTION*
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alliance Money Market $ 963.60 $1,048.36 $1,126.12 $1,390.07 $ 2,302.95
- ----------------------------------------------------------------------------------------------------------------------
Alliance High Yield $ 860.40 $1,250.11 $1,421.32 $2,352.06 $ 2,593.84
- ----------------------------------------------------------------------------------------------------------------------
Alliance Common Stock $1,200.20 $1,908.73 $2,404.59 $4,547.90 $21,336.21
- ----------------------------------------------------------------------------------------------------------------------
Alliance Aggressive Stock $ 914.00 $1,228.21 $1,521.63 $4,719.54 $ 6,539.96
- ----------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth $ 869.70 -- -- -- $ 1,113.16
- ----------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index $1,161.40 -- -- -- $ 1,161.40
- ----------------------------------------------------------------------------------------------------------------------
BT Small Company Index $ 890.70 -- -- -- $ 890.70
- ----------------------------------------------------------------------------------------------------------------------
BT International Equity Index $1,111.70 -- -- -- $ 1,111.70
- ----------------------------------------------------------------------------------------------------------------------
JPM Core Bond $1,002.60 -- -- -- $ 1,002.60
- ----------------------------------------------------------------------------------------------------------------------
Lazard Large Cap Value $1,111.40 -- -- -- $ 1,111.40
- ----------------------------------------------------------------------------------------------------------------------
Lazard Small Cap Value $ 843.80 -- -- -- $ 843.80
- ----------------------------------------------------------------------------------------------------------------------
MFS Research $1,151.30 -- -- -- $ 1,337.29
- ----------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Companies $1,254.00 -- -- -- $ 1,538.76
- ----------------------------------------------------------------------------------------------------------------------
Merrill Lynch Basic Value Equity $1,027.80 -- -- -- $ 1,206.83
- ----------------------------------------------------------------------------------------------------------------------
Merrill Lynch World Strategy $ 980.80 -- -- -- $ 1,023.94
- ----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Markets Equity $ 646.90 -- -- -- $ 504.25
- ----------------------------------------------------------------------------------------------------------------------
EQ/Putnam Growth & Income Value $1,040.00 -- -- -- $ 1,211.78
- ----------------------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth $1,271.50 -- -- -- $ 1,589.59
- ----------------------------------------------------------------------------------------------------------------------
EQ/Putnam International Equity $1,105.60 -- -- -- $ 1,209.59
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------
* Portfolio inception dates are shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
76 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 3
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- -------------------------------------------------------------------------------------------------------------------------
SINCE
PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLIANCE MONEY MARKET 3.66% 3.68% 3.49% 3.90% -- 5.38%
- -------------------------------------------------------------------------------------------------------------------------
Lipper Money Market 4.84% 4.87% 4.77% 5.20% -- 6.77%
- -------------------------------------------------------------------------------------------------------------------------
Benchmark 5.05% 5.18% 5.11% 5.44% -- 6.76%
- -------------------------------------------------------------------------------------------------------------------------
ALLIANCE HIGH YIELD (6.66)% 9.57% 8.23% 9.39% -- 8.73%
- -------------------------------------------------------------------------------------------------------------------------
Lipper High Current Yield (0.44)% 8.21% 7.37% 9.34% -- 8.97%
- -------------------------------------------------------------------------------------------------------------------------
Benchmark 3.66% 9.11% 9.01% 11.08% -- 10.72%
- -------------------------------------------------------------------------------------------------------------------------
ALLIANCE COMMON STOCK 27.32% 25.56% 19.97% 16.74% 16.71% 14.53%
- -------------------------------------------------------------------------------------------------------------------------
Lipper Growth 22.86% 22.23% 18.63% 16.72% 16.30% 16.01%
- -------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% 28.23% 24.06% 19.21% 17.76% 15.98%
- -------------------------------------------------------------------------------------------------------------------------
ALLIANCE AGGRESSIVE STOCK (1.30)% 8.97% 9.67% 16.99% -- 15.88%
- -------------------------------------------------------------------------------------------------------------------------
Lipper Mid-Cap Growth 12.16% 16.33% 14.87% 15.44% -- 13.69%
- -------------------------------------------------------------------------------------------------------------------------
Benchmark 8.28% 17.77% 15.56% 16.49% -- 14.78%
- -------------------------------------------------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH (5.73)% -- -- -- -- 10.53%
- -------------------------------------------------------------------------------------------------------------------------
Lipper Small Company Growth (0.33)% -- -- -- -- 16.72%
- -------------------------------------------------------------------------------------------------------------------------
Benchmark 1.23% -- -- -- -- 16.58%
- -------------------------------------------------------------------------------------------------------------------------
BT EQUITY 500 INDEX 23.44% -- -- -- -- 23.44%
- -------------------------------------------------------------------------------------------------------------------------
Lipper S&P 500 Index 26.78% -- -- -- -- 26.78%
- -------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 28.58%
- -------------------------------------------------------------------------------------------------------------------------
BT SMALL COMPANY INDEX (3.63)% -- -- -- -- (3.63)%
- -------------------------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% -- -- -- -- 1.53%
- -------------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- (2.54)%
- -------------------------------------------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX 18.47% -- -- -- -- 18.47%
- -------------------------------------------------------------------------------------------------------------------------
Lipper International 12.17% -- -- -- -- 12.17%
- -------------------------------------------------------------------------------------------------------------------------
Benchmark 20.00% -- -- -- -- 20.00%
- -------------------------------------------------------------------------------------------------------------------------
JPM CORE BOND 7.56% -- -- -- -- 7.56%
- -------------------------------------------------------------------------------------------------------------------------
Lipper Intermediate Investment Grade Debt 7.23% -- -- -- -- 7.23%
- -------------------------------------------------------------------------------------------------------------------------
Benchmark 8.72% -- -- -- -- 8.72%
- -------------------------------------------------------------------------------------------------------------------------
LAZARD LARGE CAP VALUE 18.44% -- -- -- -- 18.44%
- -------------------------------------------------------------------------------------------------------------------------
Lipper Capital Appreciation 24.16% -- -- -- -- 24.16%
- -------------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 28.58%
- -------------------------------------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE (8.32)% -- -- -- -- (8.32)%
- -------------------------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% -- -- -- -- 1.53%
- -------------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- (2.54)%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 77
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 3 (CONTINUED)
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- -----------------------------------------------------------------------------------------------------------------------
SINCE
PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION*
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MFS RESEARCH 22.43% -- -- -- 22.75%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Growth 25.82% -- -- -- -- 28.73%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 31.63%
- -----------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES 32.70% -- -- -- -- 33.03%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Mid-Cap 15.97% -- -- -- -- 22.72%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- 14.53%
- -----------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH BASIC VALUE EQUITY 10.08% -- -- -- -- 15.76%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Growth & Income 15.54% -- -- -- -- 21.32%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 31.63%
- -----------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH WORLD STRATEGY 5.38% -- -- -- -- 5.50%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Global Flexible Portfolio 9.34% -- -- -- -- 11.15%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 19.55% -- -- -- -- 20.00%
- -----------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY EMERGING MARKETS EQUITY (28.01)% -- -- -- -- (33.62)%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Emerging Markets (30.50)% -- -- -- -- (36.28)%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark (25.34)% -- -- -- -- (28.92)%
- -----------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE 11.30% -- -- -- -- 16.03%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Growth & Income 15.54% -- -- -- -- 21.32%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 31.63%
- -----------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH 34.45% -- -- -- -- 35.53%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Growth 25.82% -- -- -- -- 28.73%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 31.63%
- -----------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY 17.86% -- -- -- -- 15.94%
- -----------------------------------------------------------------------------------------------------------------------
Lipper International 12.17% -- -- -- -- 9.06%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 20.00% -- -- -- -- 13.43%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------
* Portfolio inception dates are shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
78 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 4
CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- -----------------------------------------------------------------------------------------------------------------------
SINCE
PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION*
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
ALLIANCE MONEY MARKET 3.66% 11.45% 18.71% 46.56% -- 149.59%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Money Market 4.84% 15.34% 26.25% 66.09% -- 214.68%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 5.05% 16.35% 28.27% 69.88% -- 214.45%
- -----------------------------------------------------------------------------------------------------------------------
ALLIANCE HIGH YIELD (6.66)% 31.56% 48.53% 145.25% -- 172.86%
- -----------------------------------------------------------------------------------------------------------------------
Lipper High Current Yield (0.44)% 26.80% 43.00% 145.62% -- 182.21%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 3.66% 29.90% 53.96% 186.01% -- 239.69%
- -----------------------------------------------------------------------------------------------------------------------
ALLIANCE COMMON STOCK 27.32% 97.96% 148.48% 370.07% 2,099.77% 2,154.10%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Growth 22.86% 84.52% 138.97% 388.00% 2,185.68% 3,490.04%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% 110.85% 193.91% 479.62% 2,530.43% 2,919.92%
- -----------------------------------------------------------------------------------------------------------------------
ALLIANCE AGGRESSIVE STOCK (1.30)% 29.40% 58.67% 380.08% -- 572.32%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Mid-Cap Growth 12.16% 58.64% 102.73% 334.88% -- 448.32%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 8.28% 63.35% 106.12% 360.30% -- 494.67%
- -----------------------------------------------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH (5.73)% -- -- -- -- 18.19%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Small Company Growth (0.33)% -- -- -- -- 28.98%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 1.23% -- -- -- -- 29.23%
- -----------------------------------------------------------------------------------------------------------------------
BT EQUITY 500 INDEX 23.44% -- -- -- -- 23.44%
- -----------------------------------------------------------------------------------------------------------------------
Lipper S&P 500 Index 26.78% -- -- -- -- 26.78%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 28.58%
- -----------------------------------------------------------------------------------------------------------------------
BT SMALL COMPANY INDEX (3.63)% -- -- -- -- (3.63)%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% -- -- -- -- 1.49%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- (2.54)%
- -----------------------------------------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX 18.47% -- -- -- -- 18.47%
- -----------------------------------------------------------------------------------------------------------------------
Lipper International 12.17% -- -- -- -- 12.23%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 20.00% -- -- -- -- 20.00%
- -----------------------------------------------------------------------------------------------------------------------
JPM CORE BOND 7.56% -- -- -- -- 7.56%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Intermediate Investment Grade
Debt 7.23% -- -- -- -- 7.23%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 8.72% -- -- -- -- 8.72%
- -----------------------------------------------------------------------------------------------------------------------
LAZARD LARGE CAP VALUE 18.44% -- -- -- -- 18.44%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Capital Appreciation 24.16% -- -- -- -- 24.09%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 28.58%
- -----------------------------------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE (8.32)% -- -- -- -- (8.32)%
- -----------------------------------------------------------------------------------------------------------------------
Lipper Small Cap 1.53% -- -- -- -- 1.53%
- -----------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- (2.54)%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 79
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 4 (continued)
CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- ---------------------------------------------------------------------------------------------------------------------
SINCE
PORTFOLIO
1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
MFS RESEARCH 22.43% -- -- -- -- 40.79%
- ---------------------------------------------------------------------------------------------------------------------
Lipper Growth 25.82% -- -- -- -- 52.86%
- ---------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 57.60%
- ---------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES 32.70% -- -- -- -- 60.99%
- ---------------------------------------------------------------------------------------------------------------------
Lipper MidCap 15.97% -- -- -- -- 42.16%
- ---------------------------------------------------------------------------------------------------------------------
Benchmark (2.54)% -- -- -- -- 25.40%
- ---------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH BASIC VALUE EQUITY 10.08% -- -- -- -- 27.65%
- ---------------------------------------------------------------------------------------------------------------------
Lipper Growth & Income 15.54% -- -- -- -- 15.59%
- ---------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 57.60%
- ---------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH WORLD STRATEGY 5.38% -- -- -- -- 9.34%
- ---------------------------------------------------------------------------------------------------------------------
Lipper Global Flexible Portfolio 9.34% -- -- -- -- 19.41%
- ---------------------------------------------------------------------------------------------------------------------
Benchmark 19.55% -- -- -- -- 33.33%
- ---------------------------------------------------------------------------------------------------------------------
MORGAN STANLEY EMERGING
MARKETS EQUITY (28.01)% -- -- -- -- (42.83)%
- ---------------------------------------------------------------------------------------------------------------------
Lipper Emerging Markets (30.50)% -- -- -- -- (45.67)%
- ---------------------------------------------------------------------------------------------------------------------
Benchmark (25.34)% -- -- -- -- (36.71)%
- ---------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME
VALUE 11.30% -- -- -- -- 28.16%
- ---------------------------------------------------------------------------------------------------------------------
Lipper Growth & Income 15.54% -- -- -- -- 38.49%
- ---------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 57.60%
- ---------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTH 34.45% -- -- -- -- 66.08%
- ---------------------------------------------------------------------------------------------------------------------
Lipper Growth 25.82% -- -- -- -- 52.86%
- ---------------------------------------------------------------------------------------------------------------------
Benchmark 28.58% -- -- -- -- 57.60%
- ---------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INTERNATIONAL EQUITY 17.86% -- -- -- -- 27.98%
- ---------------------------------------------------------------------------------------------------------------------
Lipper International 12.17% -- -- -- -- 15.88%
- ---------------------------------------------------------------------------------------------------------------------
Benchmark 20.00% -- -- -- -- 23.42%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------
* Portfolio inception dates are shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
80 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE 5
YEAR-BY-YEAR RATES OF RETURN:
- -------------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Money Market 7.45% 6.50% 4.49% 1.91% 1.32% 2.36% 4.06% 3.64% 3.74% 3.66%
- -------------------------------------------------------------------------------------------------------------------------------
Alliance High Yield 3.46% (2.70)% 22.48% 10.51% 21.19% (4.33)% 18.01% 20.91% 16.58% (6.66)%
- -------------------------------------------------------------------------------------------------------------------------------
Alliance Common Stock 23.60% (9.59)% 35.69% 1.57% 22.83% (3.70)% 30.34% 22.28% 27.16% 27.32%
- -------------------------------------------------------------------------------------------------------------------------------
Alliance Aggressive Stock 41.22% 6.43% 83.89% (4.71)% 14.89% (5.35)% 29.54% 20.24% 9.04% (1.30)%
- -------------------------------------------------------------------------------------------------------------------------------
Alliance Small Cap Growth -- -- -- -- -- -- -- -- 25.38%+ (5.73)%
- -------------------------------------------------------------------------------------------------------------------------------
BT Equity 500 Index -- -- -- -- -- -- -- -- -- 23.44%
- -------------------------------------------------------------------------------------------------------------------------------
BT Small Company Index -- -- -- -- -- -- -- -- -- (3.63)%
- -------------------------------------------------------------------------------------------------------------------------------
BT International Equity
Index -- -- -- -- -- -- -- -- -- 18.47%
- -------------------------------------------------------------------------------------------------------------------------------
JPM Core Bond -- -- -- -- -- -- -- -- -- 7.56%
- -------------------------------------------------------------------------------------------------------------------------------
Lazard Large Cap Value -- -- -- -- -- -- -- -- -- 18.44%
- -------------------------------------------------------------------------------------------------------------------------------
Lazard Small Cap Value -- -- -- -- -- -- -- -- -- (8.32)%
- -------------------------------------------------------------------------------------------------------------------------------
MFS Research -- -- -- -- -- -- -- -- 14.99%+ 22.43%
- -------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth
Companies -- -- -- -- -- -- -- -- 21.32%+ 32.70%
- -------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Basic
Value Equity -- -- -- -- -- -- -- -- 15.97%+ (10.08)%
- -------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch
World Strategy -- -- -- -- -- -- -- -- 3.76%+ 5.38%
- -------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging
Markets Equity -- -- -- -- -- -- -- -- (20.59)%+ (28.01)%
- -------------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Growth & Income -- -- -- -- -- -- -- -- 15.15%+ 11.30%
Value
- -------------------------------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth -- -- -- -- -- -- -- -- 23.53%+ 34.45%
- -------------------------------------------------------------------------------------------------------------------------------
EQ/Putnam International -- -- -- -- -- -- -- -- 8.59%+ 17.86%
Equity
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------
+ Returns for these Portfolios represent less than 12 months of performance. The
returns are as of each Portfolio inception date as shown in Table 1.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PERFORMANCE 81
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMUNICATING PERFORMANCE DATA
In reports or other communications to contract owners or in advertising
material, we may describe general economic and market conditions affecting our
variable investment options and the portfolios and may compare the performance
or ranking of those options and the portfolios with:
o those of other insurance company separate accounts or mutual funds included
in the rankings prepared by Lipper Analytical Services, Inc., Morningstar,
Inc., VARDS, or similar investment services that monitor the performance of
insurance company separate accounts or mutual funds;
o other appropriate indices of investment securities and averages for peer
universes of mutual funds; or
o data developed by us derived from such indices or averages.
We also may furnish to present or prospective contract owners advertisements
or other communications that include evaluations of a variable investment
option or portfolio by nationally recognized financial publications. Examples
of such publications are:
- --------------------------------------------------------------------------------
Barron's Investment Management Weekly
Morningstar's Variable Annuity Money Management Letter
Sourcebook Investment Dealers Digest
Business Week National Underwriter
Forbes Pension & Investments
Fortune USA Today
Institutional Investor Investor's Business Daily
Money The New York Times
Kiplinger's Personal Finance The Wall Street Journal
Financial Planning The Los Angeles Times
Investment Adviser The Chicago Tribune
- --------------------------------------------------------------------------------
Lipper compiles performance data for peer universes of funds with similar
investment objectives in its Lipper Survey. Morningstar, Inc. compiles similar
data in the Morningstar Variable Annuity/Life Report (Morningstar
Report).
The Lipper Survey records performance data as reported to it by over 800
mutual funds underlying variable annuity and life insurance products. It
divides these actively managed portfolios into 25 categories by portfolio
objectives. The Lipper Survey contains two different universes, which reflect
different types of fees in performance data:
o The "separate account" universe reports performance data net of investment
management fees, direct operating expenses and asset-based charges applicable
under variable life and annuity contracts, and
o The "mutual fund" universe reports performance net only of investment
management fees and direct operating expenses, and therefore reflects only
charges that relate to the underlying mutual fund.
The Morningstar Variable Annuity/Life Report consists of nearly 700 variable
life and annuity funds, all of which report their data net of investment
management fees, direct operating expenses and separate account level charges.
VARDS is a monthly reporting service that monitors approximately 2,500
variable life and variable annuity funds on performance and account
information.
YIELD INFORMATION
Current yield for the Alliance Money Market option will be based on net
changes in a hypothetical investment over a given seven-day period, exclusive
of capital changes, and then "annualized" (assuming that the same seven-day
result would occur each week for 52 weeks). Current yield for the Alliance
High Yield option will be based on net changes in a hypothetical investment
over a given 30-day period, exclusive of capital changes, and then
"annualized" (assuming that the same 30-day result would occur each month for
12 months).
"Effective yield" is calculated in a similar manner, but when annualized, any
income earned by the investment is assumed to be reinvested. The "effective
yield" will be slightly higher than the "current yield" because any earnings
are compounded weekly for the Alliance Money Market option. The current yields
and effective yields assume the deduction of all contract charges and expenses
other than the withdrawal charge, the optional baseBUILDER benefits charge,
the annual administrative charge, and any charge for
<PAGE>
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82 INVESTMENT PERFORMANCE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
taxes such as premium tax. The yields and effective yields for the Alliance
Money Market option, when used for the special dollar cost averaging program,
assume that no contract charges are deducted. For more information, see "Yield
Information for the Alliance Money Market Option and Alliance High Yield
Option" in the SAI.
<PAGE>
- --------------------------------------------------------------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 83
- --------------------------------------------------------------------------------
10
Incorporation of certain documents by reference
- --------------------------------------------------------------------------------
Equitable Life's annual report on Form 10-K for the year ended December 31,
1998, a current report on Form 8-K dated September 1, 1999, and a quarterly
report on Form 10-Q for the quarter ended June 30, 1999, are considered to be
a part of this prospectus because they are incorporated by reference.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the
SEC under the Securities Exchange Act of 1934 ("Exchange Act") will be
considered to become part of this prospectus because they are incorporated by
reference.
Any statement contained in a document that is, or becomes part of this
prospectus, will be considered changed or replaced for purposes of this
prospectus if a statement contained in this prospectus changes or is replaced.
Any statement that is considered to be a part of this prospectus because of
its incorporation will be considered changed or replaced for the purpose of
this prospectus if a statement contained in any other subsequently filed
document that is considered to be part of this prospectus changes or replaces
that statement. After that, only the statement that is changed or replaced
will be considered to be part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q, electronically according to
EDGAR under CIK No. 0000727920. The SEC maintains a Web site that contains
reports, proxy and information statements, and other information regarding
registrants that file electronically with the SEC. The address of the site is
http://www.sec.gov.
Upon written or oral request, we will provide, free of charge, to each person
to whom this prospectus is delivered, a copy of any or all of the documents
considered to be part of this prospectus because they are incorporated herein.
This does not include exhibits not specifically incorporated by reference into
the text of such documents. Requests for documents should be directed to The
Equitable Life Assurance Society of the United States, 1290 Avenue of the
Americas, New York, New York 10104. Attention: Corporate Secretary (telephone:
(212) 554-1234).
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX I: CONDENSED FINANCIAL INFORMATION A-1
- --------------------------------------------------------------------------------
Appendix I: Condensed financial information
- --------------------------------------------------------------------------------
UNIT VALUES AND NUMBER OF UNITS OUTSTANDING AT YEAR END FOR EACH VARIABLE
INVESTMENT OPTION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDING
------------------------------------------------------
DEC. 31, 1997 DEC. 31, 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ALLIANCE MONEY MARKET
- -----------------------------------------------------------------------------------------------------------------------
Unit value $ 25.00 $ 25.92
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 1,153 5,158
- -----------------------------------------------------------------------------------------------------------------------
ALLIANCE HIGH YIELD
- -----------------------------------------------------------------------------------------------------------------------
Unit value $ 29.96 $ 27.96
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Number of units outstanding (000s) 1,256 4,521
- -----------------------------------------------------------------------------------------------------------------------
ALLIANCE COMMON STOCK
- -----------------------------------------------------------------------------------------------------------------------
Unit value $186.29 $237.18
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 434 1,542
- -----------------------------------------------------------------------------------------------------------------------
ALLIANCE AGGRESSIVE STOCK
- -----------------------------------------------------------------------------------------------------------------------
Unit value 70.28 $ 67.37
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 380 939
- -----------------------------------------------------------------------------------------------------------------------
ALLIANCE SMALL CAP GROWTH
- -----------------------------------------------------------------------------------------------------------------------
Unit value $ 12.54 $ 11.82
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 2,521 6.101
- -----------------------------------------------------------------------------------------------------------------------
BT EQUITY 500 INDEX
- -----------------------------------------------------------------------------------------------------------------------
Unit value $ 10.00 $ 12.34
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) -- 12,279
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BT SMALL COMPANY INDEX
- -----------------------------------------------------------------------------------------------------------------------
Unit value $ 10.00 $ 9.64
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) -- 1,610
- -----------------------------------------------------------------------------------------------------------------------
BT INTERNATIONAL EQUITY INDEX
- -----------------------------------------------------------------------------------------------------------------------
Unit value $ 10.00 $ 11.85
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) -- 1,827
- -----------------------------------------------------------------------------------------------------------------------
JPM CORE BOND
- -----------------------------------------------------------------------------------------------------------------------
Unit value $ 10.00 $ 10.76
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) -- 8,661
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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A-2 APPENDIX I: CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDING
------------------------------------------------------
DEC. 31, 1997 DEC. 31, 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LAZARD LARGE CAP VALUe
- -----------------------------------------------------------------------------------------------------------------------
Unit value $10.00 $11.84
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) -- 5,696
- -----------------------------------------------------------------------------------------------------------------------
LAZARD SMALL CAP VALUE
- -----------------------------------------------------------------------------------------------------------------------
Unit value $10.00 $9.17
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) -- 4,733
- -----------------------------------------------------------------------------------------------------------------------
MFS RESEARCH
- -----------------------------------------------------------------------------------------------------------------------
Unit value $11.50 $14.08
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 5,257 14,913
- -----------------------------------------------------------------------------------------------------------------------
MFS EMERGING GROWTH COMPANIES
- -----------------------------------------------------------------------------------------------------------------------
Unit value $12.13 $16.10
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 3,327 9,117
- -----------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH BASIC VALUE EQUITYY
- -----------------------------------------------------------------------------------------------------------------------
Unit value 11.60 $12.76
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 1,182 4,389
- -----------------------------------------------------------------------------------------------------------------------
MERRILL LYNCH WORLD STRATEGY
- -----------------------------------------------------------------------------------------------------------------------
Unit value $10.38 $10.94
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Number of units outstanding (000s) 306 717
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MORGAN STANLEY EMERGING MARKETS EQUITY
- -----------------------------------------------------------------------------------------------------------------------
Unit value $7.94 $5.72
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) -- 1,805
- -----------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM GROWTH & INCOME VALUE
- -----------------------------------------------------------------------------------------------------------------------
Unit value $11.52 $12.82
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 8,113 24,343
- -----------------------------------------------------------------------------------------------------------------------
EQ/PUTNAM INVESTORS GROWTHE
- -----------------------------------------------------------------------------------------------------------------------
Unit value $12.35 $16.61
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 2,581 10,072
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EQ/PUTNAM INTERNATIONAL EQUITY INVESTORS
- -----------------------------------------------------------------------------------------------------------------------
Unit value $10.86 $12.80
- -----------------------------------------------------------------------------------------------------------------------
Number of units outstanding (000s) 4,609 10,607
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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APPENDIX II: PURCHASE CONSIDERATIONS FOR QP CONTRACTS B-1
- --------------------------------------------------------------------------------
Appendix II: Purchase considerations for QP contracts
- --------------------------------------------------------------------------------
Trustees who are considering the purchase of an Equitable Accumulator QP
contract should discuss with their tax advisers whether this is an appropriate
investment vehicle for the employer's plan. Trustees should consider whether the
plan provisions permit the investment of plan assets in the QP contract, the
distribution of such an annuity, the purchase of the guaranteed minimum income
benefit, and the payment of death benefits in accordance with the requirements
of the federal income tax rules. The QP contract and this prospectus should be
reviewed in full, and the following factors, among others, should be noted.
Assuming continued plan qualification and operation, earnings on qualified plan
assets will accumulate value on a tax-deferred basis even if the plan is not
funded by the Equitable Accumulator QP contract or another annuity. Therefore,
you should purchase an Equitable Accumulator QP contract to fund a plan for the
contract's features and benefits other than tax deferral. This QP contract
accepts transfer contributions only and not regular, ongoing payroll
contributions. For 401(k) plans under defined contribution plans, no employee
after-tax contributions are accepted.
Under defined benefit plans, we will not accept rollovers from a defined
contribution plan to a defined benefit plan. We will only accept transfers from
a defined benefit plan or a change of investment vehicles in the plan. For
defined benefit plans, the maximum percentage of actuarial value of the plan
participant/employee's normal retirement benefit that can be funded by a QP
contract is 80%. The account value under a QP contract may at any time be more
or less than the lump sum actuarial equivalent of the accrued benefit for a
defined benefit plan participant/employee. Equitable Life does not guarantee
that the account value under a QP contract will at any time equal the actuarial
value of 80% of a participant/employee's accrued benefit. If overfunding of a
plan occurs, withdrawals from the QP contract may be required. A withdrawal
charge and/or market value adjustment may apply.
Further, Equitable Life will not perform or provide any plan recordkeeping
services with respect to the QP contracts. The plan's administrator will be
solely responsible for performing or providing for all such services. There is
no loan feature offered under the QP contracts, so if the plan provides for
loans and a participant/employee takes a loan from the plan, other plan assets
must be used as the source of the loan and any loan repayments must be credited
to other investment vehicles and/or accounts available under the plan.
Given that required minimum distributions must generally commence from the plan
for annuitants after age 70 1/2, trustees should consider whether the QP
contract is an appropriate purchase for annuitants approaching or over age
70 1/2.
Finally, because the method of purchasing the QP contract and the features of
the QP contract may appeal more to plan participants/employees who are older and
tend to be highly paid, and because certain features of the QP contract are
available only to plan participants/employees who meet certain minimum and/or
maximum age requirements, plan trustees should discuss with their advisers
whether the purchase of the QP contract would cause the plan to engage in
prohibited discrimination in contributions, benefits or otherwise.
<PAGE>
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APPENDIX III: MARKET VALUE ADJUSTMENT EXAMPLE C-1
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Appendix III: Market value adjustment example
- --------------------------------------------------------------------------------
The example below shows how the market value adjustment would be determined and
how it would be applied to a withdrawal, assuming that $100,000 was allocated on
February 15, 2000 to a fixed maturity option with a maturity date of February
15, 2009 (nine years later) at a rate to maturity of 7.00%, resulting in a
maturity value at the maturity date of $183,846. We further assume that a
withdrawal of $50,000 is made four years later on February 15, 2004.
- --------------------------------------------------------------------------------
ASSUMED RATE TO
MATURITY ON FEBRUARY 15, 2004
- --------------------------------------------------------------------------------
5.00% 9.00%
- --------------------------------------------------------------------------------
AS OF FEBRUARY 15, 2004 (BEFORE WITHDRAWAL)
- --------------------------------------------------------------------------------
(1) Market adjusted amount $144,048 $119,487
- --------------------------------------------------------------------------------
(2) Fixed maturity amount $131,080 $131,080
- --------------------------------------------------------------------------------
(3) Market value adjustment:
(1) - (2) $ 12,968 $(11,593)
- --------------------------------------------------------------------------------
ON FEBRUARY 15, 2004 (AFTER WITHDRAWAL)
- --------------------------------------------------------------------------------
(4) Portion of market value adjustment associated
with withdrawal: (3) x [$50,000/(1)] $ 4,501 $ (4,851)
- --------------------------------------------------------------------------------
(5) Reduction in fixed maturity amount
[$50,000 - (4)] $ 45,499 $ 54,851
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(6) Fixed maturity amount (2) - (5) $ 85,581 $ 76,229
- --------------------------------------------------------------------------------
(7) Maturity value $120,032 $106,915
- --------------------------------------------------------------------------------
(8) Market adjusted amount of (7) $ 94,048 $ 69,487
- --------------------------------------------------------------------------------
You should note that under this example if a withdrawal is made when rates have
increased from 7.00% to 9.00% (right column), a portion of a negative market
value adjustment is realized. On the other hand, if a withdrawal is made when
rates have decreased from 7.00% to 5.00% (left column), a portion of a positive
market value adjustment is realized.
<PAGE>
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APPENDIX IV: GUARANTEED MINIMUM DEATH BENEFIT EXAMPLE D-1
- --------------------------------------------------------------------------------
Appendix IV: Guaranteed minimum death benefit example
- --------------------------------------------------------------------------------
The death benefit under the contracts is equal to the account value or, if
greater, the guaranteed minimum death benefit.
The following illustrates the guaranteed minimum death benefit calculation.
Assuming $100,000 is allocated to the variable investment options (with no
allocation to the Alliance Money Market option or the fixed maturity options),
no additional contributions, no transfers and no withdrawals, and no loans under
a Rollover TSA contract, the guaranteed minimum death benefit for an annuitant
age 45 would be calculated as follows:
- --------------------------------------------------------------------------------
END OF 50% ROLL UP TO AGE 8 ANNUAL RATEHET TO
CONTRACT GUARANTEED MINIMUM AGE 80 GUARANTEED
YEAR ACCOUNT VALUE DEATH BENEFIT(1) MINIMUM DEATH BENEFIT
- --------------------------------------------------------------------------------
1 $105,000 $105,000(1) $105,000(3)
- --------------------------------------------------------------------------------
2 $115,500 $110,250(2) $115,500(3)
- --------------------------------------------------------------------------------
3 $129,360 $115,763(2) $129,360(3)
- --------------------------------------------------------------------------------
4 $103,488 $121,551(1) $129,360(4)
- --------------------------------------------------------------------------------
5 $113,837 $127,628(1) $129,360(4)
- --------------------------------------------------------------------------------
6 $127,497 $134,010(1) $129,360(4)
- --------------------------------------------------------------------------------
7 $127,497 $140,710(1) $129,360(4)
- --------------------------------------------------------------------------------
The account values for contract years 1 through 7 are based on hypothetical
rates of return of 5.00%, 10.00%, 12.00%, (20.00)%, 10.00%, 12.00% and 0.00%. We
are using these rates solely to illustrate how the benefit is determined. The
return rates bear no relationship to past or future investment results.
5% ROLL UP TO AGE 80
(1) At the end of contract year 1, and again at the end of contract years 4
through 7, the death benefit will be equal to the guaranteed minimum death
benefit.
(2) At the end of contract years 2 and 3, the death benefit will be equal to the
current account value since it is higher than the current guaranteed minimum
death benefit.
ANNUAL RATCHET TO AGE 80
(3) At the end of contract years 1 through 3, the guaranteed minimum death
benefit is equal to the current account value.
(4) At the end of contract years 4 through 7, the guaranteed minimum
death benefit is equal to the guaranteed minimum death benefit at the
end of the prior year since it is equal to or higher than the current
account value.
<PAGE>
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STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
Unit Values 2
Annuity Unit Values 2
Custodian and Independent Accountants 3
Yield Information for the Alliance Money Market Option
and Alliance High Yield Option 3
Long-Term Market Trends 5
Key Factors in Retirement Planning 8
Financial Statements 12
HOW TO OBTAIN AN EQUITABLE ACCUMULATOR STATEMENT OF ADDITIONAL INFORMATION FOR
SEPARATE ACCOUNT NO. 49
Send this request form to:
Equitable Accumulator
P.O. Box 1547
Secaucus, NJ 07096-1547
- --------------------------------------------------------------------------------
Please send me an Equitable Accumulator Select SAI for Separate Account No. 49
dated October 18, 1999.
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
(SAI 1AMLF (10/99))
<PAGE>
Equitable Accumulator(SM)
A combination variable and
fixed deferred annuity contract
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 18, 1999
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
1290 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10104
- --------------------------------------------------------------------------------
This statement of additional information ("SAI") is not a prospectus. It should
be read in conjunction with the related Equitable Accumulator prospectus, dated
October 18, 1999. That prospectus provides detailed information concerning the
contracts and the variable investment options, as well as the fixed maturity
options, that fund the contracts. Each variable investment option is a
subaccount of Equitable Life's Separate Account No. 49. The fixed maturity
options are part of Equitable Life's general account. Definitions of special
terms used in the SAI are found in the prospectus.
A copy of the prospectus is available free of charge by writing the processing
office (Post Office Box 1547, Secaucus, NJ 07096-1547), by calling
1-800-789-7771 toll free, or by contacting your registered representative.
TABLE OF CONTENTS
Unit Values 2
Annuity Unit Values 2
Custodian and Independent Accountants 3
Yield Information for the Alliance Money Market
Option and Alliance High Yield Option 3
Long-Term Market Trends 5
Key Factors in Retirement Planning 8
Financial Statements 12
Copyright 1999 The Equitable Life Assurance Society of the United States.
All rights reserved. Accumulator is a service mark of
The Equitable Life Assurance Society of the United States.
SAI 1A (10/99)
<PAGE>
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2
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UNIT VALUES
Unit values are determined at the end of each valuation period for each of the
variable investment options. We may offer other annuity contracts and
certificates which will have their own unit values for the variable investment
options. They may be different from the unit values for the Equitable
Accumulator.
The unit value for a variable investment option for any valuation period is
equal to: (i) the unit value for the preceding valuation period multiplied by
(ii) the net investment factor for that option for that valuation period. A
valuation period is each business day together with any preceding non-business
days. The net investment factor is:
(a/b) - c
where:
(a) is the value of the variable investment option's shares of the
corresponding portfolio at the end of the valuation period. Any amounts
allocated to or withdrawn from the option for the valuation period are not
taken into account. For this purpose, we use the share value reported to us
by EQ Advisors Trust.
(b) is the value of the variable investment option's shares of the
corresponding portfolio at the end of the preceding valuation period. (Any
amounts allocated or withdrawn for that valuation period are taken into
account.)
(c) is the daily mortality and expense risks charge and administrative charge
relating to the contracts, times the number of calendar days in the
valuation period. These daily charges are at an effective annual rate not
to exceed a total of 1.35%.
ANNUITY UNIT VALUES
The annuity unit value for each variable investment option was fixed at $1.00 on
each option's respective effective date (as shown in the prospectus) for
contracts with assumed base rates of net investment return of both 5% and 3 1/2%
a year. For each valuation period after that date, it is the annuity unit value
for the immediately preceding valuation period multiplied by the adjusted net
investment factor under the contract. For each valuation period, the adjusted
net investment factor is equal to the net investment factor reduced for each day
in the valuation period by:
o .00013366 of the net investment factor if the assumed base rate of net
investment return is 5% a year; or
o .00009425 of the net investment factor if the assumed base rate of net
investment return is 3 1/2%.
Because of this adjustment, the annuity unit value rises and falls depending on
whether the actual rate of net investment return (after deduction of charges) is
higher or lower than the assumed base rate.
All contracts have a 5% assumed base rate of net investment return, except in
states where that rate is not permitted. Annuity payments under contracts with
an assumed base rate of 3 1/2% will at first be smaller than those under
contracts with a 5% assumed base rate. Payments under the 3 1/2% contracts,
however, will rise more rapidly when unit values are rising, and payments will
fall more slowly when unit values are falling than those under 5% contracts.
The amounts of variable annuity payments are determined as follows:
Payments normally start on the business day specified on your election form, or
on such other future date you specify. The payments are made on a monthly basis.
The first three payments are of equal amounts. Each of the first three payments
will be based on the amount specified in the Tables of Guaranteed Annuity
Payments in your contract.
The first three payments depend on the assumed base rate of net investment
return and the form of annuity chosen (and any fixed period or period certain).
If the annuity involved is a life
<PAGE>
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3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
contingency, the risk class and the age of the annuitants will affect payments.
The amount of the fourth and each later payment will vary according to the
investment performance of the variable investment options. We calculate each
monthly payment by multiplying the number of annuity units credited by the
average annuity unit value for the second calendar month immediately preceding
the due date of the payment. We calculate the number of units by dividing the
first monthly payment by the annuity unit value for the valuation period. This
includes the due date of the first monthly payment. The average annuity unit
value is the average of the annuity unit values for the valuation periods ending
in that month. Variable income annuities may also be available by separate
prospectus through other separate accounts we offer.
ILLUSTRATION OF CHANGES IN ANNUITY UNIT VALUES
To show how we determine variable annuity payments from month to month, assume
that the account value on the date annuity payments are to begin is enough to
fund an annuity with a monthly payment of $363. Also assume that the annuity
unit value for the valuation period that includes the due date of the first
annuity payment is $1.05. The number of annuity units credited under the
contract would be 345.71 (363 divided by 1.05 = 345.71).
If the fourth monthly payment is due in March, and the average annuity unit
value for January was $1.10, the annuity payment for March would be the number
of units (345.71) times the average annuity unit value ($1.10), or $380.28. If
the average annuity unit value was $1 in February, the annuity payment for April
would be 345.71 times $1, or $345.71.
CUSTODIAN AND INDEPENDENT ACCOUNTANTS
Equitable Life is the custodian for the shares of EQ Advisors Trust owned by
Separate Account No. 49.
The financial statements of Separate Account No. 49 as at December 31, 1998 and
for the periods ended December 31, 1998 and 1997, and the consolidated financial
statements of Equitable Life as at December 31, 1998 and 1997 and for each of
the three years ended December 31, 1998 included in this SAI have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
YIELD INFORMATION FOR THE ALLIANCE MONEY MARKET OPTION AND ALLIANCE HIGH YIELD
OPTION
ALLIANCE MONEY MARKET OPTION
The Alliance Money Market option calculates yield information for seven-day
periods. The seven-day current yield calculation is based on a hypothetical
contract with one unit at the beginning of the period. To determine the
seven-day rate of return, the net change in the unit value is computed by
subtracting the unit value at the beginning of the period from a unit value,
exclusive of capital changes, at the end of the period.
The net change is then reduced by the average administrative charge factor
(explained below). This reduction is made to recognize the deduction of the
annual administrative charge under the Flexible Premium IRA and Flexible Premium
Roth IRA contracts, which is not reflected in the unit value.
Unit values reflect all other accrued expenses of the Alliance Money Market
option but do not reflect any withdrawal charges, the optional benefit charge,
or charges for applicable taxes such as state or local premium taxes. Under the
Alliance Money Market special dollar cost averaging program, unit values also do
not reflect the mortality and expense risks charge and the administrative
charge.
The adjusted net change is divided by the unit value at the beginning of the
period to obtain what is called the adjusted base period rate of return. This
seven-day adjusted base period return is then multiplied by 365/7 to produce an
annualized seven-day current yield figure carried to the nearest one-hundredth
of one percent.
The actual dollar amount of the annual administrative charge that is deducted
from the Alliance Money Market option will vary for each contract depending upon
the percentage of the
<PAGE>
- --------------------------------------------------------------------------------
4
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
account value allocated to the Alliance Money Market option. To determine the
effect of the annual administrative charge on the yield, we start with the total
dollar amounts of the charges deducted from the option during the 12-month
period ending on the last day of the prior year. The amount is multiplied by
7/365 to produce an average administrative charge factor which is used in all
weekly yield computations for the ensuing year. The average administrative
charge factor is then divided by the number of Alliance Money Market units as of
the end of the prior calendar year, and the resulting quotient is deducted from
the net change in unit value for the seven-day period.
The effective yield is obtained by modifying the current yield to take into
account the compounding nature of the Alliance Money Market option's
investments, as follows: the unannualized adjusted base period return is
compounded by adding one to the adjusted base period return, raising the sum to
a power equal to 365 divided by 7, and subtracting one from the result, i.e.,
effective yield = (base period return + 1 ) [superscript: 365/7] - 1. The
Alliance Money Market option yields will fluctuate daily. Accordingly, yields
for any given period do not necessarily represent future results. In addition,
the value of units of the Alliance Money Market option will fluctuate and not
remain constant.
ALLIANCE HIGH YIELD OPTION
The Alliance High Yield option calculates yield information for 30-day periods.
The 30-day current yield calculation is based on a hypothetical contract with
one unit at the beginning of the period. To determine the 30-day rate of return,
the net change in the unit value is computed by subtracting the unit value at
the beginning of the period from a unit value, exclusive of capital changes, at
the end of the period.
The net change is then reduced by the average administrative charge factor
(explained below). This reduction is made to recognize the deduction of the
annual administrative charge under the Flexible Premium IRA and Flexible Premium
Roth IRA contracts, which is not reflected in the unit value.
Unit values reflect all other accrued expenses of the Alliance High Yield option
but do not reflect any withdrawal charges, the optional benefit charge or
charges for applicable taxes such as state or local premium taxes.
The adjusted net change is divided by the unit value at the beginning of the
period to obtain the adjusted base period rate of return. This 30-day adjusted
base period return is then multiplied by 365/30 to produce an annualized 30-day
current yield figure carried to the nearest one-hundredth of one percent.
The actual dollar amount of the annual administrative charge that is deducted
from the Alliance High Yield option will vary for each contract depending upon
the percentage of the account value allocated to the Alliance High Yield option.
To determine the effect of the annual administrative charge on the yield, we
start with the total dollar amounts of the charges deducted from the option
during the 12-month period ending on the last day of the prior year. The amount
is multiplied by 30/365 to produce an average administrative charge factor which
is used in all 30-day yield computations for the ensuing year. The average
administrative charge factor is then divided by the number of Alliance High
Yield units as of the end of the prior calendar year, and the resulting quotient
is deducted from the net change in unit value for the 30-day period.
The yield for the Alliance High Yield option will fluctuate daily. Accordingly,
the yield for any given period does not necessarily represent future results. In
addition, the value of units of the Alliance High Yield option will fluctuate
and not remain constant.
ALLIANCE MONEY MARKET OPTION AND ALLIANCE HIGH YIELD OPTION YIELD INFORMATION
The yields for the Alliance Money Market option and Alliance High Yield option
reflect charges that are not normally reflected in the yields of other
investments. Therefore, they may be lower when compared with yields of other
investments. The yields for the Alliance Money Market option and Alliance High
Yield option should not be compared to the return on fixed rate investments
which guarantee rates of interest for specified periods, such as the fixed
maturity options. Nor should the
<PAGE>
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5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
yields be compared to the yields of money market options made available to the
general public.
The seven-day current yield for the Alliance Money Market option was 4.19% for
the period ended December 31, 1998. The effective yield for that period was
4.28%.
The 30-day current yield for the Alliance High Yield option was 12.89% for the
period ended December 31, 1998.
Because the above yields reflect the deduction of variable investment option
expenses, they are lower than the corresponding yield figures for the Alliance
Money Market and Alliance High Yield portfolios which reflect only the deduction
of EQ Advisors Trust level expenses. Because the Flexible Premium IRA and
Flexible Premium Roth IRA contracts described in the prospectus are being
offered for the first time in 1999, the above yields do not reflect the annual
administrative charge which would apply under these contracts.
LONG-TERM MARKET TRENDS
As a tool for understanding how different investment strategies may affect
long-term results, it may be useful to consider the historical returns on
different types of assets. The following charts present historical return trends
for various types of securities. The information presented, while not directly
related to the performance of the variable investment options, helps to provide
a perspective on the potential returns of different asset classes over different
periods of time. By combining this information with knowledge of your own
financial needs (for example, the length of time until you retire, your
financial requirements at retirement), you may be able to better determine how
you wish to allocate contributions among the variable investment options.
Historically, the long-term investment performance of common stocks has
generally been superior to that of long- or short-term debt securities. For
those investors who have many years until retirement, or whose primary focus is
on long-term growth potential and protection against inflation, there may be
advantages to allocating some or all of their account value to those variable
investment options that invest in stocks.
GROWTH OF $1 INVESTED ON JANUARY 1, 1958
(VALUES ARE AS OF LAST BUSINESS DAY)
[THE FOLLOWING DATA WAS REPRESENTED AS A
SHADED AREA GRAPH IN THE PRINTED DOCUMENT:]
Common Stock Inflation
1958 1.00 1.00
1959 1.12 1.01
1960 1.12 1.03
1961 1.43 1.04
1962 1.30 1.05
1963 1.60 1.07
1964 1.86 1.08
1965 2.10 1.10
1966 1.88 1.14
1967 2.34 1.17
1968 2.59 1.23
1969 2.37 1.30
1970 2.47 1.37
1971 2.82 1.42
1972 3.36 1.47
1973 2.87 1.60
1974 2.11 1.79
1975 2.89 1.92
1976 3.58 2.01
1977 3.32 2.15
1978 3.54 2.34
1979 4.19 2.65
1980 5.55 2.98
1981 5.28 3.25
1982 6.41 3.37
1983 7.86 3.50
1984 8.35 3.64
1985 11.03 3.78
1986 13.07 3.82
1987 13.75 3.99
1988 16.07 4.16
1989 21.13 4.36
1990 20.46 4.62
1991 26.74 4.76
1992 28.75 4.90
1993 31.63 5.04
1994 32.04 5.17
1995 44.03 5.30
1996 54.19 5.48
1997 72.27 5.57
1998 92.93 5.67
[LIGHT SHADED AREA = COMMON STOCK]
[DARK SHADED AREA = INFLATION]
[END OF GRAPHICALLY REPRESENTED DATA]
Source: Ibbotson Associates, Inc. See discussion and information preceding and
following chart on next page.
Over shorter periods of time, however, common stocks tend to be subject to more
dramatic changes in value than fixed-income (debt) securities. Investors who are
nearing retirement age, or who have a need to limit short-term risk, may find it
preferable to allocate a smaller percentage of their account value to those
variable investment options that invest in common stocks. The following graph
illustrates the monthly fluctuations in value of $1 based on monthly returns of
the Standard & Poor's 500 during 1990, a year that represents more typical
volatility than 1998.
<PAGE>
- --------------------------------------------------------------------------------
6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH OF $1 INVESTED ON JANUARY 1, 1990
(VALUES ARE AS OF LAST BUSINESS DAY)
[THE FOLLOWING DATA WAS REPRESENTED AS A BLACK AND WHITE LINE GRAPH
IN THE PRINTED DOCUMENT:]
Intermediate-Term
Govt. Bonds Common Stocks
1/1/90 1.00 1.00
Jan. 0.99 0.93
Feb. 0.99 0.94
Mar. 0.99 0.97
Apr. 0.98 0.95
May 1.01 1.04
June 1.02 1.03
July 1.04 1.03
Aug. 1.03 0.93
Sep. 1.04 0.89
Oct. 1.06 0.89
Nov. 1.08 0.94
Dec. 1.10 0.97
[END OF GRAPHICALLY REPRESENTED DATA]
Source: Ibbotson Associates, Inc. See discussion and information preceding and
following chart on next page.
The following chart illustrates average annual rates of return over selected
time periods between December 31, 1926 and December 31, 1998 for different types
of securities: common stocks, long-term government bonds, long-term corporate
bonds, intermediate-term government bonds and U.S. Treasury Bills. For
comparison purposes, the Consumer Price Index is shown as a measure of
inflation. The average annual returns shown in the chart reflect capital
appreciation and assume the reinvestment of dividends and interest. Investment
management fees or expenses and charges typically associated with deferred
annuity products, are not reflected.
The information presented is merely a summary of past experience for unmanaged
groups of securities and is neither an estimate nor guarantee of future
performance. Any investment in securities, whether equity or debt, involves
varying degrees of potential risk, in addition to offering varying degrees of
potential reward.
- --------------------------------------------------------------------------------
The rates of return illustrated do not represent returns of the variable
investment options. In addition, there is no assurance that the performance of
the variable investment options will correspond to rates of return such as those
illustrated in the chart.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET TRENDS:
ILLUSTRATIVE ANNUAL RATES OF RETURN
- -----------------------------------------------------------------------------------------------------------------------
LONG-TERM INTERMEDIATE- U.S.
FOR THE FOLLOWING PERIODS COMMON LONG-TERM CORPORATE TERM TREASURY CONSUMER
ENDING 12/31/98: STOCKS GOVT. BONDS BONDS GOVT. BONDS BILLS PRICE INDEX
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 28.58% 13.06% 10.76% 10.21% 4.86% 1.80%
3 Years 28.27 9.07 8.25 6.84 5.11 2.27
5 Years 24.06 9.52 8.74 6.20 4.96 2.41
10 Years 19.19 11.66 10.85 8.74 5.29 3.14
20 Years 17.75 11.14 10.86 9.85 7.17 4.53
30 Years 12.67 9.09 9.14 8.71 6.76 5.24
40 Years 12.00 7.20 7.43 7.39 5.94 4.44
50 Years 13.56 5.89 6.20 6.21 5.07 3.92
60 Years 12.49 5.43 5.62 5.50 4.26 4.19
Since 12/31/26 11.21 5.29 5.78 5.32 3.78 3.15
Inflation adjusted since 1926 7.82 2.08 2.55 2.11 0.62 0.00
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
SOURCE: Ibbotson, Roger G., and Rex A. Sinquefield, Stocks, Bonds, Bills, and
Inflation (SBBI), 1982, updated in Stocks, Bonds, Bills and Inflation 1998
Yearbook(TM), Ibbotson Associates, Inc., Chicago. All rights reserved.
COMMON STOCKS (S&P 500) -- Standard and Poor's Composite Index, an unmanaged
weighted index of the stock performance of 500 industrial, transportation,
utility and financial companies.
LONG-TERM GOVERNMENT BONDS -- Measured using a one-bond portfolio constructed
each year containing a bond with approximately a twenty-year maturity and a
reasonably current coupon.
LONG-TERM CORPORATE BONDS -- For the period 1969-1998, represented by the
Salomon Brothers Long-Term, High-Grade Corporate Bond Index; for the period
1946-1968, the Salomon Brothers Index was backdated using Salomon Brothers
monthly yield data and a methodology similar to that used by Salomon Brothers
for 1969-1998; for the period 1927-1945, the Standard and Poor's monthly
High-Grade Corporate Composite yield data were used, assuming a 4 percent coupon
and a twenty-year maturity.
INTERMEDIATE-TERM GOVERNMENT BONDS -- Measured by a one-bond portfolio
constructed each year containing a bond with approximately a five-year maturity.
U.S. TREASURY BILLS -- Measured by rolling over each month a one-bill portfolio
containing, at the beginning of each month, the bill having the shortest
maturity not less than one month.
INFLATION -- Measured by the Consumer Price Index for all Urban Consumers
(CPI-U), not seasonally adjusted.
<PAGE>
- --------------------------------------------------------------------------------
8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KEY FACTORS IN RETIREMENT PLANNING
INTRODUCTION
The Equitable Accumulator is available to help meet the retirement income and
investment needs of individuals. In assessing these retirement needs, some key
factors need to be addressed: (1) the impact of inflation on fixed retirement
incomes; (2) the importance of planning early for retirement; (3) the benefits
of tax deferral; (4) the selection of an appropriate investment strategy; and
(5) the benefit of receiving annuity payments. Each of these factors is
addressed below.
- --------------------------------------------------------------------------------
Unless otherwise noted, all of the following presentations use an assumed annual
rate of return of 7.5% compounded annually. This rate of return is for
illustrative purposes only and is not intended to represent an expected or
guaranteed rate of return for any investment vehicle.
In addition, unless otherwise noted, none of the illustrations reflect any
charges that may be applied under a particular investment vehicle. Such charges
would effectively reduce the actual return under any type of investment.
- --------------------------------------------------------------------------------
All earnings in these presentations are assumed to accumulate tax deferred
unless otherwise noted. Most programs designed for retirement savings offer tax
deferral. Monies are taxed upon withdrawal and a 10% penalty tax may apply to
premature withdrawals. Certain retirement programs prohibit early withdrawals.
See "Tax information" in the prospectus. Where taxes are taken into
consideration in these presentations, a 28% tax rate is assumed.
The source of the data used by us to compile the charts which appear in this
section (other than charts 1, 2, 3, 4 and 7) is Ibbotson Associates, Inc.,
Chicago, Stocks, Bonds, Bills and Inflation [1998] Yearbook(TM). All rights
reserved.
In reports or other communications or in advertising material, we may make use
of these or other graphic or numerical illustrations that we prepare showing the
impact of inflation, planning early for retirement, tax deferral,
diversification and other concepts important to retirement planning.
INFLATION
Inflation erodes purchasing power. This means that, in an inflationary period,
the dollar is worth less as time passes. Because many people live on a fixed
income during retirement, inflation is of particular concern to them. The charts
that follow illustrate the harmful impact of inflation over an extended period
of time. Between 1968 and 1998, the average annual inflation rate was 5.24%. As
demonstrated in Chart 1, this 5.24% annual rate of inflation would cause the
purchasing power of $35,000 to decrease to only $7,562 after 30 years.
CHART 1
[THE FOLLOWING DATA WAS REPRESENTED AS A
SHADED VERTICAL BAR GRAPH IN THE PRINTED DOCUMENT:]
(Income)
Today 35,000
10 Years 21,002
20 Years 12,602
30 Years 7,562
[END OF GRAPHICALLY REPRESENTED DATA]
In Chart 2, the impact of inflation is examined from another perspective.
Specifically, the chart illustrates the additional income needed to maintain the
purchasing power of $35,000 over a thirty-year period. Again, the 1968-1998
historical inflation rate of 5.24% is used. In this case, an additional $126,992
would be required to maintain the purchasing power of $35,000 after 30 years.
<PAGE>
- --------------------------------------------------------------------------------
9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CHART 2
[THE FOLLOWING DATA WAS REPRESENTED AS A SHADED
VERTICAL BAR GRAPH IN THE PRINTED DOCUMENT:]
Annual
Income Increase
Needed Needed
Today 35,000 -
10 Years 58,328 23,325
20 Years 97,204 62,204
30 Years 161,992 126,992
[END OF GRAPHICALLY REPRESENTED DATA]
STARTING EARLY
The impact of inflation highlights the need to begin a retirement program early.
The value of starting early is illustrated in the following charts.
As shown in Chart 3, if an individual makes annual contributions of $2,500 to
his or her retirement program beginning at age 30, he or she would accumulate
$414,551 by age 65 under the assumptions described earlier. If that individual
waited until age 50, he or she would only accumulate $70,193 by age 65 under the
same assumptions.
CHART 3
[THE FOLLOWING DATA WAS REPRESENTED AS A SHADED
AREA GRAPH IN THE PRINTED DOCUMENT:]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[BLACK:] Age 50 $0 $0 $0 $0 $0 $15,610 $38,020 $70,193
[WHITE:] Age 40 $0 $0 $0 $15,610 $38,020 $70,193 $116,381 $182,691
[GRAY:] Age 30 $0 $15,610 $38,020 $70,193 $116,381 $182,691 $277,886 $414,551
</TABLE>
[END OF GRAPHICALLY REPRESENTED DATA]
In Table 1, the impact of starting early is demonstrated in another format. For
example, if an individual invests $300 monthly, he or she would accumulate
$387,193 in thirty years under our assumptions. In contrast, if that individual
invested the same $300 per month for 15 years, he or she would accumulate only
$97,804 under our assumptions.
TABLE 1
- -------------------------------------------------------------------------------
MONTHLY
CONTRI- YEAR YEAR YEAR YEAR YEAR
BUTION 10 15 20 25 30
- -------------------------------------------------------------------------------
$ 20 $ 3,532 $ 6,520 $ 10,811 $ 16,970 $ 25,813
- -------------------------------------------------------------------------------
50 8,829 16,301 27,027 42,425 64,532
- -------------------------------------------------------------------------------
100 17,659 32,601 54,053 84,851 129,064
- -------------------------------------------------------------------------------
200 35,317 65,202 108,107 169,701 258,129
- -------------------------------------------------------------------------------
300 52,976 97,804 162,160 254,552 387,193
- -------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Chart 4 presents an additional way to demonstrate the significant impact of
starting to make contributions to a retirement program earlier rather than
later. It assumes that an individual had a goal to accumulate $250,000 (pre-tax)
by age 65. If he or she starts at age 30, under our assumptions he or she could
reach the goal by making a monthly pre-tax contribution of $129 (equivalent to
$93 after taxes). The total net cost for the 30-year-old in this hypothetical
example would be $39,265. If the individual in this hypothetical example waited
until age 50, he or she would have to make a monthly pre-tax contribution of
$767 (equivalent to $552 after taxes) to attain the goal, illustrating the
importance of starting early.
CHART 4
GOAL: $250,000 BY AGE 65
[THE FOLLOWING DATA WAS REPRESENTED AS A BLACK AND WHITE
VERTICAL BAR GRAPH IN THE PRINTED DOCUMENT:]
Tax Savings
and Tax-deferred
Net Cost Earnings at 7.5%
$93 per month Age 30 $ 39,265 $ 210,735
$212 per month Age 40 63,641 186,359
$552 per month Age 50 99,383 150,617
[END OF GRAPHICALLY REPRESENTED DATA]
TAX DEFERRAL
Contributing to a retirement plan early is part of an effective strategy for
addressing the impact of inflation. Another part of such a strategy is to
carefully select the types of retirement programs in which to invest. In
deciding where to invest retirement contributions, there are three basic types
of programs.
The first type offers the most tax benefits, and therefore is potentially the
most beneficial for accumulating funds for retirement. Contributions are made
with pre-tax dollars or are tax deductible and earnings grow income tax
deferred. An example of this type of program is the deductible traditional IRA.
The second type of program also provides for tax-deferred earnings growth;
however, contributions are made with after-tax dollars. Examples of this type of
program are nondeductible traditional IRAs and non-qualified annuities.
The third approach to retirement savings is fully taxable. Contributions are
made with after-tax dollars and earnings are taxed each year. Examples of this
type of program include certificates of deposit, savings accounts, and taxable
stock, bond or mutual fund investments.
Consider an example. For the type of retirement program that offers both pre-tax
contributions and tax deferral, assume that a $2,000 annual pre-tax contribution
is made for thirty years. In this example, the retirement funds would be
$172,339 after thirty years (assuming a 7.5% rate of return, no withdrawals and
assuming the deduction of the 1.35% Separate Account daily asset charge -- but
no withdrawal charge or other charges under the contract, or trust charges to
portfolios), and such funds would be $222,309 without the effect of any charges.
Assuming a lump sum withdrawal was made in year thirty and a 28% tax bracket,
these amounts would be $124,084 and $160,062, respectively.
For the type of program that offers only tax deferral, assume an after-tax
annual contribution of $1,440 for thirty years and the same rate of return. The
after-tax contribution is derived by taxing the $2,000 pre-tax contribution,
again assuming a 28% tax bracket. In this example, the retirement funds would be
$124,084 after thirty years assuming the deduction of charges and no
withdrawals, and $160,062 without the effect of charges. Assuming a lump sum
withdrawal in year thirty, the total after-tax amount would be $101,436 with
charges deducted and $127,341 without charges as described above.
<PAGE>
- --------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the fully taxable investment, assume an after-tax contribution of $1,440 for
thirty years. Earnings are taxed annually. After thirty years, the amount of
this fully taxable investment is $108,046.
Keep in mind that taxable investments have fees and charges, too (investment
advisory fees, administrative charges, 12b-1 fees, sales loads, brokerage
commissions, etc.). We have not attempted to apply these fees and charges to the
fully taxable amounts since this is intended merely as an example of tax
deferral.
Again, it must be emphasized that the assumed rate of return of 7.5% compounded
annually used in these examples is for illustrative purposes only. It is not
intended to represent a guaranteed or expected rate of return on any type of
investment. Moreover, early withdrawals of tax-deferred investments are
generally subject to a 10% penalty tax.
INVESTMENT FOR RETIREMENT
Selecting an appropriate retirement program is clearly an important part of an
effective retirement planning strategy. Carefully choosing among available
investment options is another essential component.
During the 1968-1998 period, common stock average annual returns outperformed
the average annual returns of fixed investments such as long-term government
bonds and Treasury Bills (T-Bills). Common stocks earned an average annual
return of 12.67% over this period, in contrast to 9.09% and 6.76% for the other
two investment categories. Significantly, common stock returns also outpaced
inflation, which grew at 5.24% over this period.
The Equitable Accumulator can be an effective program for diversifying ongoing
investments between various asset categories. In addition, the Equitable
Accumulator offers special features which help address the risk associated with
timing the equity markets, such as dollar cost averaging. By transferring the
same dollar amount each month from the Alliance Money Market option to other
variable investment options, dollar cost averaging attempts to shield your
investment from short-term price fluctuations. This, however, does not assure a
profit or protect against a loss in declining markets.
THE BENEFIT OF ANNUITIZATION
An individual may shift the risk of outliving his or her principal by electing a
lifetime income annuity. See "Choosing your annuity payout options" under
"Accessing your money" in the prospectus. Chart 5 below shows the monthly income
that can be generated under various forms of life annuities, as compared to
receiving level payments of interest only or principal and interest from the
investment. Calculations in the Chart are based on the following assumption: a
$100,000 contribution was made at one of the ages shown, annuity payments begin
immediately, and a 5% annuitization interest rate is used. For purposes of this
example, principal and interest are paid out on a level basis over 15 years. In
the case of the interest-only scenario, the principal is always available and
may be left to other individuals at death. Under the principal and interest
scenario, a portion of the principal will be left at death, assuming the
individual dies within the 15-year period. In contrast, under the life annuity
scenarios, there is no residual amount left.
CHART 5
MONTHLY INCOME
($100,000 CONTRIBUTION)
- --------------------------------------------------------------------------------
PRINCIPAL JOINT AND SURVIVOR*
INTEREST AND ----------------------------------
ONLY INTEREST 50% 66.67% 100%
FOR FOR SINGLE TO TO TO
ANNUITANT LIFE 15 YEARS LIFE SURVIVOR SURVIVOR SURVIVOR
- --------------------------------------------------------------------------------
Male 65 $401 $785 $617 $560 $544 $513
Male 70 401 785 685 609 588 549
Male 75 401 785 771 674 646 598
Male 80 401 785 888 760 726 665
Male 85 401 785 1,045 878 834 757
- -------------------
The numbers are based on 5% interest compounded annually and the 1983 Individual
Annuity Mortality Table "a" projected with modified Scale G. Annuity purchase
rates available at annuitization may vary, depending primarily on the
annuitization interest rate, which may not be less than an annual rate of 2.5%.
* The joint and survivor annuity forms are based on male and female
annuitants of the same age.
<PAGE>
- --------------------------------------------------------------------------------
12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
The consolidated financial statements of Equitable Life included herein should
be considered only as bearing upon the ability of Equitable Life to meet its
obligations under the contracts.
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants..................................... FS-2
Financial Statements:
Statements of Assets and Liabilities, December 31, 1998........... FS-3
Statements of Operations for the Year Ended
December 31, 1998............................................... FS-6
Statements of Changes in Net Assets for the
Years Ended December 31, 1998 and 1997 ......................... FS-9
Notes to Financial Statements..................................... FS-14
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants..................................... F-1
Consolidated Financial Statements:
Consolidated Balance Sheets, December 31, 1998 and 1997........... F-2
Consolidated Statements of Earnings, Years Ended
December 31, 1998, 1997 and 1996................................ F-3
Consolidated Statements of Shareholder's Equity,
Years Ended December 31, 1998, 1997 and 1996.................... F-4
Consolidated Statements of Cash Flows, Years Ended
December 31, 1998, 1997 and 1996................................ F-5
Notes to Consolidated Financial Statements........................ F-6
FS-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Equitable Life Assurance Society of the United States
and Contractowners of Separate Account No. 49
of The Equitable Life Assurance Society of the United States
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of the Alliance Money Market Fund,
Alliance High Yield Fund, Alliance Common Stock Fund, Alliance Aggressive Stock
Fund, Alliance Small Cap Growth Fund, Alliance Global Fund, Alliance Growth
Investors Fund, Alliance Equity Index Fund ("Hudson River Trust funds") and the
BT Equity 500 Index Fund, BT Small Company Index Fund, BT International Equity
Index Fund, JPM Core Bond Fund, Lazard Large Cap Value Fund, Lazard Small Cap
Value Fund, MFS Research Fund, MFS Emerging Growth Companies Fund, MFS Growth
With Income Fund, Morgan Stanley Emerging Markets Equity Fund, EQ/Putnam Growth
& Income Value Fund, EQ/Putnam Investors Growth Fund and EQ/Putnam International
Equity Fund ("EQ Advisors Trust funds"), 21 of the separate investment funds of
The Equitable Life Assurance Society of the United States ("Equitable Life")
Separate Account No. 49 at December 31, 1998 and the results of each of their
operations and changes in each of their net assets for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of Equitable Life's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of shares owned in The
Hudson River Trust and in The EQ Advisors Trust at December 31, 1998 with the
transfer agent, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 8, 1999
FS-2
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE
MONEY ALLIANCE COMMON
MARKET HIGH STOCK
FUND YIELD FUND FUND
------------- ------------- ------------
ASSETS
<S> <C> <C> <C>
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $225,580,555....................... $224,505,500
168,101,566....................... $143,068,233
406,761,148....................... $430,175,252
91,972,683.......................
78,319,196.......................
12,469,240.......................
17,737,959.......................
Receivable for Trust shares sold................. -- -- --
Receivable for policy-related transactions....... 4,332,935 383,395 2,667,305
------------ ------------ ------------
Total Assets..................................... 228,838,435 143,451,628 432,842,557
------------ ------------ ------------
LIABILITIES
Payable for policy-related transactions.......... -- -- --
Payable for Trust shares purchased............... 4,330,788 398,221 2,690,644
Amount retained by Equitable Life in
Separate Account No. 49 (Note 5).............. 56,711 12,131 29,663
------------ ------------ ------------
Total Liabilities................................ 4,387,499 410,352 2,720,307
------------ ------------ ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS........ $224,450,936 $143,041,276 $430,122,250
============ ============ ============
<CAPTION>
ALLIANCE ALLIANCE ALLIANCE
AGGRESSIVE SMALL CAP ALLIANCE GROWTH
STOCK GROWTH GLOBAL INVESTORS
FUND FUND FUND FUND
----------- ------------ ------------ ----------
ASSETS
<S> <C> <C> <C> <C>
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $225,580,555.......................
168,101,566.......................
406,761,148.......................
91,972,683....................... $85,021,814
78,319,196....................... $75,812,281
12,469,240....................... $14,015,688
17,737,959....................... $19,586,712
Receivable for Trust shares sold................. -- -- -- --
Receivable for policy-related transactions....... 424,488 367,423 -- --
----------- ----------- ----------- -----------
Total Assets..................................... 85,446,302 76,179,704 14,015,688 19,586,712
----------- ----------- ----------- -----------
LIABILITIES
Payable for policy-related transactions.......... -- -- 2,491 3,786
Payable for Trust shares purchased............... 431,647 377,229 225 225
Amount retained by Equitable Life in
Separate Account No. 49 (Note 5).............. 19,328 14,543 13,884 21,482
----------- ----------- ----------- -----------
Total Liabilities................................ 450,975 391,772 16,600 25,493
----------- ----------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS........ $84,995,327 $75,787,932 $13,999,088 $19,561,219
=========== =========== =========== ===========
</TABLE>
- -------------------------
See Notes to Financial Statements.
FS-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ALLIANCE
EQUITY BT SMALL
INDEX BT EQUITY 500 COMPANY
FUND INDEX FUND INDEX FUND
-------- ------------- ----------
ASSETS
<S> <C> <C> <C>
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $ 5,140....................... $7,810
148,924,562....................... $164,809,643
28,054,963....................... $27,509,854
38,187,791.......................
103,171,703.......................
68,051,738.......................
52,206,882.......................
192,883,837.......................
Receivable for Trust shares sold................. -- -- --
Receivable for policy-related transactions....... -- 1,922,002 140,715
------ ------------ -----------
Total Assets..................................... 7,810 166,731,645 27,650,569
------ ------------ -----------
LIABILITIES
Payable for policy-related transactions.......... -- -- --
Payable for Trust shares purchased............... -- 1,922,001 140,715
Amount retained by Equitable Life in
Separate Account No. 49 (Note 5).............. 7,810 451,887 9,795,374
------ ------------ -----------
Total Liabilities................................ 7,810 2,373,888 9,936,089
------ ------------ -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS........ -- $164,357,757 $17,714,480
====== ============= ============
<CAPTION>
BT
INTERNATIONAL LAZARD
EQUITY INDEX JPM CORE LARGE CAP
FUND BOND FUND VALUE FUND
------------- ------------ -----------
ASSETS
<S> <C> <C> <C>
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $ 5,140.......................
148,924,562.......................
28,054,963.......................
38,187,791....................... $42,725,945
103,171,703....................... $103,323,470
68,051,738....................... $74,639,434
52,206,882.......................
192,883,837.......................
Receivable for Trust shares sold................. -- -- --
Receivable for policy-related transactions....... 204,947 1,017,157 571,212
----------- ------------ -----------
Total Assets..................................... 42,930,892 104,340,627 75,210,646
----------- ------------ -----------
LIABILITIES
Payable for policy-related transactions.......... -- -- --
Payable for Trust shares purchased............... 204,947 1,007,157 571,212
Amount retained by Equitable Life in
Separate Account No. 49 (Note 5).............. 18,049,105 5,064,229 3,198,959
----------- ------------ -----------
Total Liabilities................................ 18,254,052 6,071,386 3,770,171
----------- ------------ -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS........ $24,676,840 $ 98,269,241 $71,440,475
=========== ============ ===========
<CAPTION>
LAZARD MFS
SMALL CAP RESEARCH
VALUE FUND FUND
----------- ------------
ASSETS
<S> <C> <C>
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $ 5,140.......................
148,924,562.......................
28,054,963.......................
38,187,791.......................
103,171,703.......................
68,051,738....................... $50,968,336
52,206,882....................... $220,852,728
192,883,837.......................
Receivable for Trust shares sold................. -- --
Receivable for policy-related transactions....... 229,801 1,280,613
----------- ------------
Total Assets..................................... 51,198,137 222,133,341
----------- ------------
LIABILITIES
Payable for policy-related transactions.......... 229,801 1,284,748
Payable for Trust shares purchased............... -- --
Amount retained by Equitable Life in
Separate Account No. 49 (Note 5).............. 4,194,228 84,931
Total Liabilities 4,424,029 1,369,679
----------- ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS........ $46,774,108 $220,763,662
=========== ============
</TABLE>
- ----------
See Notes to Financial Statements.
FS-4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF ASSETS AND LIABILITIES (CONCLUDED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MFS EMERGING MORGAN STANLEY EQ/PUTNAM
GROWTH MFS GROWTH EMERGING GROWTH &
COMPANIES WITH INCOME MARKETS EQUITY INCOME VALUE
FUND FUND (a) FUND FUND
------------- ----------- -------------- -------------
ASSETS
<S> <C> <C> <C> <C>
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $125,337,823....................... $152,938,200
1,000....................... $1,000
11,094,471....................... $11,598,378
306,939,965....................... $327,783,967
144,081,047.......................
130,785,497.......................
Receivable for Trust shares sold................. -- -- -- --
Receivable for policy-related transactions....... 462,302 -- 93,637 1,246,390
------------ ----- ----------- ------------
Total Assets..................................... 153,400,502 1,000 11,692,015 329,030,357
------------ ----- ----------- ------------
LIABILITIES
Payable for policy-related transactions.......... -- -- -- --
Payable for Trust shares purchased............... 466,138 -- 92,621 1,250,224
Amount retained by Equitable Life in
Separate Account No. 49 (Note 5).............. 99,138 1,000 26,825 145,459
------------ ----- ----------- ------------
Total Liabilities................................ 565,276 1,000 119,446 1,395,683
------------ ----- ----------- ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS........ $152,835,226 -- $11,572,569 $327,634,674
============ ====== =========== ============
<CAPTION>
EQ/PUTNAM EQ/PUTNAM
INVESTORS INTERNATIONAL
GROWTH FUND EQUITY FUND
------------ ------------
ASSETS
<S> <C> <C>
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $125,337,823.......................
1,000.......................
11,094,471.......................
306,939,965.......................
144,081,047....................... $174,979,286
130,785,497....................... $143,712,431
Receivable for Trust shares sold................. -- --
Receivable for policy-related transactions....... 1,644,116 419,401
------------ ------------
Total Assets..................................... 176,623,402 144,131,832
------------ ------------
LIABILITIES
Payable for policy-related transactions.......... -- --
Payable for Trust shares purchased............... 1,648,214 453,401
Amount retained by Equitable Life in
Separate Account No. 49 (Note 5).............. 335,744 108,935
------------ ------------
Total Liabilities................................ 1,983,958 562,336
------------ ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS........ $174,639,444 $143,569,496
============ ============
</TABLE>
- ----------
See Notes to Financial Statements.
(a) December 31, 1998 initial capital was received.
FS-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE ALLIANCE
MONEY ALLIANCE COMMON AGGRESSIVE
MARKET HIGH STOCK STOCK
FUND YIELD FUND FUND FUND
---------- ------------ ----------- -----------
INCOME AND EXPENSES:
<S> <C> <C> <C> <C>
Investment Income (Note 2):
Dividends from the Trusts......................... $6,709,792 $ 11,775,522 $ 952,116 $ 275,359
Expenses (Note 3):
Asset-based charges............................... 1,118,065 1,381,303 3,268,314 855,772
---------- ------------ ----------- -----------
NET INVESTMENT INCOME (LOSS)............................ 5,591,727 10,394,219 (2,316,198) (580,413)
---------- ------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments.................. 303,090 (258,448) 277,445 (105,214)
Realized gain distribution from the Trusts........... 5,637 2,718,464 49,605,206 3,824,065
---------- ------------ ----------- -----------
NET REALIZED GAIN (LOSS)................................ 308,727 2,460,016 49,882,651 3,718,851
---------- ------------ ----------- -----------
Unrealized appreciation (depreciation)
on investments:
Beginning of period............................... (404,121) (1,398,277) 4,116,666 (2,440,983)
End of period..................................... (1,075,056) (25,033,332) 23,414,104 (6,950,869)
---------- ------------ ----------- -----------
Change in unrealized appreciation (depreciation)
during the period................................. (670,935) (23,635,055) 19,297,438 (4,509,886)
---------- ------------ ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS........................................ (362,208) (21,175,039) 69,180,089 (791,035)
---------- ------------ ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............................. $5,229,519 $(10,780,820) $66,863,891 $(1,371,448)
========== ============ =========== ===========
<CAPTION>
ALLIANCE ALLIANCE
SMALL ALLIANCE GROWTH
CAP GLOBAL INVESTORS
GROWTH FUND FUND FUND
----------- ---------- ----------
INCOME AND EXPENSES:
<S> <C> <C> <C>
Investment Income (Note 2):
Dividends from the Trusts......................... $ -- $ 136,475 $ 338,347
Expenses (Note 3):
Asset-based charges............................... 717,685 160,655 224,047
----------- ---------- ----------
NET INVESTMENT INCOME (LOSS)............................ (717,685) (24,180) 114,300
----------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments.................. 9,425 224,358 342,546
Realized gain distribution from the Trusts........... -- 892,450 1,579,446
----------- ---------- ----------
NET REALIZED GAIN (LOSS)................................ 9,425 1,116,808 1,921,992
----------- ---------- ----------
Unrealized appreciation (depreciation)
on investments:
Beginning of period............................... (532,878) 221,064 906,877
End of period..................................... (2,506,915) 1,546,448 1,848,754
----------- ---------- ----------
Change in unrealized appreciation (depreciation)
during the period................................. (1,974,037) 1,325,384 941,877
----------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS........................................ (1,964,612) 2,442,192 2,863,869
----------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............................. $(2,682,297) $2,418,012 $2,978,169
=========== ========== ==========
</TABLE>
- ----------
See Notes to Financial Statements.
FS-6
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BT SMALL BT INTER-
ALLIANCE COMPANY NATIONAL
EQUITY INDEX BT EQUITY 500 INDEX EQUITY INDEX
FUND INDEX FUND FUND FUND
------------ ------------- -------- -----------
INCOME AND EXPENSES:
<S> <C> <C> <C> <C>
Investment Income (Note 2):
Dividends from the Trusts......................... $ 63 $ 768,510 $ 188,913 $ 536,259
Expenses (Note 3):
Asset-based charges............................... -- 738,411 86,164 122,054
------ ----------- --------- ----------
NET INVESTMENT INCOME (LOSS)............................ 63 30,099 102,749 414,205
------ ----------- --------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments.................. -- 579,907 (196,585) (487,255)
Realized gain distribution from the Trusts........... 2 -- 359,171 --
------ ----------- --------- ----------
NET REALIZED GAIN (LOSS)................................ 2 579,907 162,586 (487,255)
------ ----------- --------- ----------
Unrealized appreciation (depreciation)
on investments:
Beginning of period............................... 1,039 -- -- --
End of period..................................... 2,670 15,885,081 (545,108) 4,538,154
------ ----------- --------- ----------
Change in unrealized appreciation (depreciation)
during the period................................. 1,631 15,885,081 (545,108) 4,538,154
------ ----------- --------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS........................................ 1,633 16,464,988 (382,522) 4,050,899
------ ----------- --------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............................. $1,696 $16,495,087 $(279,773) $4,465,104
====== =========== ========= ==========
<CAPTION>
LAZARD LAZARD
JPM CORE LARGE CAP SMALL CAP
BOND VALUE VALUE
FUND FUND FUND
---------- ---------- -----------
INCOME AND EXPENSES:
<S> <C> <C> <C>
Investment Income (Note 2):
Dividends from the Trusts......................... $1,942,258 $ 355,224 $ 135,255
Expenses (Note 3):
Asset-based charges............................... 428,389 332,634 248,380
---------- ---------- -----------
NET INVESTMENT INCOME (LOSS)............................ 1,513,869 22,590 (113,125)
---------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments.................. (6,592) (156,900) (707,142)
Realized gain distribution from the Trusts........... 1,048,914 -- --
---------- ---------- -----------
NET REALIZED GAIN (LOSS)................................ 1,042,322 (156,900) (707,142)
---------- ---------- -----------
Unrealized appreciation (depreciation)
on investments:
Beginning of period............................... -- -- --
End of period..................................... 151,767 6,587,696 (1,238,546)
---------- ---------- -----------
Change in unrealized appreciation (depreciation)
during the period................................. 151,767 6,587,696 (1,238,546)
---------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS........................................ 1,194,089 6,430,796 (1,945,688)
---------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............................. $2,707,958 $6,453,386 $(2,058,813)
========== ========== ===========
</TABLE>
- -------------------------
See Notes to Financial Statements.
FS-7
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF OPERATIONS (CONCLUDED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MORGAN
STANLEY
EMERGING
MFS EMERGING MARKETS
MFS RESEARCH GROWTH EQUITY
FUND COMPANIES FUND FUND
------------ -------------- -----------
INCOME AND EXPENSES:
<S> <C> <C> <C>
Investment Income (Note 2):
Dividends from the Trusts......................... $ 553,891 $ 2,768 $ 38,906
Expenses (Note 3):
Asset-based charges............................... 1,646,014 1,102,263 74,659
----------- ----------- -----------
NET INVESTMENT INCOME (LOSS)............................ (1,092,123) (1,099,495) (35,753)
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments.................. 28,858 305,790 (2,128,521)
Realized gain distribution from the Trusts........... -- -- --
----------- ----------- -----------
NET REALIZED GAIN (LOSS)................................ 28,858 305,790 (2,128,521)
----------- ----------- -----------
Unrealized appreciation (depreciation)
on investments:
Beginning of period............................... 6,734 (858,314) --
End of period..................................... 27,968,891 27,600,377 503,907
----------- ----------- -----------
Change in unrealized appreciation
(depreciation) during the period................... 27,962,157 28,458,691 503,907
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS....................................... 27,991,015 28,764,481 (1,624,614)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............................ $26,898,892 $27,664,986 $(1,660,367)
=========== =========== ===========
<CAPTION>
EQ/PUTNAM EQ/PUTNAM
GROWTH & EQ/PUTNAM INTERNATIONAL
INCOME VALUE INVESTORS EQUITY
FUND GROWTH FUND FUND
----------- ----------- -------------
INCOME AND EXPENSES:
<S> <C> <C> <C>
Investment Income (Note 2):
Dividends from the Trusts......................... $ 2,771,619 $ 111,391 $ 42,947
Expenses (Note 3):
Asset-based charges............................... 2,560,202 1,074,066 1,173,602
----------- ----------- -----------
NET INVESTMENT INCOME (LOSS)............................ 211,417 (962,675) (1,130,655)
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments.................. 303,706 2,190,787 1,085,258
Realized gain distribution from the Trusts........... 2,503,287 2 --
----------- ----------- -----------
NET REALIZED GAIN (LOSS)................................ 2,806,993 2,190,789 1,085,258
----------- ----------- -----------
Unrealized appreciation (depreciation)
on investments:
Beginning of period............................... 1,251,440 2,286,852 (355,156)
End of period..................................... 20,844,002 30,898,239 12,926,933
----------- ----------- -----------
Change in unrealized appreciation
(depreciation) during the period................... 19,592,562 28,611,387 13,282,089
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS....................................... 22,399,555 30,802,176 14,367,347
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS............................ $22,610,972 $29,839,501 $13,236,692
=========== =========== ===========
</TABLE>
- ----------
See Notes to Financial Statements.
FS-8
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ALLIANCE MONEY ALLIANCE HIGH
MARKET FUND YIELD FUND
-------------------------------- ------------------------------
1998 1997 1998 1997
------------ ----------- ------------ -----------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss)......................... $ 5,591,727 $ 1,422,874 $ 10,394,219 $ 1,935,418
Net realized gain (loss)............................. 308,727 30,245 2,460,016 1,930,121
Change in unrealized appreciation
(depreciation) of investments..................... (670,935) (374,038) (23,635,055) (1,368,712)
------------ ----------- ------------ -----------
Net increase (decrease) in net
assets from operations............................ 5,229,519 1,079,081 (10,780,820) 2,496,827
------------ ----------- ------------ -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions..................................... 308,003,451 104,148,675 101,309,392 42,971,395
Transfers from other Funds and
Guaranteed Interest Rate
Account (Note 1)............................... 117,047,248 11,039,704 28,971,750 6,495,053
------------ ----------- ------------ -----------
Total.......................................... 425,050,699 115,188,379 130,281,142 49,466,448
------------ ----------- ------------ -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions............... 7,436,997 670,360 3,457,632 327,004
Withdrawal and administrative charges................ 104,554 93,894 173,986 117,245
Transfers to other Funds and Guaranteed Interest
Rate Account (Note 1)............................. 265,941,784 50,981,067 23,920,120 1,028,028
------------ ----------- ------------ -----------
Total............................................. 273,483,335 51,745,321 27,551,738 1,472,277
------------ ----------- ------------ -----------
Net increase in net assets from Contractowners
transactions...................................... 151,567,364 63,443,058 102,729,404 47,994,171
------------ ----------- ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 49 (NOTE 5)... 3,172 (2,952) (2,579) (28,875)
------------ ----------- ------------ -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS.......................................... 156,800,055 64,519,187 91,946,005 50,462,123
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD.................................. 67,650,881 3,131,694 51,095,271 633,148
------------ ----------- ------------ -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF
PERIOD............................................... $224,450,936 $67,650,881 $143,041,276 $51,095,271
============ =========== ============ ===========
<CAPTION>
ALLIANCE COMMON ALLIANCE AGGRESSIVE
STOCK FUND STOCK FUND
-------------------------------- ------------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss)......................... $ (2,316,198) $ (480,576) $ (580,413) $ (277,123)
Net realized gain (loss)............................. 49,882,651 9,497,894 3,718,851 3,898,956
Change in unrealized appreciation
(depreciation) of investments..................... 19,297,438 4,187,658 (4,509,886) (2,412,173)
------------ ------------ ----------- -----------
Net increase (decrease) in net
assets from operations............................ 66,863,891 13,204,976 (1,371,448) 1,209,660
------------ ------------ ----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions..................................... 225,245,017 107,212,947 41,444,328 42,250,282
Transfers from other Funds and
Guaranteed Interest Rate
Account (Note 1)............................... 43,818,466 11,247,312 9,547,092 6,703,750
------------ ------------ ----------- -----------
Total.......................................... 269,063,483 118,460,259 50,991,420 48,954,032
------------ ------------ ----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions............... 9,862,986 744,150 1,928,655 534,703
Withdrawal and administrative charges................ 438,917 428,790 148,718 190,057
Transfers to other Funds and Guaranteed Interest
Rate Account (Note 1)............................. 22,819,554 4,156,366 9,292,218 3,266,536
------------ ------------ ----------- -----------
Total............................................. 33,121,457 5,329,306 11,369,591 3,991,296
------------ ------------ ----------- -----------
Net increase in net assets from Contractowners
transactions...................................... 235,942,026 113,130,953 39,621,829 44,962,736
------------ ------------ ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 49 (NOTE 5)... (207,816) (431) 3,308 8,081
------------ ------------ ----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS....................................... 302,598,101 126,335,498 38,253,689 46,180,477
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD.................................. 127,524,149 1,188,651 46,741,638 561,161
------------ ------------ ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF
PERIOD............................................... $430,122,250 $127,524,149 $84,995,327 $46,741,638
============ ============ =========== ===========
</TABLE>
- ----------
See Notes to Financial Statements.
FS-9
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ALLIANCE SMALL CAP
GROWTH FUND (a) ALLIANCE GLOBAL FUND
------------------------------- ------------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss)................. $ (717,685) $ (103,753) $ (24,180) $ 94,464
Net realized gain (loss)..................... 9,425 761,781 1,116,808 986,714
Change in unrealized appreciation
(depreciation) of investments............. (1,974,037) (532,878) 1,325,384 224,896
----------- ------------ ----------- -----------
Net increase (decrease) in net
assets from operations.................... (2,682,297) 125,150 2,418,012 1,306,074
----------- ------------ ----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions............................. 43,397,274 30,538,328 416,404 11,035,782
Transfers from other Funds
and Guaranteed Interest Rate
Account (Note 1)....................... 12,800,367 2,845,702 712,308 2,538,990
----------- ------------ ----------- -----------
Total.................................. 56,197,641 33,384,030 1,128,712 13,574,772
----------- ------------ ----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions....... 1,391,608 77,516 507,389 303,394
Withdrawal and administrative charges........ 86,076 30,958 47,663 121,147
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1)............ 8,974,764 672,314 1,808,151 1,825,805
----------- ------------ ----------- -----------
Total..................................... 10,452,448 780,788 2,363,203 2,250,346
----------- ------------ ----------- -----------
Net increase in net assets from
Contractowners transactions............... 45,745,193 32,603,242 (1,234,491) 11,324,426
----------- ------------ ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN SEPARATE
ACCOUNT NO. 49 (NOTE 5)...................... 2,485 (5,841) (24,608) (27,562)
----------- ------------ ----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS............................... 43,065,381 32,722,551 1,158,913 12,602,938
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD.......................... 32,722,551 -- 12,840,175 237,237
----------- ------------ ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD................................ $75,787,932 $ 32,722,551 $13,999,088 $12,840,175
=========== ============ =========== ===========
<CAPTION>
ALLIANCE GROWTH ALLIANCE EQUITY
INVESTORS FUND INDEX FUND (a)
------------------------------ ------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss)................. $ 114,300 $ 192,366 $ 63 $ 52
Net realized gain (loss)..................... 1,921,992 1,119,576 2 23
Change in unrealized appreciation
(depreciation) of investments............. 941,877 912,616 1,631 1,039
----------- ----------- ------ ------
Net increase (decrease) in net
assets from operations.................... 2,978,169 2,224,558 1,696 1,114
----------- ----------- ------ ------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions............................. 979,342 14,900,369 -- --
Transfers from other Funds
and Guaranteed Interest Rate
Account (Note 1)....................... 861,920 2,566,982 -- --
----------- ----------- ------ ------
Total.................................. 1,841,262 17,467,351 -- --
----------- ----------- ------ ------
WITHDRAWAL AND TRANSFERS: -- --
Benefits and other policy transactions....... 692,359 160,368 -- --
Withdrawal and administrative charges........ 62,534 87,200 -- --
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1)............ 2,475,681 1,833,943 -- --
----------- ----------- ------ ------
Total..................................... 3,230,574 2,081,511 -- --
----------- ----------- ------ ------
Net increase in net assets from
Contractowners transactions............... (1,389,312) 15,385,840 -- --
----------- ----------- ------ ------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN SEPARATE
ACCOUNT NO. 49 (NOTE 5)...................... (27,724) (29,804) (1,696) (1,114)
----------- ----------- ------ ------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS............................... 1,561,133 17,580,594 -- --
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD.......................... 18,000,086 419,492 -- --
----------- ----------- ------ ------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD................................ $19,561,219 $18,000,086 -- --
=========== =========== ====== ======
</TABLE>
- ----------
(a) Commenced operations on May 1, 1997.
See Notes to Financial Statements.
FS-10
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
BT
BT SMALL INTERNATIONAL
BT EQUITY 500 INDEX COMPANY INDEX EQUITY INDEX JPM CORE BOND
FUND (a) FUND (a) FUND (a) FUND (a)
------------------- ------------- ------------- -------------
1998 1998 1998 1998
------------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss)...................... $ 30,099 $ 102,749 $ 414,205 $ 1,513,869
Net realized gain (loss).......................... 579,907 162,586 (487,255) 1,042,322
Change in unrealized appreciation
(depreciation) of investments.................. 15,885,081 (545,108) 4,538,154 151,767
------------ ----------- ----------- ------------
Net increase (decrease) in net assets from
operations..................................... 16,495,087 (279,773) 4,465,104 2,707,958
------------ ----------- ----------- ------------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions.................................. 137,742,388 15,585,722 20,850,190 73,102,741
Transfers from other Funds and Guaranteed
Interest Rate Account (Note 1).............. 28,395,723 4,179,014 16,741,163 37,948,208
------------ ----------- ----------- ------------
Total....................................... 166,138,111 19,764,736 37,591,353 111,050,949
------------ ----------- ----------- ------------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions............ 1,738,442 120,912 219,542 1,038,633
Withdrawal and administrative charges............. 14,899 1,784 2,627 18,447
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1)................. 15,478,264 1,873,434 14,133,716 13,947,945
------------ ----------- ----------- ------------
Total.......................................... 17,231,605 1,996,130 14,355,885 15,005,025
------------ ----------- ----------- ------------
Net increase in net assets from
Contractowners transactions.................... 148,906,506 17,768,606 23,235,468 96,045,924
------------ ----------- ----------- ------------
NET (INCREASE) DECREASE IN AMOUNT RETAINED
BY EQUITABLE LIFE IN SEPARATE ACCOUNT
NO. 49 (NOTE 5)................................... (1,043,836) 225,647 (3,023,732) (484,641)
------------ ----------- ----------- ------------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS.................................... 164,357,757 17,714,480 24,676,840 98,269,241
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD.............................. -- -- -- --
------------ ----------- ----------- ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD.................................... $164,357,757 $17,714,480 $24,676,840 $ 98,269,241
============ =========== =========== ============
<CAPTION>
LAZARD LAZARD
LARGE CAP SMALL CAP
VALUE VALUE
FUND (a) FUND (a)
----------- -----------
1998 1998
----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C> <C>
Net investment income (loss)...................... $ 22,590 $ (113,125)
Net realized gain (loss).......................... (156,900) (707,142)
Change in unrealized appreciation
(depreciation) of investments.................. 6,587,696 (1,238,546)
----------- -----------
Net increase (decrease) in net assets from
operations..................................... 6,453,386 (2,058,813)
----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions.................................. 60,150,648 44,673,767
Transfers from other Funds and Guaranteed
Interest Rate Account (Note 1).............. 9,859,740 8,257,562
----------- -----------
Total....................................... 70,010,388 52,931,329
----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions............ 586,925 436,736
Withdrawal and administrative charges............. 5,537 5,989
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1)................. 3,799,798 4,021,584
----------- -----------
Total.......................................... 4,392,260 4,464,309
----------- -----------
Net increase in net assets from
Contractowners transactions.................... 65,618,128 48,467,020
----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED
BY EQUITABLE LIFE IN SEPARATE ACCOUNT
NO. 49 (NOTE 5)................................... (631,039) 365,901
----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS.................................... 71,440,475 46,774,108
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD.............................. -- --
----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD.................................... $71,440,475 $46,774,108
=========== ===========
</TABLE>
- -------------------------
(a) Commenced operations on January 1, 1998.
See Notes to Financial Statements.
FS-11
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MFS EMERGING
MFS GROWTH
RESEARCH COMPANIES
FUND (a) FUND (a)
--------------------------------- ---------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) .................... $ (1,092,123) $ (81,799) $ (1,099,495) $ (69,045)
Net realized gain (loss) ........................ 28,858 545,158 305,790 1,070,973
Change in unrealized appreciation
(depreciation) of investments ................ 27,962,157 6,734 28,458,691 (858,314)
------------- ------------- ------------- -------------
Net increase (decrease) in net
assets from operations ....................... 26,898,892 470,093 27,664,986 143,614
------------- ------------- ------------- -------------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions ................................ 121,807,223 59,357,999 76,639,008 40,227,730
Transfers from other Funds
and Guaranteed Interest
Rate Account (Note 1) ..................... 23,365,292 5,000,723 25,862,262 4,340,105
------------- ------------- ------------- -------------
Total ..................................... 145,172,515 64,358,722 102,501,270 44,567,835
------------- ------------- ------------- -------------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions .......... 3,681,079 183,523 2,376,229 341,045
Withdrawal and administrative charges ........... 208,060 85,087 133,480 44,128
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1) ............... 10,792,798 1,051,389 16,923,642 2,114,159
------------- ------------- ------------- -------------
Total ........................................ 14,681,937 1,319,999 19,433,351 2,499,332
------------- ------------- ------------- -------------
Net increase in net assets from
Contractowners transactions .................. 130,490,578 63,038,723 83,067,919 42,068,503
------------- ------------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT NO. 49 (NOTE 5) ................ (131,281) (3,343) (106,304) (3,492)
------------- ------------- ------------- -------------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS .................................. 157,258,189 63,505,473 110,626,601 42,208,625
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD ............................. 63,505,473 -- 42,208,625 --
------------- ------------- ------------- -------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD .................................. $220,763,662 $63,505,473 $152,835,226 $42,208,625
============= ============= ============= =============
<CAPTION>
MORGAN STANLEY
EMERGING
MARKETS EQUITY
FUND (b)
--------------
1998
--------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C>
Net investment income (loss) ........................... $ (35,753)
Net realized gain (loss) ............................... (2,128,521)
Change in unrealized appreciation
(depreciation) of investments ....................... 503,907
------------
Net increase (decrease) in net
assets from operations .............................. (1,660,367)
------------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions ....................................... 11,589,726
Transfers from other Funds
and Guaranteed Interest
Rate Account (Note 1) ............................ 12,891,618
------------
Total ............................................ 24,481,344
------------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions ................. 83,958
Withdrawal and administrative charges .................. 1,595
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1) ...................... 11,162,025
------------
Total ............................................... 11,247,578
------------
Net increase in net assets from
Contractowners transactions ......................... 13,233,766
------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT NO. 49 (NOTE 5) ....................... (830)
------------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS ......................................... 11,572,569
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD .................................... --
------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD ......................................... $11,572,569
============
</TABLE>
- ----------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on December 31, 1997.
See Notes to Financial Statements.
FS-12
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQ/PUTNAM
GROWTH & INCOME EQ/PUTNAM
VALUE INVESTORS GROWTH
FUND (a) FUND (a)
--------------------------------- ---------------------------------
1998 1997 1998 1997
------------ ----------- ------------ -----------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss).................... $ 211,417 $ 119,673 $ (962,675) $ (36,575)
Net realized gain (loss)........................ 2,806,993 391,558 2,190,789 364,091
Change in unrealized appreciation
(depreciation) of investments................ 19,592,562 1,251,440 28,611,387 2,286,852
------------ ----------- ------------ -----------
Net increase (decrease) in net
assets from operations....................... 22,610,972 1,762,671 29,839,501 2,614,368
------------ ----------- ------------ -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions................................ 192,282,349 89,354,305 102,305,888 29,499,045
Transfers from other Funds and
Guaranteed Interest Rate
Account (Note 1).......................... 38,949,363 8,714,901 22,084,671 3,342,187
------------ ----------- ------------ -----------
Total..................................... 231,231,712 98,069,206 124,390,559 32,841,232
------------ ----------- ------------ -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions.......... 6,393,934 -- 2,648,953 151,674
Withdrawal and administrative charges........... 306,018 684,612 116,410 70,276
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1)............... 17,366,879 1,112,466 9,084,232 573,939
------------ ----------- ------------ -----------
Total........................................ 24,066,831 1,797,078 11,849,595 795,889
------------ ----------- ------------ -----------
Net increase in net assets from
Contractowners transactions.................. 207,164,881 96,272,128 112,540,964 32,045,343
------------ ----------- ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT NO. 49 (NOTE 5)................ (181,146) 5,168 (1,164,027) (1,236,705)
------------ ----------- ------------ -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS.................................. 229,594,707 98,039,967 141,216,438 33,423,006
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD............................. 98,039,967 -- 33,423,006 --
------------ ----------- ------------ -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD................................... $327,634,674 $98,039,967 $174,639,444 $33,423,006
============ =========== ============ ===========
<CAPTION>
EQ/PUTNAM
INTERNATIONAL EQUITY
FUND (a)
---------------------------------
1998 1997
------------ -----------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
<S> <C> <C>
Net investment income (loss).................... $ (1,130,655) $ (102,449)
Net realized gain (loss)........................ 1,085,258 259,624
Change in unrealized appreciation
(depreciation) of investments................ 13,282,089 (355,156)
------------ -----------
Net increase (decrease) in net
assets from operations....................... 13,236,692 (197,981)
------------ -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions................................ 72,938,890 49,901,207
Transfers from other Funds and
Guaranteed Interest Rate
Account (Note 1).......................... 29,843,626 4,211,149
------------ -----------
Total..................................... 102,782,516 54,112,356
------------ -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions.......... 2,642,413 155,422
Withdrawal and administrative charges........... 169,696 69,966
Transfers to other Funds and Guaranteed
Interest Rate Account (Note 1)............... 21,216,559 1,074,411
------------ -----------
Total........................................ 24,028,668 1,299,799
------------ -----------
Net increase in net assets from
Contractowners transactions.................. 78,753,848 52,812,557
------------ -----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT NO. 49 (NOTE 5)................ (560,408) (475,212)
------------ -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS.................................. 91,430,132 52,139,364
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD............................. 52,139,364 --
------------ -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD................................... $143,569,496 $52,139,364
============ ===========
</TABLE>
- --------------------
(a) Commenced operations on May 1, 1997.
See Notes to Financial Statements.
FS-13
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. General
The Equitable Life Assurance Society of the United States ("Equitable
Life") Separate Account No. 49 (the "Account") is organized as a unit
investment trust, a type of investment company, and is registered with the
Securities and Exchange Commission under the Investment Company Act of
1940 (the "1940 Act"). Alliance Capital Management L.P., an indirect
majority-owned subsidiary of Equitable Life, manages The Hudson River
Trust ("HRT") and is the investment adviser for all of the investment
funds of HRT. EQ Financial Consultants, Inc., ("EQFC") and Equitable
Distributors Inc. ("EDI") are indirect, wholly owned subsidiaries of
Equitable Life. EQFC manages the EQ Advisors Trust ("EQAT") and has
overall responsibility for general management and administration of EQAT.
The Account consists of 21 investment funds ("Funds"): the Alliance Money
Market Fund, Alliance High Yield Fund, Alliance Common Stock Fund,
Alliance Aggressive Stock Fund, Alliance Small Cap Growth Fund, Alliance
Global Fund, Alliance Growth Investors Fund, Alliance Equity Index Fund,
BT Equity 500 Index Fund, BT Small Company Index Fund, BT International
Equity Index Fund, JPM Core Bond Fund, Lazard Large Cap Value Fund, Lazard
Small Cap Value Fund, MFS Research, MFS Emerging Growth Companies, MFS
Growth with Income Fund, Morgan Stanley Emerging Markets Equity Fund,
EQ/Putnam Growth & Income Value Fund, EQ/Putnam Investors Growth Fund and
EQ/Putnam International Equity Fund. As of December 31, 1998, the MFS
Growth with Income Fund had not yet sold units to the public and
accordingly there is no activity in the Statements of Operations and the
Statement of Changes in Net Assets. The assets in each fund are invested
in Class 1B shares of a corresponding portfolio ("Portfolio") of a mutual
fund of HRT or of EQAT (collectively, the "Trusts"). Class 1A and 1B
shares are offered by the Trusts at net asset value. Both classes of
shares are subject to fees for investment management and advisory services
and other Trust expenses. Class 1B shares are subject to distribution fees
imposed under a distribution plan (herein, the "Rule 12b-1 Plans") adopted
pursuant to Rule 12b-1 under the 1940 Act, as amended. The Rule 12b-1
Plans provide that the Trusts, on behalf of each Fund, may charge annually
up to 0.25% of the average daily net assets of a Fund attributable to its
Class 1B Shares in respect of activities primarily intended to result in
the sale of Class 1B Shares. These fees are reflected in the net asset
value of the shares. The Trusts are open-ended, diversified management
investment companies that sell their shares to separate accounts of
insurance companies. Each Portfolio has separate investment objectives.
The Account commenced operations on October 1, 1996.
EQFC and EDI earns fees from both Trusts under distribution agreements
held with the Trusts. EQFC also earns fees under an investment management
agreement with EQAT. Alliance earns fees under an investment advisory
agreement with the HRT.
The Account is used to fund benefits for the Rollover IRA, Equitable
Accumulator IRA, Equitable Accumulator TSA, Equitable Accumulator Select
IRA and Equitable Accumulator Select TSA, qualified deferred variable
annuities, which combine the Portfolios in the Account with guaranteed
fixed rate options, and the Accumulator, Equitable Accumulator NQ and
Equitable Accumulator Select NQ, which offer the same investment options
as the Equitable Accumulator IRA and Equitable Accumulator Select IRA for
the non-qualified market. The non-qualified variable annuities are also
available for purchase by certain types of qualified plans (referred to as
Equitable Accumulator QP and Equitable Accumulator Select QP). The
Equitable Accumulator IRA, NQ, QP and TSA (including Equitable Accumulator
Select IRA, NQ, QP and TSA), collectively referred to as the Contracts,
are offered under group and individual variable annuity forms.
All Contracts are issued by Equitable Life. The assets of the Account are
the property of Equitable Life. However, the portion of the Account's
assets attributable to the Contracts will not be chargeable with
liabilities arising out of any other business Equitable Life may conduct.
Receivable/payable for policy-related transactions represent amounts due
to/from General Account predominately related to premiums, surrenders and
death benefits.
Included in the Withdrawals and Administrative Charges line of the
Statements of Changes in Net Assets are certain administrative charges
which are deducted from the Contractowners' account value.
Contractowners may allocate amounts in their individual accounts to the
Funds of the Account, and/or to the guaranteed interest account of
Equitable Life's General Account, and/or to other Separate Accounts. The
net assets of any Fund of the Account may not be less than the aggregate
of the contractowners' accounts allocated to that Fund. Additional assets
are set aside in Equitable Life's General Account to provide for other
policy benefits, as required under the state insurance law.
Equitable Life's General Account is subject to creditor rights.
FS-14
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. Significant Accounting Policies
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Investments are made in shares of the Trust and are valued at the net
asset values per share of the respective Portfolios. The net asset value
is determined by the Trust using the market or fair value of the
underlying assets of the Portfolio less liabilities.
Investment transactions in the Trusts are recorded on the trade date.
Realized gains and losses include gains and losses on redemptions of the
Trust's shares (determined on the identified cost basis) and Trust
distributions representing the net realized gains on Trust investment
transactions which are distributed by the Trusts at the end of each year
and automatically reinvested in additional shares.
Dividends are recorded by HRT at the end of each quarter and by EQAT in
the fourth quarter on the ex-dividend date. Capital gains are distributed
by the Trust at the end of each year.
No Federal income tax based on net income or realized and unrealized
capital gains is currently applicable to Contracts participating in the
Account by reason of applicable provisions of the Internal Revenue Code
and no Federal income tax payable by Equitable Life is expected to affect
the unit value of Contracts participating in the Account. Accordingly, no
provision for income taxes is required. However, Equitable Life retains
the right to charge for any Federal income tax which is attributable to
the Account if the law is changed.
3. Asset Charges
Charges are made directly against the net assets of the Account and are
reflected daily in the computation of the unit values of the Contracts.
Under the Contracts, Equitable Life charges the account for the following
charges:
<TABLE>
<CAPTION>
Asset-based
Mortality and Administration Distribution
Expense Risks Charge Charge
-------------- --------------- ------------
<S> <C> <C> <C>
Accumulator and Rollover IRA issued before 0.90% 0.30% --
May 1, 1997
Equitable Accumulator issued after May 1, 1997 1.10% 0.25% --
Equitable Accumulator Select 1.10% 0.25% 0.25%
</TABLE>
Aggregate
Charges
---------
Accumulator and Rollover IRA issued before 1.20%
May 1, 1997
Equitable Accumulator issued after May 1, 1997 1.35%
Equitable Accumulator Select 1.60%
These charges may be retained in the Account by Equitable Life and to the
extent retained, participate in the net results of the Trust ratably with
assets attributable to the Contracts.
Trust shares are valued at their net asset value with investment advisory
or management fees, the 12b-1 fee, and direct operating expenses of the
Trust, in effect, passed on to the Account and reflected in the
accumulation unit values of the Contracts.
4. Contributions, Transfers and Charges:
Net accumulation units issued during the periods indicated were:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
----------- -----------
ALLIANCE MONEY MARKET FUND (IN THOUSANDS)
--------------------------
<S> <C> <C>
Net Issued (Redeemed) 120 b.p............ (30) 172
Net Issued (Redeemed) 135 b.p............ 4,005 1,153
Net Issued (Redeemed) 160 b.p............ 349 --
Net Issued (Redeemed) 0 b.p.............. 1,286 947
ALLIANCE HIGH YIELD FUND
--------------------------
Net Issued (Redeemed) 120 b.p............ (17) 402
Net Issued (Redeemed) 135 b.p............ 3,265 1,256
Net Issued (Redeemed) 160 b.p............ 168 2
</TABLE>
FS-15
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. Contributions, Transfers and Charges (Continued):
Net accumulation units issued during the periods indicated were:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
----------- -----------
ALLIANCE COMMON STOCK FUND (IN THOUSANDS)
--------------------------
<S> <C> <C> <C>
Net Issued (Redeemed) 120 b.p........... (10) 229
Net Issued (Redeemed) 135 b.p........... 1,108 434
Net Issued (Redeemed) 160 b.p........... 34 1
ALLIANCE AGGRESSIVE STOCK FUND
------------------------------
Net Issued (Redeemed) 120 b.p........... (13) 269
Net Issued (Redeemed) 135 b.p........... 559 380
Net Issued (Redeemed) 160 b.p........... 16 --
ALLIANCE SMALL CAP GROWTH FUND (a)
----------------------------------
Net Issued (Redeemed) 120 b.p........... 13 89
Net Issued (Redeemed) 135 b.p........... 3,580 2,521
Net Issued (Redeemed) 160 b.p........... 211 --
ALLIANCE GLOBAL FUND
--------------------
Net Issued (Redeemed) 120 b.p........... (42) 455
ALLIANCE GROWTH INVESTORS FUND
------------------------------
Net Issued (Redeemed) 120 b.p........... (44) 582
BT EQUITY 500 INDEX FUND (b)
----------------------------
Net Issued (Redeemed) 120 b.p........... 87 --
Net Issued (Redeemed) 135 b.p........... 12,279 --
Net Issued (Redeemed) 160 b.p........... 951 --
BT SMALL COMPANY INDEX FUND (b)
-------------------------------
Net Issued (Redeemed) 120 b.p........... 18 --
Net Issued (Redeemed) 135 b.p........... 1,610 --
Net Issued (Redeemed) 160 b.p........... 211 --
BT INTERNATIONAL EQUITY INDEX FUND (b)
--------------------------------------
Net Issued (Redeemed) 120 b.p........... 9 --
Net Issued (Redeemed) 135 b.p........... 1,827 --
Net Issued (Redeemed) 160 b.p........... 248 --
JPM CORE BOND FUND (b)
----------------------
Net Issued (Redeemed) 120 b.p........... 98 --
Net Issued (Redeemed) 135 b.p........... 8,661 --
Net Issued (Redeemed) 160 b.p........... 379 --
</TABLE>
- -------------------------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on January 1, 1998.
FS-16
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. Contributions, Transfers and Charges (Continued):
Net accumulation units issued during the periods indicated were:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
LAZARD LARGE CAP VALUE FUND (b) (IN THOUSANDS)
-------------------------------
<S> <C> <C> <C>
Net Issued (Redeemed) 120 b.p.................. 22 --
Net Issued (Redeemed) 135 b.p.................. 5,696 --
Net Issued (Redeemed) 160 b.p.................. 315 --
LAZARD SMALL CAP VALUE FUND (b)
-------------------------------
Net Issued (Redeemed) 120 b.p.................. 26 --
Net Issued (Redeemed) 135 b.p.................. 4,733 --
Net Issued (Redeemed) 160 b.p.................. 344 --
MFS RESEARCH FUND (a)
---------------------
Net Issued (Redeemed) 120 b.p.................. 93 263
Net Issued (Redeemed) 135 b.p.................. 9,656 5,257
Net Issued (Redeemed) 160 b.p.................. 409 2
MFS EMERGING GROWTH COMPANIES FUND (a)
--------------------------------------
Net Issued (Redeemed) 120 b.p.................. 27 149
Net Issued (Redeemed) 135 b.p.................. 5,790 3,327
Net Issued (Redeemed) 160 b.p.................. 198 3
MORGAN STANLEY EMERGING MARKETS EQUITY FUND (C)
-----------------------------------------------
Net Issued (Redeemed) 120 b.p.................. 16 --
Net Issued (Redeemed) 135 b.p.................. 1,805 --
Net Issued (Redeemed) 160 b.p.................. 203 --
EQ/PUTNAM GROWTH & INCOME VALUE FUND (a)
----------------------------------------
Net Issued (Redeemed) 120 b.p.................. 123 383
Net Issued (Redeemed) 135 b.p.................. 16,230 8,113
Net Issued (Redeemed) 160 b.p.................. 697 17
EQ/PUTNAM INVESTORS GROWTH FUND (a)
-----------------------------------
Net Issued (Redeemed) 120 b.p.................. 36 124
Net Issued (Redeemed) 135 b.p.................. 7,491 2,581
Net Issued (Redeemed) 160 b.p.................. 282 --
</TABLE>
- ----------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on January 1, 1998.
(c) Commenced operations on December 31, 1997.
FS-17
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. Contributions, Transfers and Charges (Concluded):
Net accumulation units issued during the periods indicated were:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
EQ/PUTNAM INTERNATIONAL EQUITY FUND (a) (IN THOUSANDS)
---------------------------------------
<S> <C> <C> <C>
Net Issued (Redeemed) 120 b.p................. 3 187
Net Issued (Redeemed) 135 b.p................. 5,998 4,609
Net Issued (Redeemed) 160 b.p................. 418 5
</TABLE>
- -------------------------
(a) Commenced operations on May 1, 1997.
5. Amounts retained by Equitable Life in Separate Account No. 49
The amount retained by Equitable Life in the Account arises principally
from (1) contributions from Equitable Life, (2) mortality and expense
charges and Asset-based administrative charges accumulated in the account,
and (3) that portion, determined ratably, of the Account's investment
results applicable to those assets in the Account in excess of the net
assets for the Contracts. Amounts retained by Equitable Life are not
subject to charges for mortality and expense risks and Asset-based
administrative expenses.
Amounts retained by Equitable Life in the Account may be transferred at
any time by Equitable Life to its General Account.
The following table shows the contributions (withdrawals) in net amounts
retained by Equitable Life by investment fund:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
INVESTMENT FUND 1998 1997
--------------- ------------ ----------
<S> <C> <C>
Alliance Money Market Fund.................................. $(1,183,691) $ (105,000)
Alliance High Yield Fund.................................... (1,528,340) (85,000)
Alliance Common Stock Fund.................................. (3,823,234) (180,000)
Alliance Aggressive Stock Fund.............................. (983,127) (110,000)
Alliance Small Cap Growth Fund.............................. (792,824) 5,000
Alliance Global Fund........................................ (225,129) (90,000)
Alliance Growth Investors Fund.............................. (336,002) (97,000)
Alliance Equity Index Fund.................................. -- 5,000
BT Equity 500 Index Fund(2)................................. (1,331,361) 1,000
BT Small Company Index Fund(2).............................. 9,933,857 1,000
BT International Equity Index Fund(2)....................... 14,902,319 1,000
JPM Core Bond Fund(2)....................................... 4,150,198 1,000
Lazard Large Cap Value Fund(2).............................. 2,234,287 1,000
Lazard Small Cap Value Fund(2).............................. 4,310,749 1,000
MFS Research Fund(1)........................................ (1,751,938) --
MFS Emerging Growth Companies Fund(1)....................... (1,150,981) --
MFS Growth with Income Fund(3) ............................. -- --
Morgan Stanley Emerging Markets Equity Fund(4).............. (48,664) --
EQ/Putnam Growth & Income Value Fund(1)..................... (2,678,339) --
EQ/Putnam Investors Growth Fund(1).......................... (8,168,474) 5,000,000
EQ/Putnam International Equity Fund(1)...................... (7,148,298) 5,000,000
</TABLE>
- ----------
(1) Commenced operations on May 1, 1997.
(2) Initial capital received on December 31, 1997.
(3) Initial capital received on December 31, 1998.
(4) Commenced operations on December 31, 1997.
FS-18
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1998 1997 1996
----------------------------- ---------------------------- ------------------------
ALLIANCE MONEY MARKET FUND
- --------------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period......... $25.64 $24.68 $24.43
1.20% Unit value, end of period............... $26.62 $25.64 $24.68
1.35% Unit value, beginning of period (a)..... $25.00 $24.38 --
1.35% Unit value, end of period (a)........... $25.92 $25.00 --
1.60% Unit value, beginning of period (b)..... $23.98 $23.78 --
1.60% Unit value, end of period (b)........... $24.80 $23.98 --
0% Unit value, beginning of period (a)........ $31.27 $30.21 --
0% Unit value, end of period (a).............. $32.86 $31.27 --
Number of units outstanding, end of
period (000's)
1.20%...................................... 329 359 127
1.35%...................................... 5,158 1,153 --
1.60%...................................... 349 -- --
0%......................................... 2,233 947 --
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1998 1997 1996
----------------------------- ---------------------------- ------------------------
ALLIANCE HIGH YIELD FUND
- ------------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period......... $30.46 $26.09 $25.33
1.20% Unit value, end of period............... $28.48 $30.46 $26.09
1.35% Unit value, beginning of period (a)..... $29.96 $26.35 --
1.35% Unit value, end of period (a)........... $27.96 $29.96 --
1.60% Unit value, beginning of period (b)..... $29.13 $28.79 --
1.60% Unit value, end of period (b)........... $27.12 $29.13 --
Number of units outstanding, end of
period (000's)
1.20%...................................... 422 439 24
1.35%...................................... 4,521 1,256 --
1.60%...................................... 170 2 --
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1998 1997 1996
----------------------------- ---------------------------- ------------------------
ALLIANCE COMMON STOCK FUND
- --------------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period......... $192.60 $151.23 $139.82
1.20% Unit value, end of period............... $245.58 $192.60 $151.23
1.35% Unit value, beginning of period (a)..... $186.29 $146.89 --
1.35% Unit value, end of period (a)........... $237.18 $186.29 --
1.60% Unit value, beginning of period (b)..... $176.22 $172.77 --
1.60% Unit value, end of period (b)........... $223.79 $176.22 --
Number of units outstanding, end of
period (000's)
1.20%...................................... 230 240 8
1.35%...................................... 1,542 434 --
1.60%...................................... 35 1 --
</TABLE>
- -------------------------
(a) Units were made available for sale on May 1, 1997.
(b) Units were made available for sale on October 1, 1997.
FS-19
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
1998 1997 1996
--------------------------- -------------------------- -------------------
ALLIANCE AGGRESSIVE STOCK FUND
- ------------------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period......... $71.57 $65.53 $64.24
1.20% Unit value, end of period............... $70.74 $71.57 $65.53
1.35% Unit value, beginning of period (a)..... $70.28 $61.42 --
1.35% Unit value, end of period (a)........... $69.37 $70.28 --
1.60% Unit value, beginning of period (b)..... $68.19 $75.44 --
1.60% Unit value, end of period (b)........... $67.13 $68.19 --
Number of units outstanding, end of
period (000's)
1.20%...................................... 266 279 9
1.35%...................................... 939 380 --
1.60%...................................... 16 -- --
</TABLE>
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997
---------- ----------
ALLIANCE SMALL CAP GROWTH FUND
- ------------------------------
1.20% Unit value, beginning of period (a)..... $12.55 $10.00
1.20% Unit value, end of period (a)........... $11.85 $12.55
1.35% Unit value, beginning of period (a)..... $12.54 $10.00
1.35% Unit value, end of period (a)........... $11.82 $12.54
1.60% Unit value, beginning of period (b)..... $12.52 $13.22
1.60% Unit value, end of period (b)........... $11.77 $12.52
Number of units outstanding, end of
period (000's)
1.20%...................................... 102 89
1.35%...................................... 6,101 2,521
1.60%...................................... 211 --
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------
1998 1997 1996
---------------------------- ------------------------- -----------------
ALLIANCE GLOBAL FUND
- --------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period......... $27.61 $25.12 $26.00
1.20% Unit value, end of period............... $33.15 $27.61 $25.12
Number of units outstanding, end of
period (000's)
1.20%...................................... 422 464 9
</TABLE>
- -------------------------
(a) Units were made available for sale on May 1, 1997.
(b) Units were made available for sale on October 1, 1997.
FS-20
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------
1998 1997 1996
------------------------ ------------------------- ---------------------
ALLIANCE GROWTH INVESTORS FUND
- ------------------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period......... $30.09 $26.15 $25.06
1.20% Unit value, end of period............... $35.33 $30.09 $26.15
Number of units outstanding, end of
period (000's)
1.20%...................................... 544 598 16
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------
1998 1997
--------------------------------------- -----------------------------------
ALLIANCE EQUITY INDEX FUND
- --------------------------
<S> <C> <C>
1.35% Unit value, beginning of period (a)..... $21.21 $17.51
1.35% Unit value, end of period (a)........... $26.73 $21.21
Number of units outstanding, end of
period (000's)
1.35%...................................... -- --
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------
1998 1997 (b)
--------------------------------------- -----------------------------------
BT EQUITY 500 INDEX FUND
- ------------------------
<S> <C> <C>
1.20% Unit value, beginning of period......... $10.00 $10.00
1.20% Unit value, end of period............... $12.36 $10.00
1.35% Unit value, beginning of period......... $10.00 $10.00
1.35% Unit value, end of period............... $12.34 $10.00
1.60% Unit value, beginning of period......... $10.00 $10.00
1.60% Unit value, end of period............... $12.31 $10.00
Number of units outstanding, end of
period (000's)
1.20%...................................... 87 --
1.35%...................................... 12,279 --
1.60%...................................... 951 --
</TABLE>
- -------------------------
(a) Units were made available for sale on May 1, 1997.
(b) Initial capital was received on December 31, 1997.
FS-21
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 (a)
----------- -----------
BT SMALL COMPANY INDEX FUND
- ---------------------------
1.20% Unit value, beginning of period......... $10.00 $10.00
1.20% Unit value, end of period............... $9.65 $10.00
1.35% Unit value, beginning of period......... $10.00 $10.00
1.35% Unit value, end of period............... $9.64 $10.00
1.60% Unit value, beginning of period......... $10.00 $10.00
1.60% Unit value, end of period............... $9.61 $10.00
Number of units outstanding, end of
period (000's)
1.20%...................................... 18 --
1.35%...................................... 1,610 --
1.60%...................................... 211 --
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 (a)
----------- -----------
BT INTERNATIONAL EQUITY INDEX FUND
- ----------------------------------
1.20% Unit value, beginning of period......... $10.00 $10.00
1.20% Unit value, end of period............... $11.87 $10.00
1.35% Unit value, beginning of period......... $10.00 $10.00
1.35% Unit value, end of period............... $11.85 $10.00
1.60% Unit value, beginning of period......... $10.00 $10.00
1.60% Unit value, end of period............... $11.82 $10.00
Number of units outstanding, end of
period (000's)
1.20%...................................... 9 --
1.35%...................................... 1,827 --
1.60%...................................... 248 --
- -------------------------
(a) Initial capital was received on December 31, 1997.
(b) Initial capital was received on December 31, 1998.
FS-22
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 (a)
----------- -----------
JPM CORE BOND FUND
- ------------------
1.20% Unit value, beginning of period......... $10.00 $10.00
1.20% Unit value, end of period................. $10.77 $10.00
1.35% Unit value, beginning of period........... $10.00 $10.00
1.35% Unit value, end of period................. $10.76 $10.00
1.60% Unit value, beginning of period........... $10.00 $10.00
1.60% Unit value, end of period................. $10.73 $10.00
Number of units outstanding, end of
period (000's)
1.20%........................................ 98 --
1.35%........................................ 8,661 --
1.60%........................................ 379 --
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 (a)
----------- -----------
LAZARD LARGE CAP VALUE FUND
- ---------------------------
1.20% Unit value, beginning of period........... $10.00 $10.00
1.20% Unit value, end of period................. $11.86 $10.00
1.35% Unit value, beginning of period........... $10.00 $10.00
1.35% Unit value, end of period................. $11.84 $10.00
1.60% Unit value, beginning of period........... $10.00 $10.00
1.60% Unit value, end of period................. $11.81 $10.00
Number of units outstanding, end of
period (000's)
1.20%........................................ 22 --
1.35%........................................ 5,696 --
1.60%........................................ 315 --
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 (a)
----------- -----------
LAZARD SMALL CAP VALUE FUND
- ---------------------------
1.20% Unit value, beginning of period........... $10.00 $10.00
1.20% Unit value, end of period................. $9.18 $10.00
1.35% Unit value, beginning of period........... $10.00 $10.00
1.35% Unit value, end of period................. $9.17 $10.00
1.60% Unit value, beginning of period........... $10.00 $10.00
1.60% Unit value, end of period................. $9.14 $10.00
Number of units outstanding, end of
period (000's)
1.20%........................................ 26 --
1.35%........................................ 4,733 --
1.60%........................................ 344 --
- -------------------------
(a) Initial capital was received on December 31, 1997.
(b) Initial capital was received on December 31, 1998.
FS-23
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 (a)
----------- -----------
MFS RESEARCH FUND
- -----------------
1.20% Unit value, beginning of period........... $11.51 $10.00
1.20% Unit value, end of period................. $14.12 $11.51
1.35% Unit value, beginning of period........... $11.50 $10.00
1.35% Unit value, end of period................. $14.08 $11.50
1.60% Unit value, beginning of period (c)...... $11.48 $11.77
1.60% Unit value, end of period (c)............. $14.02 $11.48
Number of units outstanding, end of
period (000's)
1.20%........................................ 356 263
1.35%........................................ 14,913 5,257
1.60%........................................ 410 1
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 (a)
----------- -----------
MFS EMERGING GROWTH COMPANIES FUND
- ----------------------------------
1.20% Unit value, beginning of period........... $12.14 $10.00
1.20% Unit value, end of period................. $16.14 $12.14
1.35% Unit value, beginning of period........... $12.13 $10.00
1.35% Unit value, end of period................. $16.10 $12.13
1.60% Unit value, beginning of period (c)....... $12.11 $12.60
1.60% Unit value, end of period (c)............. $16.03 $12.11
Number of units outstanding, end of
period (000's)
1.20%........................................ 176 149
1.35%........................................ 9,117 3,327
1.60%........................................ 200 2
DECEMBER 31, 1998 (b)
---------------------------
MFS EMERGING GROWTH WITH INCOME FUND
- ------------------------------------
1.20% Unit value, beginning of period........... $10.00
1.20% Unit value, end of period................. $10.00
1.35% Unit value, beginning of period........... $10.00
1.35% Unit value, end of period................. $10.00
1.60% Unit value, beginning of period........... $10.00
1.60% Unit value, end of period................. $10.00
- ----------
(a) Units were made available for sale on May 1, 1997.
(b) Initial capital was received on December 31, 1998.
(c) Units were made available for sale on October 1, 1997.
FS-24
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 (a)
----------- -----------
MORGAN STANLEY EMERGING MARKETS EQUITY FUND
- -------------------------------------------
1.20% Unit value, beginning of period (c)....... $7.95 $7.95
1.20% Unit value, end of period (c)............. $5.73 $7.95
1.35% Unit value, beginning of period (c)....... $7.94 $7.94
1.35% Unit value, end of period (c)............. $5.72 $7.94
1.60% Unit value, beginning of period (c)....... $7.93 $7.93
1.60% Unit value, end of period (c)............. $5.70 $7.93
Number of units outstanding, end of
period (000's)
1.20%........................................ 16 --
1.35%........................................ 1,805 --
1.60%........................................ 203 --
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 (a)
----------- -----------
EQ/PUTNAM GROWTH & INCOME VALUE FUND
- ------------------------------------
1.20% Unit value, beginning of period........... $11.53 $10.00
1.20% Unit value, end of period................. $12.85 $11.53
1.35% Unit value, beginning of period........... $11.52 $10.00
1.35% Unit value, end of period................. $12.82 $11.52
1.60% Unit value, beginning of period (c)....... $11.50 $11.63
1.60% Unit value, end of period (c)............. $12.76 $11.50
Number of units outstanding, end of
period (000's)
1.20%........................................ 506 383
1.35%........................................ 24,343 8,113
1.60%........................................ 714 17
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 (a)
----------- -----------
EQ/PUTNAM INVESTORS GROWTH FUND
- -------------------------------
1.20% Unit value, beginning of period........... $12.37 $10.00
1.20% Unit value, end of period................. $16.65 $12.37
1.35% Unit value, beginning of period........... $12.35 $10.00
1.35% Unit value, end of period................. $16.61 $12.35
1.60% Unit value, beginning of period (c) ...... $12.33 $12.12
1.60% Unit value, end of period (c) ............ $16.54 $12.33
Number of units outstanding, end of
period (000's)
1.20%........................................ 160 124
1.35%........................................ 10,072 2,581
1.60%........................................ 282 --
- ----------
(a) Units were made available for sale on May 1, 1997.
(b) Units were made available for sale on May 1, 1998.
(c) Units were made available for sale on December 31, 1997.
FS-25
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Concluded):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
YEARS ENDED DECEMBER 31,
---------------------------
1998 1997 (a)
----------- -----------
EQ/PUTNAM INTERNATIONAL EQUITY FUND
- -----------------------------------
1.20% Unit value, beginning of period........... $10.87 $10.00
1.20% Unit value, end of period................. $12.83 $10.87
1.35% Unit value, beginning of period........... $10.86 $10.00
1.35% Unit value, end of period................. $12.80 $10.86
1.60% Unit value, beginning of period (c)....... $10.84 $11.52
1.60% Unit value, end of period (c)............. $12.75 $10.84
Number of units outstanding, end of
period (000's)
1.20%........................................ 190 187
1.35%........................................ 10,607 4,609
1.60%........................................ 422 4
- -------------------------
(a) Units were made available for sale on May 1, 1997.
(c) Units were made available for sale on October 1, 1997.
FS-26
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholder of
The Equitable Life Assurance Society of the United States
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholder's equity and comprehensive
income and of cash flows present fairly, in all material respects, the financial
position of The Equitable Life Assurance Society of the United States and its
subsidiaries ("Equitable Life") at December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Equitable
Life's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, Equitable Life
changed its method of accounting for long-lived assets in 1996.
/s/PricewaterhouseCoopers LLP
- -----------------------------
PricewaterhouseCoopers LLP
New York, New York
February 8, 1999
F-1
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value............................. $ 18,993.7 $ 19,630.9
Held to maturity, at amortized cost..................................... 125.0 -
Mortgage loans on real estate............................................. 2,809.9 2,611.4
Equity real estate........................................................ 1,676.9 2,495.1
Policy loans.............................................................. 2,086.7 2,422.9
Other equity investments.................................................. 713.3 951.5
Investment in and loans to affiliates..................................... 928.5 731.1
Other invested assets..................................................... 808.2 612.2
----------------- -----------------
Total investments..................................................... 28,142.2 29,455.1
Cash and cash equivalents................................................... 1,245.5 300.5
Deferred policy acquisition costs........................................... 3,563.8 3,236.6
Amounts due from discontinued operations.................................... 2.7 572.8
Other assets................................................................ 3,051.9 2,687.4
Closed Block assets......................................................... 8,632.4 8,566.6
Separate Accounts assets.................................................... 43,302.3 36,538.7
----------------- -----------------
Total Assets................................................................ $ 87,940.8 $ 81,357.7
================= =================
LIABILITIES
Policyholders' account balances............................................. $ 20,889.7 $ 21,579.5
Future policy benefits and other policyholders' liabilities................. 4,694.2 4,553.8
Short-term and long-term debt............................................... 1,181.7 1,716.7
Other liabilities........................................................... 3,474.3 3,267.2
Closed Block liabilities.................................................... 9,077.0 9,073.7
Separate Accounts liabilities............................................... 43,211.3 36,306.3
----------------- -----------------
Total liabilities..................................................... 82,528.2 76,497.2
----------------- -----------------
Commitments and contingencies (Notes 11, 13, 14, 15 and 16)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value 2.0 million shares authorized, issued
and outstanding........................................................... 2.5 2.5
Capital in excess of par value.............................................. 3,110.2 3,105.8
Retained earnings........................................................... 1,944.1 1,235.9
Accumulated other comprehensive income...................................... 355.8 516.3
----------------- -----------------
Total shareholder's equity............................................ 5,412.6 4,860.5
----------------- -----------------
Total Liabilities and Shareholder's Equity.................................. $ 87,940.8 $ 81,357.7
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
REVENUES
Universal life and investment-type product policy fee
income...................................................... $ 1,056.2 $ 950.6 $ 874.0
Premiums...................................................... 588.1 601.5 597.6
Net investment income......................................... 2,228.1 2,282.8 2,203.6
Investment gains (losses), net................................ 100.2 (45.2) (9.8)
Commissions, fees and other income............................ 1,503.0 1,227.2 1,081.8
Contribution from the Closed Block............................ 87.1 102.5 125.0
----------------- ----------------- -----------------
Total revenues.......................................... 5,562.7 5,119.4 4,872.2
----------------- ----------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances.......... 1,153.0 1,266.2 1,270.2
Policyholders' benefits....................................... 1,024.7 978.6 1,317.7
Other operating costs and expenses............................ 2,201.2 2,203.9 2,075.7
----------------- ----------------- -----------------
Total benefits and other deductions..................... 4,378.9 4,448.7 4,663.6
----------------- ----------------- -----------------
Earnings from continuing operations before Federal
income taxes, minority interest and cumulative
effect of accounting change................................. 1,183.8 670.7 208.6
Federal income taxes.......................................... 353.1 91.5 9.7
Minority interest in net income of consolidated subsidiaries.. 125.2 54.8 81.7
----------------- ----------------- -----------------
Earnings from continuing operations before cumulative
effect of accounting change................................. 705.5 524.4 117.2
Discontinued operations, net of Federal income taxes.......... 2.7 (87.2) (83.8)
Cumulative effect of accounting change, net of Federal
income taxes................................................ - - (23.1)
----------------- ----------------- -----------------
Net Earnings.................................................. $ 708.2 $ 437.2 $ 10.3
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
Common stock, at par value, beginning and end of year......... $ 2.5 $ 2.5 $ 2.5
----------------- ----------------- -----------------
Capital in excess of par value, beginning of year............. 3,105.8 3,105.8 3,105.8
Additional capital in excess of par value..................... 4.4 - -
----------------- ----------------- -----------------
Capital in excess of par value, end of year................... 3,110.2 3,105.8 3,105.8
Retained earnings, beginning of year.......................... 1,235.9 798.7 788.4
Net earnings.................................................. 708.2 437.2 10.3
----------------- ----------------- -----------------
Retained earnings, end of year................................ 1,944.1 1,235.9 798.7
----------------- ----------------- -----------------
Accumulated other comprehensive income,
beginning of year........................................... 516.3 177.0 361.4
Other comprehensive income.................................... (160.5) 339.3 (184.4)
----------------- ----------------- -----------------
Accumulated other comprehensive income, end of year........... 355.8 516.3 177.0
----------------- ----------------- -----------------
Total Shareholder's Equity, End of Year....................... $ 5,412.6 $ 4,860.5 $ 4,084.0
================= ================= =================
COMPREHENSIVE INCOME
Net earnings.................................................. $ 708.2 $ 437.2 $ 10.3
----------------- ----------------- -----------------
Change in unrealized gains (losses), net of reclassification
adjustment.................................................. (149.5) 343.7 (206.6)
Minimum pension liability adjustment.......................... (11.0) (4.4) 22.2
----------------- ----------------- -----------------
Other comprehensive income.................................... (160.5) 339.3 (184.4)
----------------- ----------------- -----------------
Comprehensive Income.......................................... $ 547.7 $ 776.5 $ (174.1)
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
Net earnings.................................................. $ 708.2 $ 437.2 $ 10.3
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Interest credited to policyholders' account balances........ 1,153.0 1,266.2 1,270.2
Universal life and investment-type product
policy fee income......................................... (1,056.2) (950.6) (874.0)
Investment (gains) losses................................... (100.2) 45.2 9.8
Change in Federal income tax payable........................ 123.1 (74.4) (197.1)
Other, net.................................................. (324.9) 169.4 330.2
----------------- ----------------- -----------------
Net cash provided by operating activities..................... 503.0 893.0 549.4
----------------- ----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................... 2,289.0 2,702.9 2,275.1
Sales....................................................... 16,972.1 10,385.9 8,964.3
Purchases................................................... (18,578.5) (13,205.4) (12,559.6)
Decrease (increase) in short-term investments............... 102.4 (555.0) 450.3
Decrease in loans to discontinued operations................ 660.0 420.1 1,017.0
Sale of subsidiaries........................................ - 261.0 -
Other, net.................................................. (341.8) (612.6) (281.0)
----------------- ----------------- -----------------
Net cash provided (used) by investing activities.............. 1,103.2 (603.1) (133.9)
----------------- ----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits.................................................. 1,508.1 1,281.7 1,925.4
Withdrawals............................................... (1,724.6) (1,886.8) (2,385.2)
Net (decrease) increase in short-term financings............ (243.5) 419.9 (.3)
Repayments of long-term debt................................ (24.5) (196.4) (124.8)
Payment of obligation to fund accumulated deficit of
discontinued operations................................... (87.2) (83.9) -
Other, net.................................................. (89.5) (62.7) (66.5)
----------------- ----------------- -----------------
Net cash used by financing activities......................... (661.2) (528.2) (651.4)
----------------- ----------------- -----------------
Change in cash and cash equivalents........................... 945.0 (238.3) (235.9)
Cash and cash equivalents, beginning of year.................. 300.5 538.8 774.7
----------------- ----------------- -----------------
Cash and Cash Equivalents, End of Year........................ $ 1,245.5 $ 300.5 $ 538.8
================= ================= =================
Supplemental cash flow information
Interest Paid............................................... $ 130.7 $ 217.1 $ 109.9
================= ================= =================
Income Taxes Paid (Refunded)................................ $ 254.3 $ 170.0 $ (10.0)
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) ORGANIZATION
The Equitable Life Assurance Society of the United States ("Equitable
Life") is a wholly owned subsidiary of The Equitable Companies
Incorporated (the "Holding Company"). Equitable Life's insurance
business is conducted principally by Equitable Life and its wholly owned
life insurance subsidiaries, Equitable of Colorado ("EOC"), and, prior
to December 31, 1996, Equitable Variable Life Insurance Company
("EVLICO"). Effective January 1, 1997, EVLICO was merged into Equitable
Life, which continues to conduct the Company's insurance business.
Equitable Life's investment management business, which comprises the
Investment Services segment, is conducted principally by Alliance
Capital Management L.P. ("Alliance"), in which Equitable Life has a
57.7% ownership interest, and Donaldson, Lufkin & Jenrette, Inc.
("DLJ"), an investment banking and brokerage affiliate in which
Equitable Life has a 32.5% ownership interest. AXA ("AXA"), a French
holding company for an international group of insurance and related
financial services companies, is the Holding Company's largest
shareholder, owning approximately 58.5% at December 31, 1998 (53.4% if
all securities convertible into, and options on, common stock were to be
converted or exercised).
The Insurance segment offers a variety of traditional, variable and
interest-sensitive life insurance products, disability income, annuity
products, mutual fund and other investment products to individuals and
small groups. It also administers traditional participating group
annuity contracts with conversion features, generally for corporate
qualified pension plans, and association plans which provide full
service retirement programs for individuals affiliated with professional
and trade associations. This segment includes Separate Accounts for
individual insurance and annuity products.
The Investment Services segment includes Alliance, the results of DLJ
which are accounted for on an equity basis, and, through June 10, 1997,
Equitable Real Estate Investment Management, Inc. ("EREIM"), a real
estate investment management subsidiary which was sold. Alliance
provides diversified investment fund management services to a variety of
institutional clients, including pension funds, endowments, and foreign
financial institutions, as well as to individual investors, principally
through a broad line of mutual funds. This segment includes
institutional Separate Accounts which provide various investment options
for large group pension clients, primarily deferred benefit contribution
plans, through pooled or single group accounts. DLJ's businesses include
securities underwriting, sales and trading, merchant banking, financial
advisory services, investment research, venture capital, correspondent
brokerage services, online interactive brokerage services and asset
management. DLJ serves institutional, corporate, governmental and
individual clients both domestically and internationally. EREIM provided
real estate investment management services, property management
services, mortgage servicing and loan asset management, and agricultural
investment management.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles ("GAAP") which
require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The accompanying consolidated financial statements include the accounts
of Equitable Life and its wholly owned life insurance subsidiary
(collectively, the "Insurance Group"); non-insurance subsidiaries,
principally Alliance and EREIM (see Note 5); and those partnerships and
joint ventures in which Equitable Life or its subsidiaries has control
F-6
<PAGE>
and a majority economic interest (collectively, including its
consolidated subsidiaries, the "Company"). The Company's investment in
DLJ is reported on the equity basis of accounting. Closed Block assets,
liabilities and results of operations are presented in the consolidated
financial statements as single line items (see Note 7). Unless
specifically stated, all other footnote disclosures contained herein
exclude the Closed Block related amounts.
All significant intercompany transactions and balances except those with
the Closed Block and discontinued operations (see Note 8) have been
eliminated in consolidation. The years "1998," "1997" and "1996" refer
to the years ended December 31, 1998, 1997 and 1996, respectively.
Certain reclassifications have been made in the amounts presented for
prior periods to conform these periods with the 1998 presentation.
Closed Block
On July 22, 1992, Equitable Life established the Closed Block for the
benefit of certain individual participating policies which were in force
on that date. The assets allocated to the Closed Block, together with
anticipated revenues from policies included in the Closed Block, were
reasonably expected to be sufficient to support such business, including
provision for payment of claims, certain expenses and taxes, and for
continuation of dividend scales payable in 1991, assuming the experience
underlying such scales continues.
Assets allocated to the Closed Block inure solely to the benefit of the
Closed Block policyholders and will not revert to the benefit of the
Holding Company. No reallocation, transfer, borrowing or lending of
assets can be made between the Closed Block and other portions of
Equitable Life's General Account, any of its Separate Accounts or any
affiliate of Equitable Life without the approval of the New York
Superintendent of Insurance (the "Superintendent"). Closed Block assets
and liabilities are carried on the same basis as similar assets and
liabilities held in the General Account. The excess of Closed Block
liabilities over Closed Block assets represents the expected future
post-tax contribution from the Closed Block which would be recognized in
income over the period the policies and contracts in the Closed Block
remain in force.
Discontinued Operations
Discontinued operations include the Group Non-Participating Wind-Up
Annuities ("Wind-Up Annuities") and the Guaranteed Interest Contract
("GIC") lines of business. An allowance was established for the premium
deficiency reserve for Wind-Up Annuities and estimated future losses of
the GIC line of business. Management reviews the adequacy of the
allowance each quarter and believes the allowance for future losses at
December 31, 1998 is adequate to provide for all future losses; however,
the quarterly allowance review continues to involve numerous estimates
and subjective judgments regarding the expected performance of
Discontinued Operations Investment Assets. There can be no assurance the
losses provided for will not differ from the losses ultimately realized.
To the extent actual results or future projections of the discontinued
operations differ from management's current best estimates and
assumptions underlying the allowance for future losses, the difference
would be reflected in the consolidated statements of earnings in
discontinued operations. In particular, to the extent income, sales
proceeds and holding periods for equity real estate differ from
management's previous assumptions, periodic adjustments to the allowance
are likely to result (see Note 8).
Accounting Changes
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosures about Segments of an Enterprise and Related Information".
SFAS No. 131 establishes standards for public companies to report
information about operating segments in annual and interim financial
statements issued to shareholders. It also specifies related disclosure
requirements for products and services, geographic areas and major
customers. Generally, financial information must be reported using the
basis management uses to make operating decisions and to evaluate
business performance. The Company implemented SFAS No. 131 effective
December 31, 1998 and continues to identify two operating segments to
reflect its major businesses: Insurance and Investment Services. While
the segment descriptions are the same as those previously reported,
certain amounts have been reattributed between the two reportable
segments. Prior period comparative segment information has been
restated.
F-7
<PAGE>
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use,"
which requires capitalization of external and certain internal costs
incurred to obtain or develop internal-use computer software during the
application development stage. The Company applied the provisions of SOP
98-1 prospectively effective January 1, 1998. The adoption of SOP 98-1
did not have a material impact on the Company's consolidated financial
statements. Capitalized internal-use software is amortized on a
straight-line basis over the estimated useful life of the software.
The Company implemented SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of
January 1, 1996. SFAS No. 121 requires long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate the carrying value of such assets may
not be recoverable. Effective with SFAS No. 121's adoption, impaired
real estate is written down to fair value with the impairment loss being
included in investment gains (losses), net. Before implementing SFAS No.
121, valuation allowances on real estate held for the production of
income were computed using the forecasted cash flows of the respective
properties discounted at a rate equal to the Company's cost of funds.
Adoption of the statement resulted in the release of valuation
allowances of $152.4 million and recognition of impairment losses of
$144.0 million on real estate held for production of income. Real estate
which management intends to sell or abandon is classified as real estate
held for sale. Valuation allowances on real estate held for sale
continue to be computed using the lower of depreciated cost or estimated
fair value, net of disposition costs. Initial adoption of the impairment
requirements of SFAS No. 121 to other assets to be disposed of resulted
in a charge for the cumulative effect of an accounting change of $23.1
million, net of a Federal income tax benefit of $12.4 million, due to
the writedown to fair value of building improvements relating to
facilities vacated in 1996.
New Accounting Pronouncements
In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage
Loans Held for Sale by a Mortgage Banking Enterprise," which amends
existing accounting and reporting standards for certain activities of
mortgage banking enterprises and other enterprises that conduct
operations that are substantially similar to the primary operations of a
mortgage banking enterprise. This statement is effective for the first
fiscal quarter beginning after December 15, 1998. This statement is not
expected to have a material impact on the Company's consolidated
financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain
derivatives embedded in other contracts, and for hedging activities. It
requires all derivatives to be recognized on the balance sheet at fair
value. The accounting for changes in the fair value of a derivative
depends on its intended use. Derivatives not used in hedging activities
must be adjusted to fair value through earnings. Changes in the fair
value of derivatives used in hedging activities will, depending on the
nature of the hedge, either be offset in earnings against the change in
fair value of the hedged item attributable to the risk being hedged or
recognized in other comprehensive income until the hedged item affects
earnings. For all hedging activities, the ineffective portion of a
derivative's change in fair value will be immediately recognized in
earnings.
SFAS No. 133 requires adoption in fiscal years beginning after June 15,
1999 and permits early adoption as of the beginning of any fiscal
quarter following issuance of the statement. Retroactive application to
financial statements of prior periods is prohibited. The Company expects
to adopt SFAS No. 133 effective January 1, 2000. Adjustments resulting
from initial adoption of the new requirements will be reported in a
manner similar to the cumulative effect of a change in accounting
principle and will be reflected in net income or accumulated other
comprehensive income based upon existing hedging relationships, if any.
Management currently is assessing the impact of adoption. However,
Alliance's adoption is not expected to have a significant impact on the
Company's consolidated balance sheet or statement of earnings. Also,
since most of DLJ's derivatives are carried at fair values, the
Company's consolidated earnings and financial position are not expected
to be significantly affected by DLJ's adoption of the new requirements.
F-8
<PAGE>
In late 1998, the AICPA issued SOP 98-7, "Deposit Accounting: Accounting
for Insurance and Reinsurance Contracts that Do Not Transfer Insurance
Risk". This SOP, effective for fiscal years beginning after June 15,
1999, provides guidance to both the insured and insurer on how to apply
the deposit method of accounting when it is required for insurance and
reinsurance contracts that do not transfer insurance risk. The SOP does
not address or change the requirements as to when deposit accounting
should be applied. SOP 98-7 applies to all entities and all insurance
and reinsurance contracts that do not transfer insurance risk except for
long-duration life and health insurance contracts. This SOP is not
expected to have a material impact on the Company's consolidated
financial statements.
In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance
and Other Enterprises for Insurance-Related Assessments". SOP 97-3
provides guidance for assessments related to insurance activities and
requirements for disclosure of certain information. SOP 97-3 is
effective for financial statements issued for periods beginning after
December 31, 1998. Restatement of previously issued financial statements
is not required. SOP 97-3 is not expected to have a material impact on
the Company's consolidated financial statements.
Valuation of Investments
Fixed maturities identified as available for sale are reported at
estimated fair value. Fixed maturities, which the Company has both the
ability and the intent to hold to maturity, are stated principally at
amortized cost. The amortized cost of fixed maturities is adjusted for
impairments in value deemed to be other than temporary.
Valuation allowances are netted against the asset categories to which
they apply.
Mortgage loans on real estate are stated at unpaid principal balances,
net of unamortized discounts and valuation allowances. Valuation
allowances are based on the present value of expected future cash flows
discounted at the loan's original effective interest rate or the
collateral value if the loan is collateral dependent. However, if
foreclosure is or becomes probable, the measurement method used is
collateral value.
Real estate, including real estate acquired in satisfaction of debt, is
stated at depreciated cost less valuation allowances. At the date of
foreclosure (including in-substance foreclosure), real estate acquired
in satisfaction of debt is valued at estimated fair value. Impaired real
estate is written down to fair value with the impairment loss being
included in investment gains (losses), net. Valuation allowances on real
estate held for sale are computed using the lower of depreciated cost or
current estimated fair value, net of disposition costs. Depreciation is
discontinued on real estate held for sale. Prior to the adoption of SFAS
No. 121, valuation allowances on real estate held for production of
income were computed using the forecasted cash flows of the respective
properties discounted at a rate equal to the Company's cost of funds.
Policy loans are stated at unpaid principal balances.
Partnerships and joint venture interests in which the Company does not
have control or a majority economic interest are reported on the equity
basis of accounting and are included either with equity real estate or
other equity investments, as appropriate.
Common stocks are carried at estimated fair value and are included in
other equity investments.
Short-term investments are stated at amortized cost which approximates
fair value and are included with other invested assets.
F-9
<PAGE>
Cash and cash equivalents includes cash on hand, amounts due from banks
and highly liquid debt instruments purchased with an original maturity
of three months or less.
All securities are recorded in the consolidated financial statements on
a trade date basis.
Net Investment Income, Investment Gains, Net and Unrealized Investment
Gains (Losses)
Net investment income and realized investment gains (losses)
(collectively, "investment results") related to certain participating
group annuity contracts which are passed through to the contractholders
are reflected as interest credited to policyholders' account balances.
Realized investment gains (losses) are determined by specific
identification and are presented as a component of revenue. Changes in
valuation allowances are included in investment gains (losses).
Unrealized investment gains and losses on equity securities and fixed
maturities available for sale held by the Company are accounted for as a
separate component of accumulated comprehensive income, net of related
deferred Federal income taxes, amounts attributable to discontinued
operations, participating group annuity contracts and deferred policy
acquisition costs ("DAC") related to universal life and investment-type
products and participating traditional life contracts.
Recognition of Insurance Income and Related Expenses
Premiums from universal life and investment-type contracts are reported
as deposits to policyholders' account balances. Revenues from these
contracts consist of amounts assessed during the period against
policyholders' account balances for mortality charges, policy
administration charges and surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the
period in excess of related policyholders' account balances.
Premiums from participating and non-participating traditional life and
annuity policies with life contingencies generally are recognized as
income when due. Benefits and expenses are matched with such income so
as to result in the recognition of profits over the life of the
contracts. This match is accomplished by means of the provision for
liabilities for future policy benefits and the deferral and subsequent
amortization of policy acquisition costs.
For contracts with a single premium or a limited number of premium
payments due over a significantly shorter period than the total period
over which benefits are provided, premiums are recorded as income when
due with any excess profit deferred and recognized in income in a
constant relationship to insurance in force or, for annuities, the
amount of expected future benefit payments.
Premiums from individual health contracts are recognized as income over
the period to which the premiums relate in proportion to the amount of
insurance protection provided.
Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
underwriting, agency and policy issue expenses, all of which vary with
and are primarily related to the production of new business, are
deferred. DAC is subject to recoverability testing at the time of policy
issue and loss recognition testing at the end of each accounting period.
For universal life products and investment-type products, DAC is
amortized over the expected total life of the contract group (periods
ranging from 25 to 35 years and 5 to 17 years, respectively) as a
constant percentage of estimated gross profits arising principally from
investment results, mortality and expense margins and surrender charges
based on historical and anticipated future experience, updated at the
end of each accounting period. The effect on the amortization of DAC of
revisions to estimated gross profits is reflected in earnings in the
period such estimated gross profits are revised. The effect on the DAC
asset that would result from realization of unrealized gains (losses) is
recognized with an offset to accumulated other comprehensive income in
consolidated shareholder's equity as of the balance sheet date.
F-10
<PAGE>
For participating traditional life policies (substantially all of which
are in the Closed Block), DAC is amortized over the expected total life
of the contract group (40 years) as a constant percentage based on the
present value of the estimated gross margin amounts expected to be
realized over the life of the contracts using the expected investment
yield. At December 31, 1998, the expected investment yield, excluding
policy loans, generally ranged from 7.29% grading to 6.5% over a 20 year
period. Estimated gross margin includes anticipated premiums and
investment results less claims and administrative expenses, changes in
the net level premium reserve and expected annual policyholder
dividends. The effect on the amortization of DAC of revisions to
estimated gross margins is reflected in earnings in the period such
estimated gross margins are revised. The effect on the DAC asset that
would result from realization of unrealized gains (losses) is recognized
with an offset to accumulated comprehensive income in consolidated
shareholder's equity as of the balance sheet date.
For non-participating traditional life and annuity policies with life
contingencies, DAC is amortized in proportion to anticipated premiums.
Assumptions as to anticipated premiums are estimated at the date of
policy issue and are consistently applied during the life of the
contracts. Deviations from estimated experience are reflected in
earnings in the period such deviations occur. For these contracts, the
amortization periods generally are for the total life of the policy.
For individual health benefit insurance, DAC is amortized over the
expected average life of the contracts (10 years for major medical
policies and 20 years for disability income ("DI") products) in
proportion to anticipated premium revenue at time of issue.
Policyholders' Account Balances and Future Policy Benefits
Policyholders' account balances for universal life and investment-type
contracts are equal to the policy account values. The policy account
values represents an accumulation of gross premium payments plus
credited interest less expense and mortality charges and withdrawals.
For participating traditional life policies, future policy benefit
liabilities are calculated using a net level premium method on the basis
of actuarial assumptions equal to guaranteed mortality and dividend fund
interest rates. The liability for annual dividends represents the
accrual of annual dividends earned. Terminal dividends are accrued in
proportion to gross margins over the life of the contract.
For non-participating traditional life insurance policies, future policy
benefit liabilities are estimated using a net level premium method on
the basis of actuarial assumptions as to mortality, persistency and
interest established at policy issue. Assumptions established at policy
issue as to mortality and persistency are based on the Insurance Group's
experience which, together with interest and expense assumptions,
includes a margin for adverse deviation. When the liabilities for future
policy benefits plus the present value of expected future gross premiums
for a product are insufficient to provide for expected future policy
benefits and expenses for that product, DAC is written off and
thereafter, if required, a premium deficiency reserve is established by
a charge to earnings. Benefit liabilities for traditional annuities
during the accumulation period are equal to accumulated contractholders'
fund balances and after annuitization are equal to the present value of
expected future payments. Interest rates used in establishing such
liabilities range from 2.25% to 11.5% for life insurance liabilities and
from 2.25% to 13.5% for annuity liabilities.
During the fourth quarter of 1996 a loss recognition study of
participating group annuity contracts and conversion annuities ("Pension
Par") was completed which included management's revised estimate of
assumptions, such as expected mortality and future investment returns.
The study's results prompted management to establish a premium
deficiency reserve which decreased earnings from continuing operations
and net earnings by $47.5 million ($73.0 million pre-tax).
Individual health benefit liabilities for active lives are estimated
using the net level premium method and assumptions as to future
morbidity, withdrawals and interest. Benefit liabilities for disabled
lives are estimated using the present value of benefits method and
experience assumptions as to claim terminations, expenses and interest.
F-11
<PAGE>
During the fourth quarter of 1996, the Company completed a loss
recognition study of the DI business which incorporated management's
revised estimates of future experience with regard to morbidity,
investment returns, claims and administration expenses and other
factors. The study indicated DAC was not recoverable and the reserves
were not sufficient. Earnings from continuing operations and net
earnings decreased by $208.0 million ($320.0 million pre-tax) as a
result of strengthening DI reserves by $175.0 million and writing off
unamortized DAC of $145.0 million related to DI products issued prior to
July 1993. The determination of DI reserves requires making assumptions
and estimates relating to a variety of factors, including morbidity and
interest rates, claims experience and lapse rates based on then known
facts and circumstances. Such factors as claim incidence and termination
rates can be affected by changes in the economic, legal and regulatory
environments and work ethic. While management believes its Pension Par
and DI reserves have been calculated on a reasonable basis and are
adequate, there can be no assurance reserves will be sufficient to
provide for future liabilities.
Claim reserves and associated liabilities for individual DI and major
medical policies were $938.6 million and $886.7 million at December 31,
1998 and 1997, respectively. Incurred benefits (benefits paid plus
changes in claim reserves) and benefits paid for individual DI and major
medical policies (excluding reserve strengthening in 1996) are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Incurred benefits related to current year.......... $ 202.1 $ 190.2 $ 189.0
Incurred benefits related to prior years........... 22.2 2.1 69.1
----------------- ---------------- -----------------
Total Incurred Benefits............................ $ 224.3 $ 192.3 $ 258.1
================= ================ =================
Benefits paid related to current year.............. $ 17.0 $ 28.8 $ 32.6
Benefits paid related to prior years............... 155.4 146.2 153.3
----------------- ---------------- -----------------
Total Benefits Paid................................ $ 172.4 $ 175.0 $ 185.9
================= ================ =================
</TABLE>
Policyholders' Dividends
The amount of policyholders' dividends to be paid (including those on
policies included in the Closed Block) is determined annually by
Equitable Life's board of directors. The aggregate amount of
policyholders' dividends is related to actual interest, mortality,
morbidity and expense experience for the year and judgment as to the
appropriate level of statutory surplus to be retained by Equitable Life.
At December 31, 1998, participating policies, including those in the
Closed Block, represent approximately 19.9% ($49.3 billion) of directly
written life insurance in force, net of amounts ceded.
Federal Income Taxes
The Company files a consolidated Federal income tax return with the
Holding Company and its consolidated subsidiaries. Current Federal
income taxes are charged or credited to operations based upon amounts
estimated to be payable or recoverable as a result of taxable operations
for the current year. Deferred income tax assets and liabilities are
recognized based on the difference between financial statement carrying
amounts and income tax bases of assets and liabilities using enacted
income tax rates and laws.
Separate Accounts
Separate Accounts are established in conformity with the New York State
Insurance Law and generally are not chargeable with liabilities that
arise from any other business of the Insurance Group. Separate Accounts
assets are subject to General Account claims only to the extent the
value of such assets exceeds Separate Accounts liabilities.
F-12
<PAGE>
Assets and liabilities of the Separate Accounts, representing net
deposits and accumulated net investment earnings less fees, held
primarily for the benefit of contractholders, and for which the
Insurance Group does not bear the investment risk, are shown as separate
captions in the consolidated balance sheets. The Insurance Group bears
the investment risk on assets held in one Separate Account; therefore,
such assets are carried on the same basis as similar assets held in the
General Account portfolio. Assets held in the other Separate Accounts
are carried at quoted market values or, where quoted values are not
available, at estimated fair values as determined by the Insurance
Group.
The investment results of Separate Accounts on which the Insurance Group
does not bear the investment risk are reflected directly in Separate
Accounts liabilities. For 1998, 1997 and 1996, investment results of
such Separate Accounts were $4,591.0 million, $3,411.1 million and
$2,970.6 million, respectively.
Deposits to Separate Accounts are reported as increases in Separate
Accounts liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges on all Separate Accounts are
included in revenues.
Employee Stock Option Plan
The Company accounts for stock option plans sponsored by the Holding
Company, DLJ and Alliance in accordance with the provisions of
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. In accordance
with the Statement, compensation expense is recorded on the date of
grant only if the current market price of the underlying stock exceeds
the option price. See Note 22 for the pro forma disclosures for the
Holding Company, DLJ and Alliance required by SFAS No. 123, "Accounting
for Stock-Based Compensation".
F-13
<PAGE>
3) INVESTMENTS
The following tables provide additional information relating to fixed
maturities and equity securities:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------------- ----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C> <C>
December 31, 1998
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 14,520.8 $ 793.6 $ 379.6 $ 14,934.8
Mortgage-backed.................... 1,807.9 23.3 .9 1,830.3
U.S. Treasury securities and
U.S. government and
agency securities................ 1,464.1 107.6 .7 1,571.0
States and political subdivisions.. 55.0 9.9 - 64.9
Foreign governments................ 363.3 20.9 30.0 354.2
Redeemable preferred stock......... 242.7 7.0 11.2 238.5
----------------- ----------------- ---------------- -----------------
Total Available for Sale............... $ 18,453.8 $ 962.3 $ 422.4 $ 18,993.7
================= ================= ================ =================
Held to Maturity: Corporate......... $ 125.0 $ - $ - $ 125.0
================= ================= ================ =================
Equity Securities:
Common stock......................... $ 58.3 $ 114.9 $ 22.5 $ 150.7
================= ================= ================ =================
December 31, 1997
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 14,850.5 $ 785.0 $ 74.5 $ 15,561.0
Mortgage-backed.................... 1,702.8 23.5 1.3 1,725.0
U.S. Treasury securities and
U.S. government and
agency securities................ 1,583.2 83.9 .6 1,666.5
States and political subdivisions.. 52.8 6.8 .1 59.5
Foreign governments................ 442.4 44.8 2.0 485.2
Redeemable preferred stock......... 128.0 6.7 1.0 133.7
----------------- ----------------- ---------------- -----------------
Total Available for Sale............... $ 18,759.7 $ 950.7 $ 79.5 $ 19,630.9
================= ================= ================ =================
Equity Securities:
Common stock......................... $ 408.4 $ 48.7 $ 15.0 $ 442.1
================= ================= ================ =================
</TABLE>
For publicly traded fixed maturities and equity securities, estimated
fair value is determined using quoted market prices. For fixed
maturities without a readily ascertainable market value, the Company
determines an estimated fair value using a discounted cash flow
approach, including provisions for credit risk, generally based on the
assumption such securities will be held to maturity. Estimated fair
values for equity securities, substantially all of which do not have a
readily ascertainable market value, have been determined by the Company.
Such estimated fair values do not necessarily represent the values for
which these securities could have been sold at the dates of the
consolidated balance sheets. At December 31, 1998 and 1997, securities
without a readily ascertainable market value having an amortized cost of
$3,539.9 million and $3,759.2 million, respectively, had estimated fair
values of $3,748.5 million and $3,903.9 million, respectively.
F-14
<PAGE>
The contractual maturity of bonds at December 31, 1998 is shown below:
<TABLE>
<CAPTION>
Available for Sale
------------------------------------
Amortized Estimated
Cost Fair Value
---------------- -----------------
(In Millions)
<S> <C> <C>
Due in one year or less................................................ $ 324.8 $ 323.4
Due in years two through five.......................................... 3,778.2 3,787.9
Due in years six through ten........................................... 6,543.4 6,594.1
Due after ten years.................................................... 5,756.8 6,219.5
Mortgage-backed securities............................................. 1,807.9 1,830.3
---------------- -----------------
Total.................................................................. $ 18,211.1 $ 18,755.2
================ =================
</TABLE>
Corporate bonds held to maturity with an amortized cost and estimated
fair value of $125.0 million are due in one year or less.
Bonds not due at a single maturity date have been included in the above
table in the year of final maturity. Actual maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
The Insurance Group's fixed maturity investment portfolio includes
corporate high yield securities consisting of public high yield bonds,
redeemable preferred stocks and directly negotiated debt in leveraged
buyout transactions. The Insurance Group seeks to minimize the higher
than normal credit risks associated with such securities by monitoring
concentrations in any single issuer or a particular industry group.
Certain of these corporate high yield securities are classified as other
than investment grade by the various rating agencies, i.e., a rating
below Baa or National Association of Insurance Commissioners ("NAIC")
designation of 3 (medium grade), 4 or 5 (below investment grade) or 6
(in or near default). At December 31, 1998, approximately 15.1% of the
$18,336.1 million aggregate amortized cost of bonds held by the Company
was considered to be other than investment grade.
In addition, the Insurance Group is an equity investor in limited
partnership interests which primarily invest in securities considered to
be other than investment grade.
Fixed maturity investments with restructured or modified terms are not
material.
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Balances, beginning of year........................ $ 384.5 $ 137.1 $ 325.3
SFAS No. 121 release............................... - - (152.4)
Additions charged to income........................ 86.2 334.6 125.0
Deductions for writedowns and
asset dispositions............................... (240.1) (87.2) (160.8)
----------------- ---------------- -----------------
Balances, End of Year.............................. $ 230.6 $ 384.5 $ 137.1
================= ================ =================
Balances, end of year comprise:
Mortgage loans on real estate.................... $ 34.3 $ 55.8 $ 50.4
Equity real estate............................... 196.3 328.7 86.7
----------------- ---------------- -----------------
Total.............................................. $ 230.6 $ 384.5 $ 137.1
================= ================ =================
</TABLE>
F-15
<PAGE>
At December 31, 1998, the carrying value of fixed maturities which are
non-income producing for the twelve months preceding the consolidated
balance sheet date was $60.8 million.
At December 31, 1998 and 1997, mortgage loans on real estate with
scheduled payments 60 days (90 days for agricultural mortgages) or more
past due or in foreclosure (collectively, "problem mortgage loans on
real estate") had an amortized cost of $7.0 million (0.2% of total
mortgage loans on real estate) and $23.4 million (0.9% of total mortgage
loans on real estate), respectively.
The payment terms of mortgage loans on real estate may from time to time
be restructured or modified. The investment in restructured mortgage
loans on real estate, based on amortized cost, amounted to $115.1
million and $183.4 million at December 31, 1998 and 1997, respectively.
Gross interest income on restructured mortgage loans on real estate that
would have been recorded in accordance with the original terms of such
loans amounted to $10.3 million, $17.2 million and $35.5 million in
1998, 1997 and 1996, respectively. Gross interest income on these loans
included in net investment income aggregated $8.3 million, $12.7 million
and $28.2 million in 1998, 1997 and 1996, respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1998 1997
------------------- -------------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses.................. $ 125.4 $ 196.7
Impaired mortgage loans without provision for losses............... 8.6 3.6
------------------- -------------------
Recorded investment in impaired mortgage loans..................... 134.0 200.3
Provision for losses............................................... (29.0) (51.8)
------------------- -------------------
Net Impaired Mortgage Loans........................................ $ 105.0 $ 148.5
=================== ===================
</TABLE>
Impaired mortgage loans without provision for losses are loans where the
fair value of the collateral or the net present value of the expected
future cash flows related to the loan equals or exceeds the recorded
investment. Interest income earned on loans where the collateral value
is used to measure impairment is recorded on a cash basis. Interest
income on loans where the present value method is used to measure
impairment is accrued on the net carrying value amount of the loan at
the interest rate used to discount the cash flows. Changes in the
present value attributable to changes in the amount or timing of
expected cash flows are reported as investment gains or losses.
During 1998, 1997 and 1996, respectively, the Company's average recorded
investment in impaired mortgage loans was $161.3 million, $246.9 million
and $552.1 million. Interest income recognized on these impaired
mortgage loans totaled $12.3 million, $15.2 million and $38.8 million
($.9 million, $2.3 million and $17.9 million recognized on a cash basis)
for 1998, 1997 and 1996, respectively.
The Insurance Group's investment in equity real estate is through direct
ownership and through investments in real estate joint ventures. At
December 31, 1998 and 1997, the carrying value of equity real estate
held for sale amounted to $836.2 million and $1,023.5 million,
respectively. For 1998, 1997 and 1996, respectively, real estate of $7.1
million, $152.0 million and $58.7 million was acquired in satisfaction
of debt. At December 31, 1998 and 1997, the Company owned $552.3 million
and $693.3 million, respectively, of real estate acquired in
satisfaction of debt.
Depreciation of real estate held for production of income is computed
using the straight-line method over the estimated useful lives of the
properties, which generally range from 40 to 50 years. Accumulated
depreciation on real estate was $374.8 million and $541.1 million at
December 31, 1998 and 1997, respectively. Depreciation expense on real
estate totaled $30.5 million, $74.9 million and $91.8 million for 1998,
1997 and 1996, respectively.
F-16
<PAGE>
4) JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information for real estate joint ventures
(25 and 29 individual ventures as of December 31, 1998 and 1997,
respectively) and for limited partnership interests accounted for under
the equity method, in which the Company has an investment of $10.0
million or greater and an equity interest of 10% or greater, is as
follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
BALANCE SHEETS
Investments in real estate, at depreciated cost........................ $ 913.7 $ 1,700.9
Investments in securities, generally at estimated fair value........... 636.9 1,374.8
Cash and cash equivalents.............................................. 85.9 105.4
Other assets........................................................... 279.8 584.9
---------------- -----------------
Total Assets........................................................... $ 1,916.3 $ 3,766.0
================ =================
Borrowed funds - third party........................................... $ 367.1 $ 493.4
Borrowed funds - the Company........................................... 30.1 31.2
Other liabilities...................................................... 197.2 284.0
---------------- -----------------
Total liabilities...................................................... 594.4 808.6
---------------- -----------------
Partners' capital...................................................... 1,321.9 2,957.4
---------------- -----------------
Total Liabilities and Partners' Capital................................ $ 1,916.3 $ 3,766.0
================ =================
Equity in partners' capital included above............................. $ 312.9 $ 568.5
Equity in limited partnership interests not included above............. 442.1 331.8
Other.................................................................. .7 4.3
---------------- -----------------
Carrying Value......................................................... $ 755.7 $ 904.6
================ =================
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures............. $ 246.1 $ 310.5 $ 348.9
Revenues of other limited partnership interests.... 128.9 506.3 386.1
Interest expense - third party..................... (33.3) (91.8) (111.0)
Interest expense - the Company..................... (2.6) (7.2) (30.0)
Other expenses..................................... (197.0) (263.6) (282.5)
----------------- ---------------- -----------------
Net Earnings....................................... $ 142.1 $ 454.2 $ 311.5
================= ================ =================
Equity in net earnings included above.............. $ 59.6 $ 76.7 $ 73.9
Equity in net earnings of limited partnership
interests not included above..................... 22.7 69.5 35.8
Other.............................................. - (.9) .9
----------------- ---------------- -----------------
Total Equity in Net Earnings....................... $ 82.3 $ 145.3 $ 110.6
================= ================ =================
</TABLE>
F-17
<PAGE>
5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Fixed maturities................................... $ 1,489.0 $ 1,459.4 $ 1,307.4
Mortgage loans on real estate...................... 235.4 260.8 303.0
Equity real estate................................. 356.1 390.4 442.4
Other equity investments........................... 83.8 156.9 122.0
Policy loans....................................... 144.9 177.0 160.3
Other investment income............................ 185.7 181.7 217.4
----------------- ---------------- -----------------
Gross investment income.......................... 2,494.9 2,626.2 2,552.5
Investment expenses.............................. (266.8) (343.4) (348.9)
----------------- ---------------- -----------------
Net Investment Income.............................. $ 2,228.1 $ 2,282.8 $ 2,203.6
================= ================ =================
</TABLE>
Investment gains (losses), net, including changes in the valuation
allowances, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Fixed maturities................................... $ (24.3) $ 88.1 $ 60.5
Mortgage loans on real estate...................... (10.9) (11.2) (27.3)
Equity real estate................................. 74.5 (391.3) (79.7)
Other equity investments........................... 29.9 14.1 18.9
Sale of subsidiaries............................... (2.6) 252.1 -
Issuance and sales of Alliance Units............... 19.8 - 20.6
Issuance and sale of DLJ common stock.............. 18.2 3.0 -
Other.............................................. (4.4) - (2.8)
----------------- ---------------- -----------------
Investment Gains (Losses), Net..................... $ 100.2 $ (45.2) $ (9.8)
================= ================ =================
</TABLE>
Writedowns of fixed maturities amounted to $101.6 million, $11.7 million
and $29.9 million for 1998, 1997 and 1996, respectively, and writedowns
of equity real estate subsequent to the adoption of SFAS No. 121
amounted to $136.4 million for 1997. In the fourth quarter of 1997, the
Company reclassified $1,095.4 million depreciated cost of equity real
estate from real estate held for the production of income to real estate
held for sale. Additions to valuation allowances of $227.6 million were
recorded upon these transfers. Additionally, in fourth quarter 1997,
$132.3 million of writedowns on real estate held for production of
income were recorded.
For 1998, 1997 and 1996, respectively, proceeds received on sales of
fixed maturities classified as available for sale amounted to $15,961.0
million, $9,789.7 million and $8,353.5 million. Gross gains of $149.3
million, $166.0 million and $154.2 million and gross losses of $95.1
million, $108.8 million and $92.7 million, respectively, were realized
on these sales. The change in unrealized investment gains (losses)
related to fixed maturities classified as available for sale for 1998,
1997 and 1996 amounted to $(331.7) million, $513.4 million and $(258.0)
million, respectively.
For 1998, 1997 and 1996, investment results passed through to certain
participating group annuity contracts as interest credited to
policyholders' account balances amounted to $136.9 million, $137.5
million and $136.7 million, respectively.
F-18
<PAGE>
On June 10, 1997, Equitable Life sold EREIM (other than its interest in
Column Financial, Inc.) ("ERE") to Lend Lease Corporation Limited ("Lend
Lease"), a publicly traded, international property and financial
services company based in Sydney, Australia. The total purchase price
was $400.0 million and consisted of $300.0 million in cash and a $100.0
million note which was paid in 1998. The Company recognized an
investment gain of $162.4 million, net of Federal income tax of $87.4
million as a result of this transaction. Equitable Life entered into
long-term advisory agreements whereby ERE continues to provide
substantially the same services to Equitable Life's General Account and
Separate Accounts, for substantially the same fees, as provided prior to
the sale.
Through June 10, 1997 and for the year ended December 31, 1996,
respectively, the businesses sold reported combined revenues of $91.6
million and $226.1 million and combined net earnings of $10.7 million
and $30.7 million.
In 1996, Alliance acquired the business of Cursitor Holdings L.P. and
Cursitor Holdings Limited (collectively, "Cursitor") for approximately
$159.0 million. The purchase price consisted of $94.3 million in cash,
1.8 million of Alliance's publicly traded units ("Alliance Units"), 6%
notes aggregating $21.5 million payable ratably over four years, and
additional consideration to be determined at a later date but currently
estimated to not exceed $10.0 million. The excess of the purchase price,
including acquisition costs and minority interest, over the fair value
of Cursitor's net assets acquired resulted in the recognition of
intangible assets consisting of costs assigned to contracts acquired and
goodwill of approximately $122.8 million and $38.3 million,
respectively. The Company recognized an investment gain of $20.6 million
as a result of the issuance of Alliance Units in this transaction. On
June 30, 1997, Alliance reduced the recorded value of goodwill and
contracts associated with Alliance's acquisition of Cursitor by $120.9
million. This charge reflected Alliance's view that Cursitor's
continuing decline in assets under management and its reduced
profitability, resulting from relative investment underperformance, no
longer supported the carrying value of its investment. As a result, the
Company's earnings from continuing operations before cumulative effect
of accounting change for 1997 included a charge of $59.5 million, net of
a Federal income tax benefit of $10.0 million and minority interest of
$51.4 million. The remaining balance of intangible assets is being
amortized over its estimated useful life of 20 years. At December 31,
1998, the Company's ownership of Alliance Units was approximately 56.7%.
F-19
<PAGE>
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of accumulated comprehensive income and
the changes for the corresponding years, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Balance, beginning of year......................... $ 533.6 $ 189.9 $ 396.5
Changes in unrealized investment gains (losses).... (242.4) 543.3 (297.6)
Changes in unrealized investment losses
(gains) attributable to:
Participating group annuity contracts.......... (5.7) 53.2 -
DAC............................................ 13.2 (89.0) 42.3
Deferred Federal income taxes.................. 85.4 (163.8) 48.7
----------------- ---------------- -----------------
Balance, End of Year............................... $ 384.1 $ 533.6 $ 189.9
================= ================ =================
Balance, end of year comprises:
Unrealized investment gains on:
Fixed maturities............................... $ 539.9 $ 871.2 $ 357.8
Other equity investments....................... 92.4 33.7 31.6
Other, principally Closed Block................ 111.1 80.9 53.1
----------------- ---------------- -----------------
Total........................................ 743.4 985.8 442.5
Amounts of unrealized investment gains
attributable to:
Participating group annuity contracts........ (24.7) (19.0) (72.2)
DAC.......................................... (127.8) (141.0) (52.0)
Deferred Federal income taxes................ (206.8) (292.2) (128.4)
----------------- ---------------- -----------------
Total.............................................. $ 384.1 $ 533.6 $ 189.9
================= ================ =================
</TABLE>
6) ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income represents cumulative gains and
losses on items that are not reflected in earnings. The balances for the
years 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Unrealized gains on investments.................... $ 384.1 $ 533.6 $ 189.9
Minimum pension liability.......................... (28.3) (17.3) (12.9)
----------------- ---------------- -----------------
Total Accumulated Other
Comprehensive Income............................. $ 355.8 $ 516.3 $ 177.0
================= ================ =================
</TABLE>
F-20
<PAGE>
The components of other comprehensive income for the years 1998, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Net unrealized gains (losses) on investment
securities:
Net unrealized gains (losses) arising during
the period..................................... $ (186.1) $ 564.0 $ (249.8)
Reclassification adjustment for (gains) losses
included in net earnings....................... (56.3) (20.7) (47.8)
----------------- ---------------- -----------------
Net unrealized gains (losses) on investment
securities....................................... (242.4) 543.3 (297.6)
Adjustments for policyholder liabilities,
DAC and deferred
Federal income taxes............................. 92.9 (199.6) 91.0
----------------- ---------------- -----------------
Change in unrealized gains (losses), net of
reclassification and adjustments................. (149.5) 343.7 (206.6)
Change in minimum pension liability................ (11.0) (4.4) 22.2
----------------- ---------------- -----------------
Total Other Comprehensive Income................... $ (160.5) $ 339.3 $ (184.4)
================= ================ =================
</TABLE>
7) CLOSED BLOCK
Summarized financial information for the Closed Block follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
Assets
Fixed Maturities:
Available for sale, at estimated fair value (amortized cost,
$4,149.0 and $4,059.4)........................................... $ 4,373.2 $ 4,231.0
Mortgage loans on real estate........................................ 1,633.4 1,341.6
Policy loans......................................................... 1,641.2 1,700.2
Cash and other invested assets....................................... 86.5 282.0
DAC.................................................................. 676.5 775.2
Other assets......................................................... 221.6 236.6
----------------- -----------------
Total Assets......................................................... $ 8,632.4 $ 8,566.6
================= =================
Liabilities
Future policy benefits and policyholders' account balances........... $ 9,013.1 $ 8,993.2
Other liabilities.................................................... 63.9 80.5
----------------- -----------------
Total Liabilities.................................................... $ 9,077.0 $ 9,073.7
================= =================
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Revenues
Premiums and other revenue......................... $ 661.7 $ 687.1 $ 724.8
Investment income (net of investment
expenses of $15.5, $27.0 and $27.3).............. 569.7 574.9 546.6
Investment losses, net............................. .5 (42.4) (5.5)
----------------- ---------------- -----------------
Total revenues............................... 1,231.9 1,219.6 1,265.9
----------------- ---------------- -----------------
Benefits and Other Deductions
Policyholders' benefits and dividends.............. 1,082.0 1,066.7 1,106.3
Other operating costs and expenses................. 62.8 50.4 34.6
----------------- ---------------- -----------------
Total benefits and other deductions.......... 1,144.8 1,117.1 1,140.9
----------------- ---------------- -----------------
Contribution from the Closed Block................. $ 87.1 $ 102.5 $ 125.0
================= ================ =================
</TABLE>
At December 31, 1998 and 1997, problem mortgage loans on real estate had
an amortized cost of $5.1 million and $8.1 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had an amortized cost of $26.0 million and $70.5 million,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses...................... $ 55.5 $ 109.1
Impaired mortgage loans without provision for losses................... 7.6 .6
---------------- -----------------
Recorded investment in impaired mortgages.............................. 63.1 109.7
Provision for losses................................................... (10.1) (17.4)
---------------- -----------------
Net Impaired Mortgage Loans............................................ $ 53.0 $ 92.3
================ =================
</TABLE>
During 1998, 1997 and 1996, the Closed Block's average recorded
investment in impaired mortgage loans was $85.5 million, $110.2 million
and $153.8 million, respectively. Interest income recognized on these
impaired mortgage loans totaled $4.7 million, $9.4 million and $10.9
million ($1.5 million, $4.1 million and $4.7 million recognized on a
cash basis) for 1998, 1997 and 1996, respectively.
Valuation allowances amounted to $11.1 million and $18.5 million on
mortgage loans on real estate and $15.4 million and $16.8 million on
equity real estate at December 31, 1998 and 1997, respectively. As of
January 1, 1996, the adoption of SFAS No. 121 resulted in the
recognition of impairment losses of $5.6 million on real estate held for
production of income. Writedowns of fixed maturities amounted to $3.5
million and $12.8 million for 1997 and 1996, respectively. Writedowns of
equity real estate subsequent to the adoption of SFAS No. 121 amounted
to $28.8 million for 1997.
In the fourth quarter of 1997, $72.9 million depreciated cost of equity
real estate held for production of income was reclassified to equity
real estate held for sale. Additions to valuation allowances of $15.4
million were recorded upon these transfers. Additionally, in fourth
quarter 1997, $28.8 million of writedowns on real estate held for
production of income were recorded.
Many expenses related to Closed Block operations are charged to
operations outside of the Closed Block; accordingly, the contribution
from the Closed Block does not represent the actual profitability of the
Closed Block operations. Operating costs and expenses outside of the
Closed Block are, therefore, disproportionate to the business outside of
the Closed Block.
F-22
<PAGE>
8) DISCONTINUED OPERATIONS
Summarized financial information for discontinued operations follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
Assets
Mortgage loans on real estate........................................ $ 553.9 $ 635.2
Equity real estate................................................... 611.0 874.5
Other equity investments............................................. 115.1 209.3
Other invested assets................................................ 24.9 152.4
----------------- -----------------
Total investments.................................................. 1,304.9 1,871.4
Cash and cash equivalents............................................ 34.7 106.8
Other assets......................................................... 219.0 243.8
----------------- -----------------
Total Assets......................................................... $ 1,558.6 $ 2,222.0
================= =================
Liabilities
Policyholders' liabilities........................................... $ 1,021.7 $ 1,048.3
Allowance for future losses.......................................... 305.1 259.2
Amounts due to continuing operations................................. 2.7 572.8
Other liabilities.................................................... 229.1 341.7
----------------- -----------------
Total Liabilities.................................................... $ 1,558.6 $ 2,222.0
================= =================
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Revenues
Investment income (net of investment
expenses of $63.3, $97.3 and $127.5)............. $ 160.4 $ 188.6 $ 245.4
Investment gains (losses), net..................... 35.7 (173.7) (18.9)
Policy fees, premiums and other income............. (4.3) .2 .2
----------------- ---------------- -----------------
Total revenues..................................... 191.8 15.1 226.7
Benefits and other deductions...................... 141.5 169.5 250.4
Earnings added (losses charged) to allowance
for future losses................................ 50.3 (154.4) (23.7)
----------------- ---------------- -----------------
Pre-tax loss from operations....................... - - -
Pre-tax earnings from releasing (loss from
strengthening) of the allowance for future
losses........................................... 4.2 (134.1) (129.0)
Federal income tax (expense) benefit............... (1.5) 46.9 45.2
----------------- ---------------- -----------------
Earnings (Loss) from Discontinued Operations....... $ 2.7 $ (87.2) $ (83.8)
================= ================ =================
</TABLE>
The Company's quarterly process for evaluating the allowance for future
losses applies the current period's results of the discontinued
operations against the allowance, re-estimates future losses and adjusts
the allowance, if appropriate. Additionally, as part of the Company's
annual planning process which takes place in the fourth quarter of each
year, investment and benefit cash flow projections are prepared. These
updated assumptions and estimates resulted in a release of allowance in
1998 and strengthening of allowance in 1997 and 1996.
F-23
<PAGE>
In the fourth quarter of 1997, $329.9 million depreciated cost of equity
real estate was reclassified from equity real estate held for production
of income to real estate held for sale. Additions to valuation
allowances of $79.8 million were recognized upon these transfers.
Additionally, in fourth quarter 1997, $92.5 million of writedowns on
real estate held for production of income were recognized.
Benefits and other deductions includes $26.6 million, $53.3 million and
$114.3 million of interest expense related to amounts borrowed from
continuing operations in 1998, 1997 and 1996, respectively.
Valuation allowances amounted to $3.0 million and $28.4 million on
mortgage loans on real estate and $34.8 million and $88.4 million on
equity real estate at December 31, 1998 and 1997, respectively. As of
January 1, 1996, the adoption of SFAS No. 121 resulted in a release of
existing valuation allowances of $71.9 million on equity real estate and
recognition of impairment losses of $69.8 million on real estate held
for production of income. Writedowns of equity real estate subsequent to
the adoption of SFAS No. 121 amounted to $95.7 million and $12.3 million
for 1997 and 1996, respectively.
At December 31, 1998 and 1997, problem mortgage loans on real estate had
amortized costs of $1.1 million and $11.0 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had amortized costs of $3.5 million and $109.4 million,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses...................... $ 6.7 $ 101.8
Impaired mortgage loans without provision for losses................... 8.5 .2
---------------- -----------------
Recorded investment in impaired mortgages.............................. 15.2 102.0
Provision for losses................................................... (2.1) (27.3)
---------------- -----------------
Net Impaired Mortgage Loans............................................ $ 13.1 $ 74.7
================ =================
</TABLE>
During 1998, 1997 and 1996, the discontinued operations' average
recorded investment in impaired mortgage loans was $73.3 million, $89.2
million and $134.8 million, respectively. Interest income recognized on
these impaired mortgage loans totaled $4.7 million, $6.6 million and
$10.1 million ($3.4 million, $5.3 million and $7.5 million recognized on
a cash basis) for 1998, 1997 and 1996, respectively.
At December 31, 1998 and 1997, discontinued operations had carrying
values of $50.0 million and $156.2 million, respectively, of real estate
acquired in satisfaction of debt.
F-24
<PAGE>
9) SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
Short-term debt...................................................... $ 179.3 $ 422.2
----------------- -----------------
Long-term debt:
Equitable Life:
6.95% surplus notes scheduled to mature 2005....................... 399.4 399.4
7.70% surplus notes scheduled to mature 2015....................... 199.7 199.7
Other.............................................................. .3 .3
----------------- -----------------
Total Equitable Life........................................... 599.4 599.4
----------------- -----------------
Wholly Owned and Joint Venture Real Estate:
Mortgage notes, 5.91% - 12.00%, due through 2017................... 392.2 676.6
----------------- -----------------
Alliance:
Other.............................................................. 10.8 18.5
----------------- -----------------
Total long-term debt................................................. 1,002.4 1,294.5
----------------- -----------------
Total Short-term and Long-term Debt.................................. $ 1,181.7 $ 1,716.7
================= =================
</TABLE>
Short-term Debt
Equitable Life has a $350.0 million bank credit facility available to
fund short-term working capital needs and to facilitate the securities
settlement process. The credit facility consists of two types of
borrowing options with varying interest rates and expires in September
2000. The interest rates are based on external indices dependent on the
type of borrowing and at December 31, 1998 range from 5.23% to 7.75%.
There were no borrowings outstanding under this bank credit facility at
December 31, 1998.
Equitable Life has a commercial paper program with an issue limit of
$500.0 million. This program is available for general corporate purposes
used to support Equitable Life's liquidity needs and is supported by
Equitable Life's existing $350.0 million bank credit facility. At
December 31, 1998, there were no borrowings outstanding under this
program.
During July 1998, Alliance entered into a $425.0 million five-year
revolving credit facility with a group of commercial banks which
replaced a $250.0 million revolving credit facility. Under the facility,
the interest rate, at the option of Alliance, is a floating rate
generally based upon a defined prime rate, a rate related to the London
Interbank Offered Rate ("LIBOR") or the Federal Funds Rate. A facility
fee is payable on the total facility. During September 1998, Alliance
increased the size of its commercial paper program from $250.0 million
to $425.0 million. Borrowings from these two sources may not exceed
$425.0 million in the aggregate. The revolving credit facility provides
backup liquidity for commercial paper issued under Alliance's commercial
paper program and can be used as a direct source of borrowing. The
revolving credit facility contains covenants which require Alliance to,
among other things, meet certain financial ratios. As of December 31,
1998, Alliance had commercial paper outstanding totaling $179.5 million
at an effective interest rate of 5.5% and there were no borrowings
outstanding under Alliance's revolving credit facility.
Long-term Debt
Several of the long-term debt agreements have restrictive covenants
related to the total amount of debt, net tangible assets and other
matters. The Company is in compliance with all debt covenants.
F-25
<PAGE>
The Company has pledged real estate, mortgage loans, cash and securities
amounting to $640.2 million and $1,164.0 million at December 31, 1998
and 1997, respectively, as collateral for certain short-term and
long-term debt.
At December 31, 1998, aggregate maturities of the long-term debt based
on required principal payments at maturity for 1999 and the succeeding
four years are $322.8 million, $6.9 million, $1.7 million, $1.8 million
and $2.0 million, respectively, and $668.0 million thereafter.
10) FEDERAL INCOME TAXES
A summary of the Federal income tax expense in the consolidated
statements of earnings is shown below:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current.......................................... $ 283.3 $ 186.5 $ 97.9
Deferred......................................... 69.8 (95.0) (88.2)
----------------- ---------------- -----------------
Total.............................................. $ 353.1 $ 91.5 $ 9.7
================= ================ =================
</TABLE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings before
Federal income taxes and minority interest by the expected Federal
income tax rate of 35%. The sources of the difference and the tax
effects of each are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Expected Federal income tax expense................ $ 414.3 $ 234.7 $ 73.0
Non-taxable minority interest...................... (33.2) (38.0) (28.6)
Adjustment of tax audit reserves................... 16.0 (81.7) 6.9
Equity in unconsolidated subsidiaries.............. (39.3) (45.1) (32.3)
Other.............................................. (4.7) 21.6 (9.3)
----------------- ---------------- -----------------
Federal Income Tax Expense......................... $ 353.1 $ 91.5 $ 9.7
================= ================ =================
</TABLE>
The components of the net deferred Federal income taxes are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------------------- ---------------------------------
Assets Liabilities Assets Liabilities
--------------- ---------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
Compensation and related benefits...... $ 235.3 $ - $ 257.9 $ -
Other.................................. 27.8 - 30.7 -
DAC, reserves and reinsurance.......... - 231.4 - 222.8
Investments............................ - 364.4 - 405.7
--------------- ---------------- --------------- ---------------
Total.................................. $ 263.1 $ 595.8 $ 288.6 $ 628.5
=============== ================ =============== ===============
</TABLE>
F-26
<PAGE>
The deferred Federal income taxes impacting operations reflect the net
tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. The sources of these temporary differences
and the tax effects of each are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
DAC, reserves and reinsurance...................... $ (7.7) $ 46.2 $ (156.2)
Investments........................................ 46.8 (113.8) 78.6
Compensation and related benefits.................. 28.6 3.7 22.3
Other.............................................. 2.1 (31.1) (32.9)
----------------- ---------------- -----------------
Deferred Federal Income Tax
Expense (Benefit)................................ $ 69.8 $ (95.0) $ (88.2)
================= ================ =================
</TABLE>
The Internal Revenue Service (the "IRS") is in the process of examining
the Holding Company's consolidated Federal income tax returns for the
years 1992 through 1996. Management believes these audits will have no
material adverse effect on the Company's results of operations.
11) REINSURANCE AGREEMENTS
The Insurance Group assumes and cedes reinsurance with other insurance
companies. The Insurance Group evaluates the financial condition of its
reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies. Ceded reinsurance does not relieve the originating insurer
of liability. The effect of reinsurance (excluding group life and
health) is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Direct premiums.................................... $ 438.8 $ 448.6 $ 461.4
Reinsurance assumed................................ 203.6 198.3 177.5
Reinsurance ceded.................................. (54.3) (45.4) (41.3)
----------------- ---------------- -----------------
Premiums........................................... $ 588.1 $ 601.5 $ 597.6
================= ================ =================
Universal Life and Investment-type Product
Policy Fee Income Ceded.......................... $ 75.7 $ 61.0 $ 48.2
================= ================ =================
Policyholders' Benefits Ceded...................... $ 85.9 $ 70.6 $ 54.1
================= ================ =================
Interest Credited to Policyholders' Account
Balances Ceded................................... $ 39.5 $ 36.4 $ 32.3
================= ================ =================
</TABLE>
Beginning in May 1997, the Company began reinsuring on a yearly renewal
term basis 90% of the mortality risk on new issues of certain term,
universal and variable life products. During 1996, the Company's
retention limit on joint survivorship policies was increased to $15.0
million. Effective January 1, 1994, all in force business above $5.0
million was reinsured. The Insurance Group also reinsures the entire
risk on certain substandard underwriting risks as well as in certain
other cases.
The Insurance Group cedes 100% of its group life and health business to
a third party insurance company. Premiums ceded totaled $1.3 million,
$1.6 million and $2.4 million for 1998, 1997 and 1996, respectively.
Ceded death and disability benefits totaled $15.6 million, $4.3 million
and $21.2 million for 1998, 1997 and 1996, respectively. Insurance
liabilities ceded totaled $560.3 million and $593.8 million at December
31, 1998 and 1997, respectively.
F-27
<PAGE>
12) EMPLOYEE BENEFIT PLANS
The Company sponsors qualified and non-qualified defined benefit plans
covering substantially all employees (including certain qualified
part-time employees), managers and certain agents. The pension plans are
non-contributory. Equitable Life's benefits are based on a cash balance
formula or years of service and final average earnings, if greater,
under certain grandfathering rules in the plans. Alliance's benefits are
based on years of credited service, average final base salary and
primary social security benefits. The Company's funding policy is to
make the minimum contribution required by the Employee Retirement Income
Security Act of 1974 ("ERISA").
Components of net periodic pension cost (credit) for the qualified and
non-qualified plans are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Service cost....................................... $ 33.2 $ 32.5 $ 33.8
Interest cost on projected benefit obligations..... 129.2 128.2 120.8
Actual return on assets............................ (175.6) (307.6) (181.4)
Net amortization and deferrals..................... 6.1 166.6 43.4
----------------- ---------------- -----------------
Net Periodic Pension Cost (Credit)................. $ (7.1) $ 19.7 $ 16.6
================= ================ =================
</TABLE>
The plan's projected benefit obligation under the qualified and
non-qualified plans was comprised of:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Benefit obligation, beginning of year.................................. $ 1,801.3 $ 1,765.5
Service cost........................................................... 33.2 32.5
Interest cost.......................................................... 129.2 128.2
Actuarial (gains) losses............................................... 108.4 (15.5)
Benefits paid.......................................................... (138.7) (109.4)
---------------- -----------------
Benefit Obligation, End of Year........................................ $ 1,933.4 $ 1,801.3
================ =================
</TABLE>
The funded status of the qualified and non-qualified pension plans is as
follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Plan assets at fair value, beginning of year........................... $ 1,867.4 $ 1,626.0
Actual return on plan assets........................................... 338.9 307.5
Contributions.......................................................... - 30.0
Benefits paid and fees................................................. (123.2) (96.1)
---------------- -----------------
Plan assets at fair value, end of year................................. 2,083.1 1,867.4
Projected benefit obligations.......................................... 1,933.4 1,801.3
---------------- -----------------
Projected benefit obligations less than plan assets.................... 149.7 66.1
Unrecognized prior service cost........................................ (7.5) (9.9)
Unrecognized net loss from past experience different
from that assumed.................................................... 38.7 95.0
Unrecognized net asset at transition................................... 1.5 3.1
---------------- -----------------
Prepaid Pension Cost.................................................. $ 182.4 $ 154.3
================ =================
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of projected benefit
obligations were 7.0% and 3.83%, respectively, at December 31, 1998 and
7.25% and 4.07%, respectively, at December 31, 1997. As of January 1,
1998 and 1997, the expected long-term rate of return on assets for the
retirement plan was 10.25%.
F-28
<PAGE>
The Company recorded, as a reduction of shareholders' equity an
additional minimum pension liability of $28.3 million and $17.3 million,
net of Federal income taxes, at December 31, 1998 and 1997,
respectively, primarily representing the excess of the accumulated
benefit obligation of the qualified pension plan over the accrued
liability.
The pension plan's assets include corporate and government debt
securities, equity securities, equity real estate and shares of group
trusts managed by Alliance.
Prior to 1987, the qualified plan funded participants' benefits through
the purchase of non-participating annuity contracts from Equitable Life.
Benefit payments under these contracts were approximately $31.8 million,
$33.2 million and $34.7 million for 1998, 1997 and 1996, respectively.
The Company provides certain medical and life insurance benefits
(collectively, "postretirement benefits") for qualifying employees,
managers and agents retiring from the Company (i) on or after attaining
age 55 who have at least 10 years of service or (ii) on or after
attaining age 65 or (iii) whose jobs have been abolished and who have
attained age 50 with 20 years of service. The life insurance benefits
are related to age and salary at retirement. The costs of postretirement
benefits are recognized in accordance with the provisions of SFAS No.
106. The Company continues to fund postretirement benefits costs on a
pay-as-you-go basis and, for 1998, 1997 and 1996, the Company made
estimated postretirement benefits payments of $28.4 million, $18.7
million and $18.9 million, respectively.
The following table sets forth the postretirement benefits plan's
status, reconciled to amounts recognized in the Company's consolidated
financial statements:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Service cost....................................... $ 4.6 $ 4.5 $ 5.3
Interest cost on accumulated postretirement
benefits obligation.............................. 33.6 34.7 34.6
Net amortization and deferrals..................... .5 1.9 2.4
----------------- ---------------- -----------------
Net Periodic Postretirement Benefits Costs......... $ 38.7 $ 41.1 $ 42.3
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Accumulated postretirement benefits obligation, beginning
of year.............................................................. $ 490.8 $ 388.5
Service cost........................................................... 4.6 4.5
Interest cost.......................................................... 33.6 34.7
Contributions and benefits paid........................................ (28.4) 72.1
Actuarial (gains) losses............................................... (10.2) (9.0)
---------------- -----------------
Accumulated postretirement benefits obligation, end of year............ 490.4 490.8
Unrecognized prior service cost........................................ 31.8 40.3
Unrecognized net loss from past experience different
from that assumed and from changes in assumptions.................... (121.2) (140.6)
---------------- -----------------
Accrued Postretirement Benefits Cost................................... $ 401.0 $ 390.5
================ =================
</TABLE>
Since January 1, 1994, costs to the Company for providing these medical
benefits available to retirees under age 65 are the same as those
offered to active employees and medical benefits will be limited to 200%
of 1993 costs for all participants.
F-29
<PAGE>
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefits obligation was 8.0% in 1998,
gradually declining to 2.5% in the year 2009, and in 1997 was 8.75%,
gradually declining to 2.75% in the year 2009. The discount rate used in
determining the accumulated postretirement benefits obligation was 7.0%
and 7.25% at December 31, 1998 and 1997, respectively.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefits obligation as of December 31, 1998
would be increased 4.83%. The effect of this change on the sum of the
service cost and interest cost would be an increase of 4.57%. If the
health care cost trend rate assumptions were decreased by 1% the
accumulated postretirement benefits obligation as of December 31, 1998
would be decreased by 5.6%. The effect of this change on the sum of the
service cost and interest cost would be a decrease of 5.4%.
13) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives
The Insurance Group primarily uses derivatives for asset/liability risk
management and for hedging individual securities. Derivatives mainly are
utilized to reduce the Insurance Group's exposure to interest rate
fluctuations. Accounting for interest rate swap transactions is on an
accrual basis. Gains and losses related to interest rate swap
transactions are amortized as yield adjustments over the remaining life
of the underlying hedged security. Income and expense resulting from
interest rate swap activities are reflected in net investment income.
The notional amount of matched interest rate swaps outstanding at
December 31, 1998 and 1997, respectively, was $880.9 million and
$1,353.4 million. The average unexpired terms at December 31, 1998
ranged from 1 month to 4.3 years. At December 31, 1998, the cost of
terminating swaps in a loss position was $8.0 million. Equitable Life
has implemented an interest rate cap program designed to hedge crediting
rates on interest-sensitive individual annuities contracts. The
outstanding notional amounts at December 31, 1998 of contracts purchased
and sold were $8,450.0 million and $875.0 million, respectively. The net
premium paid by Equitable Life on these contracts was $54.8 million and
is being amortized ratably over the contract periods ranging from 1 to 5
years. Income and expense resulting from this program are reflected as
an adjustment to interest credited to policyholders' account balances.
Substantially all of DLJ's activities related to derivatives are, by
their nature trading activities which are primarily for the purpose of
customer accommodations. DLJ enters into certain contractual agreements
referred to as derivatives or off-balance-sheet financial instruments
involving futures, forwards and options. DLJ's derivative activities
consist of writing over-the-counter ("OTC") options to accommodate its
customer needs, trading in forward contracts in U.S. government and
agency issued or guaranteed securities and in futures contracts on
equity-based indices, interest rate instruments and currencies and
issuing structured products based on emerging market financial
instruments and indices. DLJ's involvement in swap contracts and
commodity derivative instruments is not significant.
Fair Value of Financial Instruments
The Company defines fair value as the quoted market prices for those
instruments that are actively traded in financial markets. In cases
where quoted market prices are not available, fair values are estimated
using present value or other valuation techniques. The fair value
estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument,
including estimates of the timing and amount of expected future cash
flows and the credit standing of counterparties. Such estimates do not
reflect any premium or discount that could result from offering for sale
at one time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of
unrealized gains or losses. In many cases, the fair value estimates
cannot be substantiated by comparison to independent markets, nor can
the disclosed value be realized in immediate settlement of the
instrument.
Certain financial instruments are excluded, particularly insurance
liabilities other than financial guarantees and investment contracts.
Fair market value of off-balance-sheet financial instruments of the
Insurance Group was not material at December 31, 1998 and 1997.
F-30
<PAGE>
Fair values for mortgage loans on real estate are estimated by
discounting future contractual cash flows using interest rates at which
loans with similar characteristics and credit quality would be made.
Fair values for foreclosed mortgage loans and problem mortgage loans are
limited to the estimated fair value of the underlying collateral if
lower.
Fair values of policy loans are estimated by discounting the face value
of the loans from the time of the next interest rate review to the
present, at a rate equal to the excess of the current estimated market
rates over the current interest rate charged on the loan.
The estimated fair values for the Company's association plan contracts,
supplementary contracts not involving life contingencies ("SCNILC") and
annuities certain, which are included in policyholders' account
balances, and guaranteed interest contracts are estimated using
projected cash flows discounted at rates reflecting expected current
offering rates.
The estimated fair values for variable deferred annuities and single
premium deferred annuities ("SPDA"), which are included in
policyholders' account balances, are estimated by discounting the
account value back from the time of the next crediting rate review to
the present, at a rate equal to the excess of current estimated market
rates offered on new policies over the current crediting rates.
Fair values for long-term debt are determined using published market
values, where available, or contractual cash flows discounted at market
interest rates. The estimated fair values for non-recourse mortgage debt
are determined by discounting contractual cash flows at a rate which
takes into account the level of current market interest rates and
collateral risk. The estimated fair values for recourse mortgage debt
are determined by discounting contractual cash flows at a rate based
upon current interest rates of other companies with credit ratings
similar to the Company. The Company's carrying value of short-term
borrowings approximates their estimated fair value.
The following table discloses carrying value and estimated fair value
for financial instruments not otherwise disclosed in Notes 3, 7 and 8:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1998 1997
--------------------------------- ---------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
--------------- ---------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
Consolidated Financial Instruments:
Mortgage loans on real estate.......... $ 2,809.9 $ 2,961.8 $ 2,611.4 $ 2,822.8
Other limited partnership interests.... 562.6 562.6 509.4 509.4
Policy loans........................... 2,086.7 2,370.7 2,422.9 2,493.9
Policyholders' account balances -
investment contracts................. 12,892.0 13,396.0 12,611.0 12,714.0
Long-term debt......................... 1,002.4 1,025.2 1,294.5 1,257.0
Closed Block Financial Instruments:
Mortgage loans on real estate.......... 1,633.4 1,703.5 1,341.6 1,420.7
Other equity investments............... 56.4 56.4 86.3 86.3
Policy loans........................... 1,641.2 1,929.7 1,700.2 1,784.2
SCNILC liability....................... 25.0 25.0 27.6 30.3
Discontinued Operations Financial
Instruments:
Mortgage loans on real estate.......... 553.9 599.9 655.5 779.9
Fixed maturities....................... 24.9 24.9 38.7 38.7
Other equity investments............... 115.1 115.1 209.3 209.3
Guaranteed interest contracts.......... 37.0 34.0 37.0 34.0
Long-term debt......................... 147.1 139.8 296.4 297.6
</TABLE>
F-31
<PAGE>
14) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has provided, from time to time, certain guarantees or
commitments to affiliates, investors and others. These arrangements
include commitments by the Company, under certain conditions: to make
capital contributions of up to $142.9 million to affiliated real estate
joint ventures; and to provide equity financing to certain limited
partnerships of $287.3 million at December 31, 1998, under existing loan
or loan commitment agreements.
Equitable Life is the obligor under certain structured settlement
agreements which it had entered into with unaffiliated insurance
companies and beneficiaries. To satisfy its obligations under these
agreements, Equitable Life owns single premium annuities issued by
previously wholly owned life insurance subsidiaries. Equitable Life has
directed payment under these annuities to be made directly to the
beneficiaries under the structured settlement agreements. A contingent
liability exists with respect to these agreements should the previously
wholly owned subsidiaries be unable to meet their obligations.
Management believes the satisfaction of those obligations by Equitable
Life is remote.
The Insurance Group had $24.7 million of letters of credit outstanding
at December 31, 1998.
15) LITIGATION
Major Medical Insurance Cases
Equitable Life agreed to settle, subject to court approval, previously
disclosed cases involving lifetime guaranteed renewable major medical
insurance policies issued by Equitable Life in five states. Plaintiffs
in these cases claimed that Equitable Life's method for determining
premium increases breached the terms of certain forms of the policies
and was misrepresented. In certain cases plaintiffs also claimed that
Equitable Life misrepresented to policyholders that premium increases
had been approved by insurance departments, and that it determined
annual rate increases in a manner that discriminated against the
policyholders.
In December 1997, Equitable Life entered into a settlement agreement,
subject to court approval, which would result in creation of a
nationwide class consisting of all persons holding, and paying premiums
on, the policies at any time since January 1, 1988 and the dismissal
with prejudice of the pending actions and the resolution of all similar
claims on a nationwide basis. Under the terms of the settlement, which
involves approximately 127,000 former and current policyholders,
Equitable Life would pay $14.2 million in exchange for release of all
claims and will provide future relief to certain current policyholders
by restricting future premium increases, estimated to have a present
value of $23.3 million. This estimate is based upon assumptions about
future events that cannot be predicted with certainty and accordingly
the actual value of the future relief may vary. In October 1998, the
court entered a judgment approving the settlement agreement and, in
November, a member of the national class filed a notice of appeal of the
judgment. In January 1999, the Court of Appeals granted Equitable Life's
motion to dismiss the appeal.
Life Insurance and Annuity Sales Cases
A number of lawsuits are pending as individual claims and purported
class actions against Equitable Life and its subsidiary insurance
companies Equitable Variable Life Insurance Company ("EVLICO," which was
merged into Equitable Life effective January 1, 1997) and The Equitable
of Colorado, Inc. ("EOC"). These actions involve, among other things,
sales of life and annuity products for varying periods from 1980 to the
present, and allege, among other things, sales practice
misrepresentation primarily involving: the number of premium payments
required; the propriety of a product as an investment vehicle; the
propriety of a product as a replacement of an existing policy; and
failure to disclose a product as life insurance. Some actions are in
state courts and others are in U.S. District Courts in varying
jurisdictions, and are in varying stages of discovery and motions for
class certification.
F-32
<PAGE>
In general, the plaintiffs request an unspecified amount of damages,
punitive damages, enjoinment from the described practices, prohibition
against cancellation of policies for non-payment of premium or other
remedies, as well as attorneys' fees and expenses. Similar actions have
been filed against other life and health insurers and have resulted in
the award of substantial judgments, including material amounts of
punitive damages, or in substantial settlements. Although the outcome of
litigation cannot be predicted with certainty, particularly in the early
stages of an action, The Equitable's management believes that the
ultimate resolution of these cases should not have a material adverse
effect on the financial position of The Equitable. The Equitable's
management cannot make an estimate of loss, if any, or predict whether
or not any such litigation will have a material adverse effect on The
Equitable's results of operations in any particular period.
Discrimination Case
Equitable Life is a defendant in an action, certified as a class action
in September 1997, in the United States District Court for the Northern
District of Alabama, Southern Division, involving alleged discrimination
on the basis of race against African-American applicants and potential
applicants in hiring individuals as sales agents. Plaintiffs seek a
declaratory judgment and affirmative and negative injunctive relief,
including the payment of back-pay, pension and other compensation.
Although the outcome of litigation cannot be predicted with certainty,
The Equitable's management believes that the ultimate resolution of this
matter should not have a material adverse effect on the financial
position of The Equitable. The Equitable's management cannot make an
estimate of loss, if any, or predict whether or not such matter will
have a material adverse effect on The Equitable's results of operations
in any particular period.
Alliance Capital
In July 1995, a class action complaint was filed against Alliance North
American Government Income Trust, Inc. (the "Fund"), Alliance and
certain other defendants affiliated with Alliance, including the Holding
Company, alleging violations of Federal securities laws, fraud and
breach of fiduciary duty in connection with the Fund's investments in
Mexican and Argentine securities. The original complaint was dismissed
in 1996; on appeal, the dismissal was affirmed. In October 1996,
plaintiffs filed a motion for leave to file an amended complaint,
alleging the Fund failed to hedge against currency risk despite
representations that it would do so, the Fund did not properly disclose
that it planned to invest in mortgage-backed derivative securities and
two Fund advertisements misrepresented the risks of investing in the
Fund. In October 1998, the U.S. Court of Appeals for the Second Circuit
issued an order granting plaintiffs' motion to file an amended complaint
alleging that the Fund misrepresented its ability to hedge against
currency risk and denying plaintiffs' motion to file an amended
complaint containing the other allegations. Alliance believes that the
allegations in the amended complaint, which was filed in February 1999,
are without merit and intends to defend itself vigorously against these
claims. While the ultimate outcome of this matter cannot be determined
at this time, Alliance's management does not expect that it will have a
material adverse effect on Alliance's results of operations or financial
condition.
DLJSC
DLJSC is a defendant along with certain other parties in a class action
complaint involving the underwriting of units, consisting of notes and
warrants to purchase common shares, of Rickel Home Centers, Inc.
("Rickel"), which filed a voluntary petition for reorganization pursuant
to Chapter 11 of the Bankruptcy Code. The complaint seeks unspecified
compensatory and punitive damages from DLJSC, as an underwriter and as
an owner of 7.3% of the common stock, for alleged violation of Federal
securities laws and common law fraud for alleged misstatements and
omissions contained in the prospectus and registration statement used in
the offering of the units. DLJSC is defending itself vigorously against
all the allegations contained in the complaint. Although there can be no
assurance, DLJ's management does not believe that the ultimate outcome
of this litigation will have a material adverse effect on DLJ's
consolidated financial condition. Due to the early stage of this
litigation, based on the information currently available to it, DLJ's
management cannot predict whether or not such litigation will have a
material adverse effect on DLJ's results of operations in any particular
period.
F-33
<PAGE>
DLJSC is a defendant in a purported class action filed in a Texas State
Court on behalf of the holders of $550 million principal amount of
subordinated redeemable discount debentures of National Gypsum
Corporation ("NGC"). The debentures were canceled in connection with a
Chapter 11 plan of reorganization for NGC consummated in July 1993. The
litigation seeks compensatory and punitive damages for DLJSC's
activities as financial advisor to NGC in the course of NGC's Chapter 11
proceedings. Trial is expected in early May 1999. DLJSC intends to
defend itself vigorously against all the allegations contained in the
complaint. Although there can be no assurance, DLJ's management does not
believe that the ultimate outcome of this litigation will have a
material adverse effect on DLJ's consolidated financial condition. Based
upon the information currently available to it, DLJ's management cannot
predict whether or not such litigation will have a material adverse
effect on DLJ's results of operations in any particular period.
DLJSC is a defendant in a complaint which alleges that DLJSC and a
number of other financial institutions and several individual defendants
violated civil provisions of RICO by inducing plaintiffs to invest over
$40 million in The Securities Groups, a number of tax shelter limited
partnerships, during the years 1978 through 1982. The plaintiffs seek
recovery of the loss of their entire investment and an approximately
equivalent amount of tax-related damages. Judgment for damages under
RICO are subject to trebling. Discovery is complete. Trial has been
scheduled for May 17, 1999. DLJSC believes that it has meritorious
defenses to the complaints and will continue to contest the suits
vigorously. Although there can be no assurance, DLJ's management does
not believe that the ultimate outcome of this litigation will have a
material adverse effect on DLJ's consolidated financial condition. Based
upon the information currently available to it, DLJ's management cannot
predict whether or not such litigation will have a material adverse
effect on DLJ's results of operations in any particular period.
DLJSC is a defendant along with certain other parties in four actions
involving Mid-American Waste Systems, Inc. ("Mid-American"), which filed
a voluntary petition for reorganization pursuant to Chapter 11 of the
Bankruptcy Code in January 1997. Three actions seek rescission,
compensatory and punitive damages for DLJSC's role in underwriting notes
of Mid-American. The other action, filed by the Plan Administrator for
the bankruptcy estate of Mid-American, alleges that DLJSC is liable as
an underwriter for alleged misrepresentations and omissions in the
prospectus for the notes, and liable as financial advisor to
Mid-American for allegedly failing to advise Mid-American about its
financial condition. DLJSC believes that it has meritorious defenses to
the complaints and will continue to contest the suits vigorously.
Although there can be no assurance, DLJ's management does not believe
that the ultimate outcome of this litigation will have a material
adverse effect on DLJ's consolidated financial condition. Based upon
information currently available to it, DLJ's management cannot predict
whether or not such litigation will have a material adverse effect on
DLJ's results of operations in any particular period.
Other Matters
In addition to the matters described above, the Holding Company and its
subsidiaries are involved in various legal actions and proceedings in
connection with their businesses. Some of the actions and proceedings
have been brought on behalf of various alleged classes of claimants and
certain of these claimants seek damages of unspecified amounts. While
the ultimate outcome of such matters cannot be predicted with certainty,
in the opinion of management no such matter is likely to have a material
adverse effect on the Company's consolidated financial position or
results of operations.
16) LEASES
The Company has entered into operating leases for office space and
certain other assets, principally data processing equipment and office
furniture and equipment. Future minimum payments under noncancelable
leases for 1999 and the succeeding four years are $98.7 million, $92.7
million, $73.4 million, $59.9 million, $55.8 million and $550.1 million
thereafter. Minimum future sublease rental income on these noncancelable
leases for 1999 and the succeeding four years is $7.6 million, $5.6
million, $4.6 million, $2.3 million, $2.3 million and $25.4 million
thereafter.
F-34
<PAGE>
At December 31, 1998, the minimum future rental income on noncancelable
operating leases for wholly owned investments in real estate for 1999
and the succeeding four years is $189.2 million, $177.0 million, $165.5
million, $145.4 million, $122.8 million and $644.7 million thereafter.
17) OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Compensation costs................................. $ 772.0 $ 721.5 $ 704.8
Commissions........................................ 478.1 409.6 329.5
Short-term debt interest expense................... 26.1 31.7 8.0
Long-term debt interest expense.................... 84.6 121.2 137.3
Amortization of policy acquisition costs........... 292.7 287.3 405.2
Capitalization of policy acquisition costs......... (609.1) (508.0) (391.9)
Rent expense, net of sublease income............... 100.0 101.8 113.7
Cursitor intangible assets writedown............... - 120.9 -
Other.............................................. 1,056.8 917.9 769.1
----------------- ---------------- -----------------
Total.............................................. $ 2,201.2 $ 2,203.9 $ 2,075.7
================= ================ =================
</TABLE>
During 1997 and 1996, the Company restructured certain operations in
connection with cost reduction programs and recorded pre-tax provisions
of $42.4 million and $24.4 million, respectively. The amounts paid
during 1998, associated with cost reduction programs, totaled $22.6
million. At December 31, 1998, the liabilities associated with cost
reduction programs amounted to $39.4 million. The 1997 cost reduction
program included costs related to employee termination and exit costs.
The 1996 cost reduction program included restructuring costs related to
the consolidation of insurance operations' service centers. Amortization
of DAC in 1996 included a $145.0 million writeoff of DAC related to DI
contracts.
18) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION
Equitable Life is restricted as to the amounts it may pay as dividends
to the Holding Company. Under the New York Insurance Law, the
Superintendent has broad discretion to determine whether the financial
condition of a stock life insurance company would support the payment of
dividends to its shareholders. For 1998, 1997 and 1996, statutory net
income (loss) totaled $384.4 million, $(351.7) million and $(351.1)
million, respectively. Statutory surplus, capital stock and Asset
Valuation Reserve ("AVR") totaled $4,728.0 million and $3,907.1 million
at December 31, 1998 and 1997, respectively. No dividends have been paid
by Equitable Life to the Holding Company to date.
At December 31, 1998, the Insurance Group, in accordance with various
government and state regulations, had $25.6 million of securities
deposited with such government or state agencies.
The differences between statutory surplus and capital stock determined
in accordance with Statutory Accounting Principles ("SAP") and total
shareholders' equity on a GAAP basis are primarily attributable to: (a)
inclusion in SAP of an AVR intended to stabilize surplus from
fluctuations in the value of the investment portfolio; (b) future policy
benefits and policyholders' account balances under SAP differ from GAAP
due to differences between actuarial assumptions and reserving
methodologies; (c) certain policy acquisition costs are expensed under
SAP but deferred under GAAP and amortized over future periods to achieve
a matching of revenues and expenses; (d) Federal income taxes are
generally accrued under SAP based upon revenues and expenses in the
Federal income tax return while under GAAP deferred taxes are provided
for timing differences between recognition of revenues and expenses for
financial reporting and income tax purposes; (e) valuation of assets
under SAP and GAAP differ due to different investment valuation and
depreciation methodologies, as well as the deferral of interest-related
realized capital gains and losses on fixed income investments; and (f)
differences in the accrual methodologies for post-employment and
retirement benefit plans.
F-35
<PAGE>
19) BUSINESS SEGMENT INFORMATION
The Company's operations consist of Insurance and Investment Services.
The Company's management evaluates the performance of each of these
segments independently and allocates resources based on current and
future requirements of each segment. Management evaluates the
performance of each segment based upon operating results adjusted to
exclude the effect of unusual or non-recurring events and transactions
and certain revenue and expense categories not related to the base
operations of the particular business net of minority interest.
Information for all periods is presented on a comparable basis.
Intersegment investment advisory and other fees of approximately $61.8
million, $84.1 million and $129.2 million for 1998, 1997 and 1996,
respectively, are included in total revenues of the Investment Services
segment. These fees, excluding amounts related to discontinued
operations of $.5 million, $4.2 million and $13.3 million for 1998, 1997
and 1996, respectively, are eliminated in consolidation.
The following tables reconcile each segment's revenues and operating
earnings to total revenues and earnings from continuing operations
before Federal income taxes and cumulative effect of accounting change
as reported on the consolidated statements of earnings and the segments'
assets to total assets on the consolidated balance sheets, respectively.
<TABLE>
<CAPTION>
Investment
Insurance Services Elimination Total
--------------- ----------------- --------------- ----------------
(In Millions)
<S> <C> <C> <C> <C>
1998
Segment revenues..................... $ 4,029.8 $ 1,438.4 $ (5.7) $ 5,462.5
Investment gains..................... 64.8 35.4 - 100.2
--------------- ----------------- --------------- ----------------
Total Revenues....................... $ 4,094.6 $ 1,473.8 $ (5.7) $ 5,562.7
=============== ================= =============== ================
Pre-tax operating earnings........... $ 688.6 $ 284.3 $ - $ 972.9
Investment gains , net of
DAC and other charges.............. 41.7 27.7 - 69.4
Pre-tax minority interest............ - 141.5 - 141.5
--------------- ----------------- --------------- ----------------
Earnings from Continuing
Operations......................... $ 730.3 $ 453.5 $ - $ 1,183.8
=============== ================= =============== ================
Total Assets......................... $ 75,626.0 $ 12,379.2 $ (64.4) $ 87,940.8
=============== ================= =============== ================
1997
Segment revenues..................... $ 3,990.8 $ 1,200.0 $ (7.7) $ 5,183.1
Investment gains (losses)............ (318.8) 255.1 - (63.7)
--------------- ----------------- --------------- ----------------
Total Revenues....................... $ 3,672.0 $ 1,455.1 $ (7.7) $ 5,119.4
=============== ================= =============== ================
Pre-tax operating earnings........... $ 507.0 $ 258.3 $ - $ 765.3
Investment gains (losses), net of
DAC and other charges.............. (292.5) 252.7 - (39.8)
Non-recurring costs and expenses..... (41.7) (121.6) - (163.3)
Pre-tax minority interest............ - 108.5 - 108.5
--------------- ----------------- --------------- ----------------
Earnings from Continuing
Operations......................... $ 172.8 $ 497.9 $ - $ 670.7
=============== ================= =============== ================
Total Assets......................... $ 67,762.4 $ 13,691.4 $ (96.1) $ 81,357.7
=============== ================= =============== ================
</TABLE>
F-36
<PAGE>
<TABLE>
<CAPTION>
Investment
Insurance Services Elimination Total
--------------- ----------------- --------------- ----------------
(In Millions)
<S> <C> <C> <C> <C>
1996
Segment revenues..................... $ 3,789.1 $ 1,105.5 $ (12.6) $ 4,882.0
Investment gains (losses)............ (30.3) 20.5 - (9.8)
--------------- ----------------- --------------- ----------------
Total Revenues....................... $ 3,758.8 $ 1,126.0 $ (12.6) $ 4,872.2
=============== ================= =============== ================
Pre-tax operating earnings........... $ 337.1 $ 224.6 $ - $ 561.7
Investment gains (losses), net of
DAC and other charges.............. (37.2) 16.9 - (20.3)
Reserve strengthening and DAC
writeoff........................... (393.0) - - (393.0)
Non-recurring costs and
expenses........................... (22.3) (1.1) - (23.4)
Pre-tax minority interest............ - 83.6 - 83.6
--------------- ----------------- --------------- ----------------
Earnings (Loss) from
Continuing Operations.............. $ (115.4) $ 324.0 $ - $ 208.6
=============== ================= =============== ================
</TABLE>
20) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations for 1998 and 1997 are summarized
below:
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- ----------------- ------------------ ------------------
(In Millions)
<S> <C> <C> <C> <C>
1998
Total Revenues................ $ 1,470.2 $ 1,422.9 $ 1,297.6 $ 1,372.0
================= ================= ================== ==================
Earnings from Continuing
Operations before
Cumulative Effect
of Accounting Change........ $ 212.8 $ 197.0 $ 136.8 $ 158.9
================= ================= ================== ==================
Net Earnings.................. $ 213.3 $ 198.3 $ 137.5 $ 159.1
================= ================= ================== ==================
1997
Total Revenues................ $ 1,266.0 $ 1,552.8 $ 1,279.0 $ 1,021.6
================= ================= ================== ==================
Earnings from Continuing
Operations before
Cumulative Effect
of Accounting Change........ $ 117.4 $ 222.5 $ 145.1 $ 39.4
================= ================= ================== ==================
Net Earnings (Loss)........... $ 114.1 $ 223.1 $ 144.9 $ (44.9)
================= ================= ================== ==================
</TABLE>
Net earnings for the three months ended December 31, 1997 includes a
charge of $212.0 million related to additions to valuation allowances on
and writeoffs of real estate of $225.2 million, and reserve
strengthening on discontinued operations of $84.3 million offset by a
reversal of prior years tax reserves of $97.5 million.
F-37
<PAGE>
21) INVESTMENT IN DLJ
At December 31, 1998, the Company's ownership of DLJ interest was
approximately 32.5%. The Company's ownership interest will be further
reduced upon the issuance of common stock after the vesting of
forfeitable restricted stock units acquired by and/or the exercise of
options granted to certain DLJ employees. DLJ restricted stock units
represents forfeitable rights to receive approximately 5.2 million
shares of DLJ common stock through February 2000.
The results of operations of DLJ are accounted for on the equity basis
and are included in commissions, fees and other income in the
consolidated statements of earnings. The Company's carrying value of DLJ
is included in investment in and loans to affiliates in the consolidated
balance sheets.
Summarized balance sheets information for DLJ, reconciled to the
Company's carrying value of DLJ, are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Assets:
Trading account securities, at market value............................ $ 13,195.1 $ 16,535.7
Securities purchased under resale agreements........................... 20,063.3 22,628.8
Broker-dealer related receivables...................................... 34,264.5 28,159.3
Other assets........................................................... 4,759.3 3,182.0
---------------- -----------------
Total Assets........................................................... $ 72,282.2 $ 70,505.8
================ =================
Liabilities:
Securities sold under repurchase agreements............................ $ 35,775.6 $ 36,006.7
Broker-dealer related payables......................................... 26,161.5 26,127.2
Short-term and long-term debt.......................................... 3,997.6 3,249.5
Other liabilities...................................................... 3,219.8 2,860.9
---------------- -----------------
Total liabilities...................................................... 69,154.5 68,244.3
DLJ's company-obligated mandatorily redeemed preferred
securities of subsidiary trust holding solely debentures of DLJ...... 200.0 200.0
Total shareholders' equity............................................. 2,927.7 2,061.5
---------------- -----------------
Total Liabilities, Cumulative Exchangeable Preferred Stock and
Shareholders' Equity................................................. $ 72,282.2 $ 70,505.8
================ =================
DLJ's equity as reported............................................... $ 2,927.7 $ 2,061.5
Unamortized cost in excess of net assets acquired in 1985
and other adjustments................................................ 23.7 23.5
The Holding Company's equity ownership in DLJ.......................... (1,002.4) (740.2)
Minority interest in DLJ............................................... (1,118.2) (729.3)
---------------- -----------------
The Company's Carrying Value of DLJ.................................... $ 830.8 $ 615.5
================ =================
</TABLE>
F-38
<PAGE>
Summarized statements of earnings information for DLJ reconciled to the
Company's equity in earnings of DLJ is as follows:
<TABLE>
<CAPTION>
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Commission, fees and other income...................................... $ 3,184.7 $ 2,430.7
Net investment income.................................................. 2,189.1 1,652.1
Dealer, trading and investment gains, net.............................. 33.2 557.7
---------------- -----------------
Total revenues......................................................... 5,407.0 4,640.5
Total expenses including income taxes.................................. 5,036.2 4,232.2
---------------- -----------------
Net earnings........................................................... 370.8 408.3
Dividends on preferred stock........................................... 21.3 12.2
---------------- -----------------
Earnings Applicable to Common Shares................................... $ 349.5 $ 396.1
================ =================
DLJ's earnings applicable to common shares as reported................. $ 349.5 $ 396.1
Amortization of cost in excess of net assets acquired in 1985.......... (.8) (1.3)
The Holding Company's equity in DLJ's earnings......................... (136.8) (156.8)
Minority interest in DLJ............................................... (99.5) (109.1)
---------------- -----------------
The Company's Equity in DLJ's Earnings................................. $ 112.4 $ 128.9
================ =================
</TABLE>
22) ACCOUNTING FOR STOCK-BASED COMPENSATION
The Holding Company sponsors a stock option plan for employees of
Equitable Life. DLJ and Alliance each sponsor their own stock option
plans for certain employees. The Company has elected to continue to
account for stock-based compensation using the intrinsic value method
prescribed in APB No. 25. Had compensation expense for the Holding
Company, DLJ and Alliance Stock Option Incentive Plan options been
determined based on SFAS No. 123's fair value based method, the
Company's pro forma net earnings for 1998, 1997 and 1996 would have
been:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C>
Net Earnings:
As reported............................................. $ 708.2 $ 437.2 $ 10.3
Pro forma............................................... 678.4 426.3 3.3
</TABLE>
The fair values of options granted after December 31, 1994, used as a
basis for the above pro forma disclosures, were estimated as of the
dates of grant using the Black-Scholes option pricing model. The option
pricing assumptions for 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Holding Company DLJ Alliance
------------------------------ ------------------------------- ----------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
--------- ---------- --------- ---------- -------------------- ---------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend yield...... 0.32% 0.48% 0.80% 0.69% 0.86% 1.54% 6.50% 8.00% 8.00%
Expected volatility. 28% 20% 20% 40% 33% 25% 29% 26% 23%
Risk-free interest
rate.............. 5.48% 5.99% 5.92% 5.53% 5.96% 6.07% 4.40% 5.70% 5.80%
Expected life
in years.......... 5 5 5 5 5 5 7.2 7.2 7.4
Weighted average
fair value per
option at
grant-date........ $22.64 $12.25 $6.94 $16.27 $10.81 $4.03 $3.86 $2.18 $1.35
</TABLE>
F-39
<PAGE>
A summary of the Holding Company, DLJ and Alliance's option plans is as
follows:
<TABLE>
<CAPTION>
Holding Company DLJ Alliance
----------------------------- ----------------------------- -----------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Price of Price of Price of
Shares Options Shares Options Units Options
(In Millions) Outstanding (In Millions) Outstanding (In Millions) Outstanding
--------------- ------------- --------------- ------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1996........ 6.7 $20.27 18.4 $13.50 9.6 $ 8.86
Granted................ .7 $24.94 4.2 $16.27 1.4 $12.56
Exercised.............. (.1) $19.91 - (.8) $ 6.82
Expired................ - - -
Forfeited.............. (.6) $20.21 (.4) $13.50 (.2) $ 9.66
--------------- ------------- ---------------
Balance as of
December 31, 1996...... 6.7 $20.79 22.2 $14.03 10.0 $ 9.54
Granted................ 3.2 $41.85 6.4 $30.54 2.2 $18.28
Exercised.............. (1.6) $20.26 (.2) $16.01 (1.2) $ 8.06
Forfeited.............. (.4) $23.43 (.2) $13.79 (.4) $10.64
--------------- ------------- ---------------
Balance as of
December 31, 1997...... 7.9 $29.05 28.2 $17.78 10.6 $11.41
Granted................ 4.3 $66.26 1.5 $38.59 2.8 $26.28
Exercised.............. (1.1) $21.18 (1.4) $14.91 (.9) $ 8.91
Forfeited.............. (.4) $47.01 (.1) $17.31 (.2) $13.14
--------------- ------------- ---------------
Balance as of
December 31, 1998...... 10.7 $44.00 28.2 $19.04 12.3 $14.94
=============== ============= ===============
</TABLE>
F-40
<PAGE>
Information about options outstanding and exercisable at December 31,
1998 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- -----------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices (In Millions) Life (Years) Price (In Millions) Price
--------------------------------------- ----------------- ---------------- ------------------- ---------------
Holding
Company
----------------------
<S> <C> <C> <C> <C> <C>
$18.125 -$27.75 3.7 5.19 $20.97 3.0 $20.33
$28.50 -$45.25 3.0 8.68 $41.79 -
$50.63 -$66.75 2.1 9.21 $52.73 -
$81.94 -$82.56 1.9 9.62 $82.56 -
----------------- -------------------
$18.125 -$82.56 10.7 7.75 $44.00 3.0 $20.33
================= ================= ================ ==================== ==============
DLJ
----------------------
$13.50 -$25.99 22.3 7.1 $14.59 21.4 $15.05
$26.00 -$38.99 5.0 8.8 $33.94 -
$39.00 -$52.875 .9 9.4 $44.65 -
----------------- -------------------
$13.50 -$52.875 28.2 7.5 $19.04 21.4 $15.05
================= ================== ============== ===================== =============
Alliance
----------------------
$ 3.03 -$ 9.69 3.1 4.5 $ 8.03 2.4 $ 7.57
$ 9.81 -$10.69 2.0 5.3 $10.05 1.6 $10.07
$11.13 -$13.75 2.4 7.5 $11.92 1.0 $11.77
$18.47 -$18.78 2.0 9.0 $18.48 .4 $18.48
$22.50 -$26.31 2.8 9.9 $26.28 - -
----------------- -------------------
$ 3.03 -$26.31 12.3 7.2 $14.94 5.4 $ 9.88
================= =================== ============= ===================== =============
</TABLE>
F-41
<PAGE>
Equitable Accumulator(SM) THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
A combination variable and 1290 AVENUE OF THE AMERICAS
fixed deferred annuity contract NEW YORK, NEW YORK 10104
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 18, 1999
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This statement of additional information ("SAI") is not a prospectus. It should
be read in conjunction with the related Equitable Accumulator prospectus, dated
October 18, 1999. That prospectus provides detailed information concerning the
contracts and the variable investment options, as well as the fixed maturity
options, that fund the contracts. Each variable investment option is a
subaccount of Equitable Life's Separate Account No. 49. The fixed maturity
options are part of Equitable Life's general account. Definitions of special
terms used in the SAI are found in the prospectus.
A copy of the prospectus is available free of charge by writing the processing
office (Post Office Box 1547, Secaucus, NJ 07096-1547), by calling
1-800-789-7771 toll free, or by contacting your registered representative.
TABLE OF CONTENTS
Unit Values 2
Annuity Unit Values 2
Custodian and Independent Accountants 3
Yield Information for the Alliance Money Market
Option and Alliance High Yield Option 3
Long-Term Market Trends 5
Key Factors in Retirement Planning 8
Financial Statements 12
Copyright 1999 The Equitable Life Assurance Society of the United States.
All rights reserved. Accumulator is a service mark of The Equitable Life
Assurance Society of the United States.
SAI 1AMLF (10/99)
<PAGE>
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2
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UNIT VALUES
Unit values are determined at the end of each valuation period for each of the
variable investment options. We may offer other annuity contracts and
certificates which will have their own unit values for the variable investment
options. They may be different from the unit values for the Equitable
Accumulator.
The unit value for a variable investment option for any valuation period is
equal to: (i) the unit value for the preceding valuation period multiplied by
(ii) the net investment factor for that option for that valuation period. A
valuation period is each business day together with any preceding non-business
days. The net investment factor is:
(a / b) - c
where:
(a) is the value of the variable investment option's shares of the corresponding
portfolio at the end of the valuation period. Any amounts allocated to or
withdrawn from the option for the valuation period are not taken into
account. For this purpose, we use the share value reported to us by EQ
Advisors Trust.
(b) is the value of the variable investment option's shares of the corresponding
portfolio at the end of the preceding valuation period. (Any amounts
allocated or withdrawn for that valuation period are taken into account.)
(c) is the daily mortality and expense risks charge and administrative charge
relating to the contracts, times the number of calendar days in the
valuation period. These daily charges are at an effective annual rate not to
exceed a total of 1.35%.
ANNUITY UNIT VALUES
The annuity unit value for each variable investment option was fixed at $1.00 on
each option's respective effective date (as shown in the prospectus) for
contracts with assumed base rates of net investment return of both 5% and 3 1/2%
a year. For each valuation period after that date, it is the annuity unit value
for the immediately preceding valuation period multiplied by the adjusted net
investment factor under the contract. For each valuation period, the adjusted
net investment factor is equal to the net investment factor reduced for each day
in the valuation period by:
o .00013366 of the net investment factor if the assumed base rate of net
investment return is 5% a year; or
o .00009425 of the net investment factor if the assumed base rate of net
investment return is 3 1/2%.
Because of this adjustment, the annuity unit value rises and falls depending on
whether the actual rate of net investment return (after deduction of charges) is
higher or lower than the assumed base rate.
All contracts have a 5% assumed base rate of net investment return, except in
states where that rate is not permitted. Annuity payments under contracts with
an assumed base rate of 3 1/2% will at first be smaller than those under
contracts with a 5% assumed base rate. Payments under the 3 1/2% contracts,
however, will rise more rapidly when unit values are rising, and payments will
fall more slowly when unit values are falling than those under 5% contracts.
The amounts of variable annuity payments are determined as follows:
Payments normally start on the business day specified on your election form, or
on such other future date you specify. The payments are made on a monthly basis.
The first three payments are of equal amounts. Each of the first three payments
will be based on the amount specified in the Tables of Guaranteed Annuity
Payments in your contract.
The first three payments depend on the assumed base rate of net investment
return and the form of annuity chosen (and any fixed period or period certain).
If the annuity involved is a life
<PAGE>
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3
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contingency, the risk class and the age of the annuitants will affect payments.
The amount of the fourth and each later payment will vary according to the
investment performance of the variable investment options. We calculate each
monthly payment by multiplying the number of annuity units credited by the
average annuity unit value for the second calendar month immediately preceding
the due date of the payment. We calculate the number of units by dividing the
first monthly payment by the annuity unit value for the valuation period. This
includes the due date of the first monthly payment. The average annuity unit
value is the average of the annuity unit values for the valuation periods ending
in that month. Variable income annuities may also be available by separate
prospectus through other separate accounts we offer.
ILLUSTRATION OF CHANGES IN ANNUITY UNIT VALUES
To show how we determine variable annuity payments from month to month, assume
that the account value on the date annuity payments are to begin is enough to
fund an annuity with a monthly payment of $363. Also assume that the annuity
unit value for the valuation period that includes the due date of the first
annuity payment is $1.05. The number of annuity units credited under the
contract would be 345.71 (363 divided by 1.05 = 345.71).
If the fourth monthly payment is due in March, and the average annuity unit
value for January was $1.10, the annuity payment for March would be the number
of units (345.71) times the average annuity unit value ($1.10), or $380.28. If
the average annuity unit value was $1 in February, the annuity payment for April
would be 345.71 times $1, or $345.71.
CUSTODIAN AND INDEPENDENT ACCOUNTANTS
Equitable Life is the custodian for the shares of EQ Advisors Trust owned by
Separate Account No. 49.
The financial statements of Separate Account No. 49 as at December 31, 1998 and
for the periods ended December 31, 1998 and 1997, and the consolidated financial
statements of Equitable Life as at December 31, 1998 and 1997 and for each of
the three years ended December 31, 1998 included in this SAI have been so
included in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
YIELD INFORMATION FOR THE ALLIANCE MONEY
MARKET OPTION AND ALLIANCE HIGH YIELD OPTION
ALLIANCE MONEY MARKET OPTION
The Alliance Money Market option calculates yield information for seven-day
periods. The seven-day current yield calculation is based on a hypothetical
contract with one unit at the beginning of the period. To determine the
seven-day rate of return, the net change in the unit value is computed by
subtracting the unit value at the beginning of the period from a unit value,
exclusive of capital changes, at the end of the period.
The net change is then reduced by the average administrative charge factor
(explained below). This reduction is made to recognize the deduction of the
annual administrative charge under the Flexible Premium IRA and Flexible Premium
Roth IRA contracts, which is not reflected in the unit value.
Unit values reflect all other accrued expenses of the Alliance Money Market
option but do not reflect any withdrawal charges, the optional benefit charge,
or charges for applicable taxes such as state or local premium taxes. Under the
Alliance Money Market special dollar cost averaging program, unit values also do
not reflect the mortality and expense risks charge and the administrative
charge.
The adjusted net change is divided by the unit value at the beginning of the
period to obtain what is called the adjusted base period rate of return. This
seven-day adjusted base period return is then multiplied by 365/7 to produce an
annualized seven-day current yield figure carried to the nearest one-hundredth
of one percent.
The actual dollar amount of the annual administrative charge that is deducted
from the Alliance Money Market option will vary for each contract depending upon
the percentage of the
<PAGE>
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4
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account value allocated to the Alliance Money Market option. To determine the
effect of the annual administrative charge on the yield, we start with the total
dollar amounts of the charges deducted from the option during the 12-month
period ending on the last day of the prior year. The amount is multiplied by
7/365 to produce an average administrative charge factor which is used in all
weekly yield computations for the ensuing year. The average administrative
charge factor is then divided by the number of Alliance Money Market units as of
the end of the prior calendar year, and the resulting quotient is deducted from
the net change in unit value for the seven-day period.
The effective yield is obtained by modifying the current yield to take into
account the compounding nature of the Alliance Money Market option's
investments, as follows: the unannualized adjusted base period return is
compounded by adding one to the adjusted base period return, raising the sum to
a power equal to 365 divided by 7, and subtracting one from the result, i.e.,
effective yield = (base period return + 1)[superscript: 365/7] - 1. The Alliance
Money Market option yields will fluctuate daily. Accordingly, yields for any
given period do not necessarily represent future results. In addition, the value
of units of the Alliance Money Market option will fluctuate and not remain
constant.
ALLIANCE HIGH YIELD OPTION
The Alliance High Yield option calculates yield information for 30-day periods.
The 30-day current yield calculation is based on a hypothetical contract with
one unit at the beginning of the period. To determine the 30-day rate of return,
the net change in the unit value is computed by subtracting the unit value at
the beginning of the period from a unit value, exclusive of capital changes, at
the end of the period.
The net change is then reduced by the average administrative charge factor
(explained below). This reduction is made to recognize the deduction of the
annual administrative charge under the Flexible Premium IRA and Flexible Premium
Roth IRA contracts, which is not reflected in the unit value.
Unit values reflect all other accrued expenses of the Alliance High Yield option
but do not reflect any withdrawal charges, the optional benefit charge or
charges for applicable taxes such as state or local premium taxes.
The adjusted net change is divided by the unit value at the beginning of the
period to obtain the adjusted base period rate of return. This 30-day adjusted
base period return is then multiplied by 365/30 to produce an annualized 30-day
current yield figure carried to the nearest one-hundredth of one percent.
The actual dollar amount of the annual administrative charge that is deducted
from the Alliance High Yield option will vary for each contract depending upon
the percentage of the account value allocated to the Alliance High Yield option.
To determine the effect of the annual administrative charge on the yield, we
start with the total dollar amounts of the charges deducted from the option
during the 12-month period ending on the last day of the prior year. The amount
is multiplied by 30/365 to produce an average administrative charge factor which
is used in all 30-day yield computations for the ensuing year. The average
administrative charge factor is then divided by the number of Alliance High
Yield units as of the end of the prior calendar year, and the resulting quotient
is deducted from the net change in unit value for the 30-day period.
The yield for the Alliance High Yield option will fluctuate daily. Accordingly,
the yield for any given period does not necessarily represent future results. In
addition, the value of units of the Alliance High Yield option will fluctuate
and not remain constant.
ALLIANCE MONEY MARKET OPTION AND ALLIANCE HIGH YIELD
OPTION YIELD INFORMATION
The yields for the Alliance Money Market option and Alliance High Yield option
reflect charges that are not normally reflected in the yields of other
investments. Therefore, they may be lower when compared with yields of other
investments. The yields for the Alliance Money Market option and Alliance High
Yield option should not be compared to the return on fixed rate investments
which guarantee rates of interest for specified periods, such as the fixed
maturity options. Nor should the
<PAGE>
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5
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yields be compared to the yields of money market options made available to the
general public.
The seven-day current yield for the Alliance Money Market option was 4.19% for
the period ended December 31, 1998. The effective yield for that period was
4.28%.
The 30-day current yield for the Alliance High Yield option was 12.89% for the
period ended December 31, 1998.
Because the above yields reflect the deduction of variable investment option
expenses, they are lower than the corresponding yield figures for the Alliance
Money Market and Alliance High Yield portfolios which reflect only the deduction
of EQ Advisors Trust level expenses. Because the Flexible Premium IRA and
Flexible Premium Roth IRA contracts described in the prospectus are being
offered for the first time in 1999, the above yields do not reflect the annual
administrative charge which would apply under these contracts.
LONG-TERM MARKET TRENDS
As a tool for understanding how different investment strategies may affect
long-term results, it may be useful to consider the historical returns on
different types of assets. The following charts present historical return trends
for various types of securities. The information presented, while not directly
related to the performance of the variable investment options, helps to provide
a perspective on the potential returns of different asset classes over different
periods of time. By combining this information with knowledge of your own
financial needs (for example, the length of time until you retire, your
financial requirements at retirement), you may be able to better determine how
you wish to allocate contributions among the variable investment options.
Historically, the long-term investment performance of common stocks has
generally been superior to that of long- or short-term debt securities. For
those investors who have many years until retirement, or whose primary focus is
on long-term growth potential and protection against inflation, there may be
advantages to allocating some or all of their account value to those variable
investment options that invest in stocks.
GROWTH OF $1 INVESTED ON JANUARY 1, 1958
(VALUES ARE AS OF LAST BUSINESS DAY)
[THE FOLLOWING DATA WAS REPRESENTED AS A
SHADED AREA GRAPH IN THE PRINTED DOCUMENT:]
Common Stock Inflation
1958 1.00 1.00
1959 1.12 1.01
1960 1.12 1.03
1961 1.43 1.04
1962 1.30 1.05
1963 1.60 1.07
1964 1.86 1.08
1965 2.10 1.10
1966 1.88 1.14
1967 2.34 1.17
1968 2.59 1.23
1969 2.37 1.30
1970 2.47 1.37
1971 2.82 1.42
1972 3.36 1.47
1973 2.87 1.60
1974 2.11 1.79
1975 2.89 1.92
1976 3.58 2.01
1977 3.32 2.15
1978 3.54 2.34
1979 4.19 2.65
1980 5.55 2.98
1981 5.28 3.25
1982 6.41 3.37
1983 7.86 3.50
1984 8.35 3.64
1985 11.03 3.78
1986 13.07 3.82
1987 13.75 3.99
1988 16.07 4.16
1989 21.13 4.36
1990 20.46 4.62
1991 26.74 4.76
1992 28.75 4.90
1993 31.63 5.04
1994 32.04 5.17
1995 44.03 5.30
1996 54.19 5.48
1997 72.27 5.57
1998 92.93 5.67
[LIGHT SHADED AREA = COMMON STOCK]
[DARK SHADED AREA = INFLATION]
[END OF GRAPHICALLY REPRESENTED DATA]
Source: Ibbotson Associates, Inc. See discussion and information preceding and
following chart on next page.
Over shorter periods of time, however, common stocks tend to be subject to more
dramatic changes in value than fixed-income (debt) securities. Investors who are
nearing retirement age, or who have a need to limit short-term risk, may find it
preferable to allocate a smaller percentage of their account value to those
variable investment options that invest in common stocks. The following graph
illustrates the monthly fluctuations in value of $1 based on monthly returns of
the Standard & Poor's 500 during 1990, a year that represents more typical
volatility than 1998.
<PAGE>
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6
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GROWTH OF $1 INVESTED ON JANUARY 1, 1990
(VALUES ARE AS OF LAST BUSINESS DAY)
[THE FOLLOWING DATA WAS REPRESENTED AS A BLACK AND WHITE LINE GRAPH
IN THE PRINTED DOCUMENT:]
Intermediate-Term
Govt. Bonds Common Stocks
1/1/90 1.00 1.00
Jan. 0.99 0.93
Feb. 0.99 0.94
Mar. 0.99 0.97
Apr. 0.98 0.95
May 1.01 1.04
June 1.02 1.03
July 1.04 1.03
Aug. 1.03 0.93
Sep. 1.04 0.89
Oct. 1.06 0.89
Nov. 1.08 0.94
Dec. 1.10 0.97
[END OF GRAPHICALLY REPRESENTED DATA]
Source: Ibbotson Associates, Inc. See discussion and information preceding and
following chart on next page.
The following chart illustrates average annual rates of return over selected
time periods between December 31, 1926 and December 31, 1998 for different types
of securities: common stocks, long-term government bonds, long-term corporate
bonds, intermediate-term government bonds and U.S. Treasury Bills. For
comparison purposes, the Consumer Price Index is shown as a measure of
inflation. The average annual returns shown in the chart reflect capital
appreciation and assume the reinvestment of dividends and interest. Investment
management fees or expenses and charges typically associated with deferred
annuity products, are not reflected.
The information presented is merely a summary of past experience for unmanaged
groups of securities and is neither an estimate nor guarantee of future
performance. Any investment in securities, whether equity or debt, involves
varying degrees of potential risk, in addition to offering varying degrees of
potential reward.
- --------------------------------------------------------------------------------
The rates of return illustrated do not represent returns of the variable
investment options. In addition, there is no assurance that the performance of
the variable investment options will correspond to rates of return such as those
illustrated in the chart.
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<PAGE>
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7
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MARKET TRENDS:
ILLUSTRATIVE ANNUAL RATES OF RETURN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
LONG-TERM INTERMEDIATE- U.S.
FOR THE FOLLOWING PERIODS COMMON LONG-TERM CORPORATE TERM TREASURY CONSUMER
ENDING 12/31/98: STOCKS GOVT. BONDS BONDS GOVT. BONDS BILLS PRICE INDEX
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year 28.58% 13.06% 10.76% 10.21% 4.86% 1.80%
3 Years 28.27 9.07 8.25 6.84 5.11 2.27
5 Years 24.06 9.52 8.74 6.20 4.96 2.41
10 Years 19.19 11.66 10.85 8.74 5.29 3.14
20 Years 17.75 11.14 10.86 9.85 7.17 4.53
30 Years 12.67 9.09 9.14 8.71 6.76 5.24
40 Years 12.00 7.20 7.43 7.39 5.94 4.44
50 Years 13.56 5.89 6.20 6.21 5.07 3.92
60 Years 12.49 5.43 5.62 5.50 4.26 4.19
Since 12/31/26 11.21 5.29 5.78 5.32 3.78 3.15
Inflation Adjusted Since 1926 7.82 2.08 2.55 2.11 0.62 0.00
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
SOURCE: Ibbotson, Roger G., and Rex A. Sinquefield, Stocks, Bonds, Bills, and
Inflation (SBBI), 1982, updated in Stocks, Bonds, Bills and Inflation 1998
Yearbook(TM), Ibbotson Associates, Inc., Chicago. All rights reserved.
COMMON STOCKS (S&P 500) -- Standard and Poor's Composite Index, an unmanaged
weighted index of the stock performance of 500 industrial, transportation,
utility and financial companies.
LONG-TERM GOVERNMENT BONDS -- Measured using a one-bond portfolio constructed
each year containing a bond with approximately a twenty-year maturity and a
reasonably current coupon.
LONG-TERM CORPORATE BONDS -- For the period 1969-1998, represented by the
Salomon Brothers Long-Term, High-Grade Corporate Bond Index; for the period
1946-1968, the Salomon Brothers Index was backdated using Salomon Brothers
monthly yield data and a methodology similar to that used by Salomon Brothers
for 1969-1998; for the period 1927-1945, the Standard and Poor's monthly
High-Grade Corporate Composite yield data were used, assuming a 4 percent coupon
and a twenty-year maturity.
INTERMEDIATE-TERM GOVERNMENT BONDS -- Measured by a one-bond portfolio
constructed each year containing a bond with approximately a five-year maturity.
U.S. TREASURY BILLS -- Measured by rolling over each month a one-bill portfolio
containing, at the beginning of each month, the bill having the shortest
maturity not less than one month.
INFLATION -- Measured by the Consumer Price Index for all Urban Consumers
(CPI-U), not seasonally adjusted.
<PAGE>
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8
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KEY FACTORS IN RETIREMENT PLANNING
INTRODUCTION
The Equitable Accumulator is available to help meet the retirement income and
investment needs of individuals. In assessing these retirement needs, some key
factors need to be addressed: (1) the impact of inflation on fixed retirement
incomes; (2) the importance of planning early for retirement; (3) the benefits
of tax deferral; (4) the selection of an appropriate investment strategy; and
(5) the benefit of receiving annuity payments. Each of these factors is
addressed below.
- --------------------------------------------------------------------------------
Unless otherwise noted, all of the following presentations use an assumed annual
rate of return of 7.5% compounded annually. This rate of return is for
illustrative purposes only and is not intended to represent an expected or
guaranteed rate of return for any investment vehicle.
In addition, unless otherwise noted, none of the illustrations reflect any
charges that may be applied under a particular investment vehicle. Such charges
would effectively reduce the actual return under any type of investment.
- --------------------------------------------------------------------------------
All earnings in these presentations are assumed to accumulate tax deferred
unless otherwise noted. Most programs designed for retirement savings offer tax
deferral. Monies are taxed upon withdrawal and a 10% penalty tax may apply to
premature withdrawals. Certain retirement programs prohibit early withdrawals.
See "Tax information" in the prospectus. Where taxes are taken into
consideration in these presentations, a 28% tax rate is assumed.
The source of the data used by us to compile the charts which appear in this
section (other than charts 1, 2, 3, 4 and 7) is Ibbotson Associates, Inc.,
Chicago, Stocks, Bonds, Bills and Inflation [1998] Yearbook(TM). All rights
reserved.
In reports or other communications or in advertising material, we may make use
of these or other graphic or numerical illustrations that we prepare showing the
impact of inflation, planning early for retirement, tax deferral,
diversification and other concepts important to retirement planning.
INFLATION
Inflation erodes purchasing power. This means that, in an inflationary period,
the dollar is worth less as time passes. Because many people live on a fixed
income during retirement, inflation is of particular concern to them. The charts
that follow illustrate the harmful impact of inflation over an extended period
of time. Between 1968 and 1998, the average annual inflation rate was 5.24%. As
demonstrated in Chart 1, this 5.24% annual rate of inflation would cause the
purchasing power of $35,000 to decrease to only $7,562 after 30 years.
CHART 1
[THE FOLLOWING DATA WAS REPRESENTED AS A
SHADED VERTICAL BAR GRAPH IN THE PRINTED DOCUMENT:]
(Income)
Today 35,000
10 Years 21,002
20 Years 12,602
30 Years 7,562
[END OF GRAPHICALLY REPRESENTED DATA]
In Chart 2, the impact of inflation is examined from another perspective.
Specifically, the chart illustrates the additional income needed to maintain the
purchasing power of $35,000 over a thirty-year period. Again, the 1968-1998
historical inflation rate of 5.24% is used. In this case, an additional $126,992
would be required to maintain the purchasing power of $35,000 after 30 years.
<PAGE>
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9
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CHART 2
[THE FOLLOWING DATA WAS REPRESENTED AS A SHADED
VERTICAL BAR GRAPH IN THE PRINTED DOCUMENT:]
Annual
Income Increase
Needed Needed
Today 35,000 -
10 Years 58,328 23,325
20 Years 97,204 62,204
30 Years 161,992 126,992
[END OF GRAPHICALLY REPRESENTED DATA]
STARTING EARLY
The impact of inflation highlights the need to begin a retirement program early.
The value of starting early is illustrated in the following charts.
As shown in Chart 3, if an individual makes annual contributions of $2,500 to
his or her retirement program beginning at age 30, he or she would accumulate
$414,551 by age 65 under the assumptions described earlier. If that individual
waited until age 50, he or she would only accumulate $70,193 by age 65 under the
same assumptions.
CHART 3
[THE FOLLOWING DATA WAS REPRESENTED AS A SHADED
AREA GRAPH IN THE PRINTED DOCUMENT:]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[BLACK:] Age 50 $0 $0 $0 $0 $0 $15,610 $38,020 $70,193
[WHITE:] Age 40 $0 $0 $0 $15,610 $38,020 $70,193 $116,381 $182,691
[GRAY:] Age 30 $0 $15,610 $38,020 $70,193 $116,381 $182,691 $277,886 $414,551
</TABLE>
[END OF GRAPHICALLY REPRESENTED DATA]
In Table 1, the impact of starting early is demonstrated in another format. For
example, if an individual invests $300 monthly, he or she would accumulate
$387,193 in thirty years under our assumptions. In contrast, if that individual
invested the same $300 per month for 15 years, he or she would accumulate only
$97,804 under our assumptions.
TABLE 1
- -----------------------------------------------------------------
Monthly
Contri- Year Year Year Year Year
bution 10 15 20 25 30
- -----------------------------------------------------------------
$ 20 $ 3,532 $ 6,520 $ 10,811 $ 16,970 $ 25,813
- -----------------------------------------------------------------
50 8,829 16,301 27,027 42,425 64,532
- -----------------------------------------------------------------
100 17,659 32,601 54,053 84,851 129,064
- -----------------------------------------------------------------
200 35,317 65,202 108,107 169,701 258,129
- -----------------------------------------------------------------
300 52,976 97,804 162,160 254,552 387,193
- -----------------------------------------------------------------
<PAGE>
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10
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Chart 4 presents an additional way to demonstrate the significant impact of
starting to make contributions to a retirement program earlier rather than
later. It assumes that an individual had a goal to accumulate $250,000 (pre-tax)
by age 65. If he or she starts at age 30, under our assumptions he or she could
reach the goal by making a monthly pre-tax contribution of $129 (equivalent to
$93 after taxes). The total net cost for the 30-year-old in this hypothetical
example would be $39,265. If the individual in this hypothetical example waited
until age 50, he or she would have to make a monthly pre-tax contribution of
$767 (equivalent to $552 after taxes) to attain the goal, illustrating the
importance of starting early.
CHART 4
[THE FOLLOWING DATA WAS REPRESENTED AS A BLACK AND WHITE
VERTICAL BAR GRAPH IN THE PRINTED DOCUMENT:]
GOAL: $250,000 BY AGE 65
Tax Savings
and Tax-deferred
Net Cost Earnings at 7.5%
$93 per month Age 30 $ 39,265 $ 210,735
$212 per month Age 40 63,641 186,359
$552 per month Age 50 99,383 150,617
[END OF GRAPHICALLY REPRESENTED DATA]
TAX DEFERRAL
Contributing to a retirement plan early is part of an effective strategy for
addressing the impact of inflation. Another part of such a strategy is to
carefully select the types of retirement programs in which to invest. In
deciding where to invest retirement contributions, there are three basic types
of programs.
The first type offers the most tax benefits, and therefore is potentially the
most beneficial for accumulating funds for retirement. Contributions are made
with pre-tax dollars or are tax deductible and earnings grow income tax
deferred. An example of this type of program is the deductible traditional IRA.
The second type of program also provides for tax-deferred earnings growth;
however, contributions are made with after-tax dollars. Examples of this type of
program are nondeductible traditional IRAs and non-qualified annuities.
The third approach to retirement savings is fully taxable. Contributions are
made with after-tax dollars and earnings are taxed each year. Examples of this
type of program include certificates of deposit, savings accounts, and taxable
stock, bond or mutual fund investments.
Consider an example. For the type of retirement program that offers both pre-tax
contributions and tax deferral, assume that a $2,000 annual pre-tax contribution
is made for thirty years. In this example, the retirement funds would be
$172,339 after thirty years (assuming a 7.5% rate of return, no withdrawals and
assuming the deduction of the 1.35% Separate Account daily asset charge -- but
no withdrawal charge or other charges under the contract, or trust charges to
portfolios), and such funds would be $222,309 without the effect of any charges.
Assuming a lump sum withdrawal was made in year thirty and a 28% tax bracket,
these amounts would be $124,084 and $160,062, respectively.
For the type of program that offers only tax deferral, assume an after-tax
annual contribution of $1,440 for thirty years and the same rate of return. The
after-tax contribution is derived by taxing the $2,000 pre-tax contribution,
again assuming a 28% tax bracket. In this example, the retirement funds would be
$124,084 after thirty years assuming the deduction of charges and no
withdrawals, and $160,062 without the effect of charges. Assuming a lump sum
withdrawal in year thirty, the total after-tax amount would be $101,436 with
charges deducted and $127,341 without charges as described above.
<PAGE>
- --------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the fully taxable investment, assume an after-tax contribution of $1,440 for
thirty years. Earnings are taxed annually. After thirty years, the amount of
this fully taxable investment is $108,046.
Keep in mind that taxable investments have fees and charges, too (investment
advisory fees, administrative charges, 12b-1 fees, sales loads, brokerage
commissions, etc.). We have not attempted to apply these fees and charges to the
fully taxable amounts since this is intended merely as an example of tax
deferral.
Again, it must be emphasized that the assumed rate of return of 7.5% compounded
annually used in these examples is for illustrative purposes only. It is not
intended to represent a guaranteed or expected rate of return on any type of
investment. Moreover, early withdrawals of tax-deferred investments are
generally subject to a 10% penalty tax.
INVESTMENT FOR RETIREMENT
Selecting an appropriate retirement program is clearly an important part of an
effective retirement planning strategy. Carefully choosing among available
investment options is another essential component.
During the 1968-1998 period, common stock average annual returns outperformed
the average annual returns of fixed investments such as long-term government
bonds and Treasury Bills (T-Bills). Common stocks earned an average annual
return of 12.67% over this period, in contrast to 9.09% and 6.76% for the other
two investment categories. Significantly, common stock returns also outpaced
inflation, which grew at 5.24% over this period.
The Equitable Accumulator can be an effective program for diversifying ongoing
investments between various asset categories. In addition, the Equitable
Accumulator offers special features which help address the risk associated with
timing the equity markets, such as dollar cost averaging. By transferring the
same dollar amount each month from the Alliance Money Market option to other
variable investment options, dollar cost averaging attempts to shield your
investment from short-term price fluctuations. This, however, does not assure a
profit or protect against a loss in declining markets.
THE BENEFIT OF ANNUITIZATION
An individual may shift the risk of outliving his or her principal by electing a
lifetime income annuity. See "Choosing your annuity payout options" under
"Accessing your money" in the prospectus. Chart 5 below shows the monthly income
that can be generated under various forms of life annuities, as compared to
receiving level payments of interest only or principal and interest from the
investment. Calculations in the Chart are based on the following assumption: a
$100,000 contribution was made at one of the ages shown, annuity payments begin
immediately, and a 5% annuitization interest rate is used. For purposes of this
example, principal and interest are paid out on a level basis over 15 years. In
the case of the interest-only scenario, the principal is always available and
may be left to other individuals at death. Under the principal and interest
scenario, a portion of the principal will be left at death, assuming the
individual dies within the 15-year period. In contrast, under the life annuity
scenarios, there is no residual amount left.
- ---------------------------------------------------------------------------
PRINCIPAL JOINT AND SURVIVOR*
AND -------------------------------
INTEREST INTEREST 50% 66.67% 100%
ONLY FOR SINGLE TO TO TO
ANNUITANT FOR LIFE 15 YEARS LIFE SURVIVOR SURVIVOR SURVIVOR
- ---------------------------------------------------------------------------
Male 65 $401 $785 $ 617 $560 $544 $513
Male 70 401 785 685 609 588 549
Male 75 401 785 771 674 646 598
Male 80 401 785 888 760 726 665
Male 85 401 785 1,045 878 834 757
- ----------------------
The numbers are based on 5% interest compounded annually and the 1983 Individual
Annuity Mortality Table "a" projected with modified Scale G. Annuity purchase
rates available at annuitization may vary, depending primarily on the
annuitization interest rate, which may not be less than an annual rate of 2.5%.
* The joint and survivor annuity forms are based on male and female annuitants
of the same age.
<PAGE>
- --------------------------------------------------------------------------------
12
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
The consolidated financial statements of Equitable Life included herein should
be considered only as bearing upon the ability of Equitable Life to meet its
obligations under the contracts.
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants ...................................... FS-2
Financial Statements:
Statements of Assets and Liabilities, December 31, 1998 .............. FS-3
Statements of Operations for the Year Ended December 31, 1998 ........ FS-7
Statements of Changes in Net Assets for the Years Ended December 31,
1998 and 1997 ...................................................... FS-10
Notes to Financial Statements ........................................ FS-15
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants ...................................... F-1
Consolidated Financial Statements:
Consolidated Balance Sheets, December 31, 1998 and 1997 .............. F-2
Consolidated Statements of Earnings, Years Ended December 31, 1998,
1997 and 1996 ..................................................... F-3
Consolidated Statements of Shareholder's Equity, Years Ended December
31, 1998, 1997 and 1996 ........................................... F-4
Consolidated Statements of Cash Flows, Years Ended December 31, 1998,
1997 and 1996 ..................................................... F-5
Notes to Consolidated Financial Statements ........................... F-6
FS-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Equitable Life Assurance Society of the United States
and Contractowners of Separate Account No. 49
of The Equitable Life Assurance Society of the United States
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of the Alliance Money Market Fund,
Alliance High Yield Fund, Alliance Common Stock Fund, Alliance Aggressive Stock
Fund, Alliance Small Cap Growth Fund, Alliance Global Fund, Alliance Growth
Investors Fund, Alliance Equity Index Fund ("Hudson River Trust funds") and the
BT Equity 500 Index Fund, BT Small Company Index Fund, BT International Equity
Index Fund, EQ/Evergreen Fund, EQ/Evergreen Foundation Fund, JPM Core Bond Fund,
Lazard Large Cap Value Fund, Lazard Small Cap Value Fund, Merrill Lynch Basic
Value Equity Fund, Merrill Lynch World Strategy Fund, MFS Research Fund, MFS
Emerging Growth Companies Fund, MFS Growth With Income Fund, Morgan Stanley
Emerging Markets Equity Fund, EQ/Putnam Growth & Income Value Fund, EQ/Putnam
Investors Growth Fund and EQ/Putnam International Equity Fund ("EQ Advisors
Trust funds"), separate investment funds of The Equitable Life Assurance Society
of the United States ("Equitable Life") Separate Account No. 49 at December 31,
1998 and the results of each of their operations and changes in each of their
net assets for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Equitable Life's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of shares owned in The Hudson River Trust and in The EQ Advisors
Trust at December 31, 1998 with the transfer agent, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 8, 1999
FS-2
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE ALLIANCE ALLIANCE
MONEY ALLIANCE COMMON AGGRESSIVE SMALL CAP ALLIANCE
MARKET HIGH STOCK STOCK GROWTH GLOBAL
FUND YIELD FUND FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $225,580,555 ...................... $224,505,500
168,101,566 ...................... $143,068,233
406,761,148 ...................... $430,175,252
91,972,683 ...................... $ 85,021,814
78,319,196 ...................... $ 75,812,281
12,469,240 ...................... $ 14,015,688
Receivable for Trust shares sold ........... -- -- -- -- -- --
Receivable for policy-related transactions . 4,332,935 383,395 2,667,305 424,488 367,423 --
------------ ------------ ------------ ------------ ------------ ------------
Total Assets ............................... 228,838,435 143,451,628 432,842,557 85,446,302 76,179,704 14,015,688
------------ ------------ ------------ ------------ ------------ ------------
LIABILITIES
Payable for policy-related transactions .... -- -- -- -- -- 2,491
Payable for Trust shares purchased ......... 4,330,788 398,221 2,690,644 431,647 377,229 225
Amount retained by Equitable Life in
Separate Account No. 49 (Note 5) ........ 56,711 12,131 29,663 19,328 14,543 13,884
------------ ------------ ------------ ------------ ------------ ------------
Total Liabilities .......................... 4,387,499 410,352 2,720,307 450,975 391,772 16,600
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS .. $224,450,936 $143,041,276 $430,122,250 $ 84,995,327 $ 75,787,932 $ 13,999,088
============ ============ ============ ============ ============ ============
</TABLE>
- ----------
See Notes to Financial Statements.
FS-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE BT
GROWTH EQUITY BT SMALL INTERNATIONAL EQ/
INVESTORS INDEX BT EQUITY 500 COMPANY EQUITY INDEX EVERGREEN
FUND FUND INDEX FUND INDEX FUND FUND FUND(a)
----------- ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $ 17,737,959 ...................... $19,586,712
5,140 ...................... $7,810
148,924,562 ...................... $164,809,643
28,054,963 ...................... $27,509,854
38,187,791 ...................... $ 42,725,945
1,000 ...................... $ 1,000
Receivable for Trust shares sold ........... -- -- -- -- -- --
Receivable for policy-related transactions . -- -- 1,922,002 140,715 204,947 --
----------- ------ ------------ ----------- ------------ ------------
Total Assets ............................... 19,586,712 7,810 166,731,645 27,650,569 42,930,892 1,000
----------- ------ ------------ ----------- ------------ ------------
LIABILITIES
Payable for policy-related transactions .... 3,786 -- -- -- -- --
Payable for Trust shares purchased ......... 225 -- 1,922,001 140,715 204,947 --
Amount retained by Equitable Life in
Separate Account No. 49 (Note 5) ........ 21,482 7,810 451,887 9,795,374 18,049,105 1,000
----------- ------ ------------ ----------- ------------ ------------
Total Liabilities .......................... 25,493 7,810 2,373,888 9,936,089 18,254,052 1,000
----------- ------ ------------ ----------- ------------ ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS .. $19,561,219 -- $164,357,757 $17,714,480 $ 24,676,840 --
=========== ====== ============ =========== ============ ============
</TABLE>
- ----------
See Notes to Financial Statements.
(a) December 31, 1998 initial capital was received.
FS-4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MERRILL
EQ/ MERRILL LYNCH
EVERGREEN LAZARD LAZARD LYNCH BASIC WORLD MFS
FOUNDATION JPM CORE LARGE CAP SMALL CAP VALUE EQUITY STRATEGY RESEARCH
FUND(a) BOND FUND VALUE FUND VALUE FUND FUND FUND FUND
------ ------------ ----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $ 1,000 ..................... $1,000
103,171,703 ..................... $103,323,470
68,051,738 ..................... $74,639,434
52,206,882 ..................... $50,968,336
56,285,600 ..................... $56,061,240
7,720,878 ..................... $7,859,687
192,883,837 ..................... $220,852,728
Receivable for Trust shares sold .......... -- -- -- -- -- 79,629 --
Receivable for policy-related transactions. -- 1,017,157 571,212 229,801 255,851 -- 1,280,613
------ ------------ ----------- ----------- ----------- ---------- ------------
Total Assets .............................. 1,000 104,340,627 75,210,646 51,198,137 56,317,091 7,939,316 222,133,341
------ ------------ ----------- ----------- ----------- ---------- ------------
LIABILITIES
Payable for policy-related transactions ... -- -- -- -- -- 79,629 --
Payable for Trust shares purchased ........ -- 1,007,157 571,212 229,801 259,993 -- 1,284,748
Amount retained by Equitable Life in
Separate Account No. 49 (Note 5) ....... 1,000 5,064,229 3,198,959 4,194,228 37,340 17,784 84,931
------ ------------ ----------- ----------- ----------- ---------- ------------
Total Liabilities ......................... 1,000 6,071,386 3,770,171 4,424,029 297,333 97,413 1,369,679
------ ------------ ----------- ----------- ----------- ---------- ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS.. -- $ 98,269,241 $71,440,475 $46,774,108 $56,019,758 $7,841,903 $220,763,662
====== ============ =========== =========== =========== ========== ============
</TABLE>
- ----------
See Notes to Financial Statements.
(a) December 31, 1998 initial capital was received.
FS-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF ASSETS AND LIABILITIES (CONCLUDED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MFS MORGAN
EMERGING MFS STANLEY EQ/PUTNAM
GROWTH GROWTH EMERGING GROWTH & EQ/PUTNAM EQ/PUTNAM
COMPANIES WITH INCOME MARKETS INCOME VALUE INVESTORS INTERNATIONAL
FUND FUND(a) EQUITY FUND FUND GROWTH FUND EQUITY FUND
------------ ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of the Trusts --
at market value (Note 1)
Cost: $125,337,823 .................... $152,938,200
1,000 .................... $1,000
11,094,471 .................... $ 11,598,378
306,939,965 .................... $327,783,967
144,081,047 .................... $174,979,286
130,785,497 .................... $143,712,431
Receivable for Trust shares sold ......... -- -- -- -- -- --
Receivable for policy-related
transactions .......................... 462,302 -- 93,637 1,246,390 1,644,116 419,401
------------ ------ ------------ ------------ ------------ ------------
Total Assets ............................. 153,400,502 1,000 11,692,015 329,030,357 176,623,402 144,131,832
------------ ------ ------------ ------------ ------------ ------------
LIABILITIES
Payable for policy-related transactions .. -- -- -- -- -- --
Payable for Trust shares purchased ....... 466,138 -- 92,621 1,250,224 1,648,214 453,401
Amount retained by Equitable Life in
Separate Account No. 49 (Note 5) ...... 99,138 1,000 26,825 145,459 335,744 108,935
------------ ------ ------------ ------------ ------------ ------------
Total Liabilities ........................ 565,276 1,000 119,446 1,395,683 1,983,958 562,336
------------ ------ ------------ ------------ ------------ ------------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS. $152,835,226 -- $ 11,572,569 $327,634,674 $174,639,444 $143,569,496
============ ====== ============ ============ ============ ============
</TABLE>
- ----------
See Notes to Financial Statements.
(a) December 31, 1998 initial capital was received.
FS-6
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE ALLIANCE
MONEY ALLIANCE COMMON AGGRESSIVE
MARKET HIGH STOCK STOCK
FUND YIELD FUND FUND FUND
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts ..................................... $ 6,709,792 $ 11,775,522 $ 952,116 $ 275,359
Expenses (Note 3):
Asset-based charges ........................................... 1,118,065 1,381,303 3,268,314 855,772
----------- ------------ ----------- -----------
NET INVESTMENT INCOME (LOSS) ........................................ 5,591,727 10,394,219 (2,316,198) (580,413)
----------- ------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............................. 303,090 (258,448) 277,445 (105,214)
Realized gain distribution from the Trusts ....................... 5,637 2,718,464 49,605,206 3,824,065
----------- ------------ ----------- -----------
NET REALIZED GAIN (LOSS) ............................................ 308,727 2,460,016 49,882,651 3,718,851
----------- ------------ ----------- -----------
Unrealized appreciation (depreciation) on investments:
Beginning of period ........................................... (404,121) (1,398,277) 4,116,666 (2,440,983)
End of period ................................................. (1,075,056) (25,033,332) 23,414,104 (6,950,869)
----------- ------------ ----------- -----------
Change in unrealized appreciation (depreciation) during
the period .................................................... (670,935) (23,635,055) 19,297,438 (4,509,886)
----------- ------------ ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .............. (362,208) (21,175,039) 69,180,089 (791,035)
----------- ------------ ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..... $ 5,229,519 $(10,780,820) $66,863,891 $(1,371,448)
=========== ============ =========== ===========
<CAPTION>
ALLIANCE ALLIANCE
SMALL ALLIANCE GROWTH
CAP GLOBAL INVESTORS
GROWTH FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts ..................................... $ -- $ 136,475 $ 338,347
Expenses (Note 3):
Asset-based charges ........................................... 717,685 160,655 224,047
----------- ---------- ----------
NET INVESTMENT INCOME (LOSS) ........................................ (717,685) (24,180) 114,300
----------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............................. 9,425 224,358 342,546
Realized gain distribution from the Trusts ....................... -- 892,450 1,579,446
----------- ---------- ----------
NET REALIZED GAIN (LOSS) ............................................ 9,425 1,116,808 1,921,992
----------- ---------- ----------
Unrealized appreciation (depreciation) on investments:
Beginning of period ........................................... (532,878) 221,064 906,877
End of period ................................................. (2,506,915) 1,546,448 1,848,754
----------- ---------- ----------
Change in unrealized appreciation (depreciation) during
the period .................................................... (1,974,037) 1,325,384 941,877
----------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .............. (1,964,612) 2,442,192 2,863,869
----------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..... $(2,682,297) $2,418,012 $2,978,169
=========== ========== ==========
</TABLE>
- ----------
See Notes to Financial Statements.
FS-7
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
BT SMALL BT INTER-
ALLIANCE COMPANY NATIONAL
EQUITY INDEX BT EQUITY 500 INDEX EQUITY INDEX
FUND INDEX FUND FUND FUND
------------ ----------- --------- ----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts ..................................... $ 63 $ 768,510 $ 188,913 $ 536,259
Expenses (Note 3):
Asset-based charges ........................................... -- 738,411 86,164 122,054
------ ----------- --------- ----------
NET INVESTMENT INCOME (LOSS) ........................................ 63 30,099 102,749 414,205
------ ----------- --------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............................. -- 579,907 (196,585) (487,255)
Realized gain distribution from the Trusts ....................... 2 -- 359,171 --
------ ----------- --------- ----------
NET REALIZED GAIN (LOSS) ............................................ 2 579,907 162,586 (487,255)
------ ----------- --------- ----------
Unrealized appreciation (depreciation) on investments:
Beginning of period ........................................... 1,039 -- -- --
End of period ................................................. 2,670 15,885,081 (545,108) 4,538,154
------ ----------- --------- ----------
Change in unrealized appreciation (depreciation) during
the period .................................................... 1,631 15,885,081 (545,108) 4,538,154
------ ----------- --------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .............. 1,633 16,464,988 (382,522) 4,050,899
------ ----------- --------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..... $1,696 $16,495,087 $(279,773) $4,465,104
====== =========== ========= ==========
<CAPTION>
LAZARD LAZARD
JPM CORE LARGE CAP SMALL CAP
BOND VALUE VALUE
FUND FUND FUND
----------- ----------- -----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts ..................................... $ 1,942,258 $ 355,224 $ 135,255
Expenses (Note 3):
Asset-based charges ........................................... 428,389 332,634 248,380
----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) ........................................ 1,513,869 22,590 (113,125)
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............................. (6,592) (156,900) (707,142)
Realized gain distribution from the Trusts ....................... 1,048,914 -- --
----------- ----------- -----------
NET REALIZED GAIN (LOSS) ............................................ 1,042,322 (156,900) (707,142)
----------- ----------- -----------
Unrealized appreciation (depreciation) on investments:
Beginning of period ........................................... -- -- --
End of period ................................................. 151,767 6,587,696 (1,238,546)
----------- ----------- -----------
Change in unrealized appreciation (depreciation) during
the period .................................................... 151,767 6,587,696 (1,238,546)
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .............. 1,194,089 6,430,796 (1,945,688)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..... $ 2,707,958 $ 6,453,386 $(2,058,813)
=========== =========== ===========
</TABLE>
- ----------
See Notes to Financial Statements.
FS-8
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF OPERATIONS (CONCLUDED)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
MERRILL MERRILL MFS
LYNCH LYNCH EMERGING
BASIC WORLD MFS GROWTH
VALUE EQUITY STRATEGY RESEARCH COMPANIES
FUND FUND FUND FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts ..................................... $ 523,399 $ 56,946 $ 553,891 $ 2,768
Expenses (Note 3):
Asset-based charges ........................................... 433,649 73,191 1,646,014 1,102,263
---------- --------- ----------- -----------
NET INVESTMENT INCOME (LOSS) ........................................ 89,750 (16,245) (1,092,123) (1,099,495)
---------- --------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............................. (125,370) (47,109) 28,858 305,790
Realized gain distribution from the Trusts ....................... 1,814,918 -- -- --
---------- --------- ----------- -----------
NET REALIZED GAIN (LOSS) ............................................ 1,689,548 (47,109) 28,858 305,790
---------- --------- ----------- -----------
Unrealized appreciation (depreciation) on investments:
Beginning of period ........................................... (304,932) (116,763) 6,734 (858,314)
End of period ................................................. (224,361) 138,809 27,968,891 27,600,377
---------- --------- ----------- -----------
Change in unrealized appreciation (depreciation) during
the period .................................................... 80,571 255,572 27,962,157 28,458,691
---------- --------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .............. 1,770,119 208,463 27,991,015 28,764,481
---------- --------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..... $1,859,869 $ 192,218 $26,898,892 $27,664,986
========== ========= =========== ===========
<CAPTION>
MORGAN
STANLEY EQ/PUTNAM EQ/
EMERGING GROWTH & EQ/PUTNAM PUTNAM
MARKETS INCOME INVESTORS INTERNATIONAL
EQUITY VALUE GROWTH EQUITY
FUND FUND FUND FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from the Trusts ..................................... $ 38,906 $ 2,771,619 $ 111,391 $ 42,947
Expenses (Note 3):
Asset-based charges ........................................... 74,659 2,560,202 1,074,066 1,173,602
----------- ----------- ----------- -----------
NET INVESTMENT INCOME (LOSS) ........................................ (35,753) 211,417 (962,675) (1,130,655)
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............................. (2,128,521) 303,706 2,190,787 1,085,258
Realized gain distribution from the Trusts ....................... -- 2,503,287 2 --
----------- ----------- ----------- -----------
NET REALIZED GAIN (LOSS) ............................................ (2,128,521) 2,806,993 2,190,789 1,085,258
----------- ----------- ----------- -----------
Unrealized appreciation (depreciation) on investments:
Beginning of period ........................................... -- 1,251,440 2,286,852 (355,156)
End of period ................................................. 503,907 20,844,002 30,898,239 12,926,933
----------- ----------- ----------- -----------
Change in unrealized appreciation (depreciation) during
the period .................................................... 503,907 19,592,562 28,611,387 13,282,089
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .............. (1,624,614) 22,399,555 30,802,176 14,367,347
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ..... $(1,660,367) $22,610,972 $29,839,501 $13,236,692
=========== =========== =========== ===========
</TABLE>
- ----------
See Notes to Financial Statements.
FS-9
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ALLIANCE MONEY ALLIANCE HIGH
MARKET FUND YIELD FUND
---------------------------- ---------------------------
1998 1997 1998 1997
------------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) .............................. $ 5,591,727 $ 1,422,874 $ 10,394,219 $ 1,935,418
Net realized gain (loss) .................................. 308,727 30,245 2,460,016 1,930,121
Change in unrealized appreciation (depreciation) of
investments ............................................ (670,935) (374,038) (23,635,055) (1,368,712)
------------ ------------ ------------ -----------
Net increase (decrease) in net assets from
operations ............................................. 5,229,519 1,079,081 (10,780,820) 2,496,827
------------ ------------ ------------ -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions .......................................... 308,003,451 104,148,675 101,309,392 42,971,395
Transfers from other Funds and Guaranteed Interest
Rate Account (Note 1) ............................... 117,047,248 11,039,704 28,971,750 6,495,053
------------ ------------ ------------ -----------
Total ............................................... 425,050,699 115,188,379 130,281,142 49,466,448
------------ ------------ ------------ -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions .................... 7,436,997 670,360 3,457,632 327,004
Withdrawal and administrative charges ..................... 104,554 93,894 173,986 117,245
Transfers to other Funds and Guaranteed Interest
Rate Account (Note 1) .................................. 265,941,784 50,981,067 23,920,120 1,028,028
------------ ------------ ------------ -----------
Total .................................................. 273,483,335 51,745,321 27,551,738 1,472,277
------------ ------------ ------------ -----------
Net increase in net assets from Contractowners
transactions ........................................... 151,567,364 63,443,058 102,729,404 47,994,171
------------ ------------ ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 49 (NOTE 5) ........ 3,172 (2,952) (2,579) (28,875)
------------ ------------ ------------ -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS ............................................ 156,800,055 64,519,187 91,946,005 50,462,123
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING
OF PERIOD ................................................. 67,650,881 3,131,694 51,095,271 633,148
------------ ------------ ------------ -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF
PERIOD .................................................... $224,450,936 $ 67,650,881 $143,041,276 $51,095,271
============ ============ ============ ===========
<CAPTION>
ALLIANCE COMMON ALLIANCE AGGRESSIVE
STOCK FUND STOCK FUND
---------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) .............................. $ (2,316,198) $ (480,576) $ (580,413) $ (277,123)
Net realized gain (loss) .................................. 49,882,651 9,497,894 3,718,851 3,898,956
Change in unrealized appreciation (depreciation) of
investments ............................................ 19,297,438 4,187,658 (4,509,886) (2,412,173)
------------ ------------ ----------- -----------
Net increase (decrease) in net assets from
operations ............................................. 66,863,891 13,204,976 (1,371,448) 1,209,660
------------ ------------ ----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions .......................................... 225,245,017 107,212,947 41,444,328 42,250,282
Transfers from other Funds and Guaranteed Interest
Rate Account (Note 1) ............................... 43,818,466 11,247,312 9,547,092 6,703,750
------------ ------------ ----------- -----------
Total ............................................... 269,063,483 118,460,259 50,991,420 48,954,032
------------ ------------ ----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions .................... 9,862,986 744,150 1,928,655 534,703
Withdrawal and administrative charges ..................... 438,917 428,790 148,718 190,057
Transfers to other Funds and Guaranteed Interest
Rate Account (Note 1) .................................. 22,819,554 4,156,366 9,292,218 3,266,536
------------ ------------ ----------- -----------
Total .................................................. 33,121,457 5,329,306 11,369,591 3,991,296
------------ ------------ ----------- -----------
Net increase in net assets from Contractowners
transactions ........................................... 235,942,026 113,130,953 39,621,829 44,962,736
------------ ------------ ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 49 (NOTE 5) ........ (207,816) (431) 3,308 8,081
------------ ------------ ----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS ............................................ 302,598,101 126,335,498 38,253,689 46,180,477
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING
OF PERIOD ................................................. 127,524,149 1,188,651 46,741,638 561,161
------------ ------------ ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF
PERIOD .................................................... $430,122,250 $127,524,149 $84,995,327 $46,741,638
============ ============ =========== ===========
</TABLE>
- ----------
See Notes to Financial Statements.
FS-10
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ALLIANCE SMALL CAP
GROWTH FUND(a) ALLIANCE GLOBAL FUND
----------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) .............................. $ (717,685) $ (103,753) $ (24,180) $ 94,464
Net realized gain (loss) .................................. 9,425 761,781 1,116,808 986,714
Change in unrealized appreciation (depreciation)
of investments ......................................... (1,974,037) (532,878) 1,325,384 224,896
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations ..... (2,682,297) 125,150 2,418,012 1,306,074
----------- ----------- ----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions .......................................... 43,397,274 30,538,328 416,404 11,035,782
Transfers from other Funds and Guaranteed
Interest Rate Account (Note 1) ...................... 12,800,367 2,845,702 712,308 2,538,990
----------- ----------- ----------- -----------
Total ............................................... 56,197,641 33,384,030 1,128,712 13,574,772
----------- ----------- ----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions .................... 1,391,608 77,516 507,389 303,394
Withdrawal and administrative charges ..................... 86,076 30,958 47,663 121,147
Transfers to other Funds and Guaranteed Interest Rate
Account (Note 1) ....................................... 8,974,764 672,314 1,808,151 1,825,805
----------- ----------- ----------- -----------
Total .................................................. 10,452,448 780,788 2,363,203 2,250,346
----------- ----------- ----------- -----------
Net increase in net assets from Contractowners
transactions ........................................... 45,745,193 32,603,242 (1,234,491) 11,324,426
----------- ----------- ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE
IN SEPARATE ACCOUNT NO.49
(NOTE 5) .................................................. 2,485 (5,841) (24,608) (27,562)
----------- ----------- ----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS ............................................ 43,065,381 32,722,551 1,158,913 12,602,938
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING
OF PERIOD ................................................. 32,722,551 -- 12,840,175 237,237
----------- ----------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD ............................................. $75,787,932 $32,722,551 $13,999,088 $12,840,175
=========== =========== =========== ===========
<CAPTION>
ALLIANCE GROWTH ALLIANCE EQUITY
INVESTORS FUND INDEX FUND(a)
----------------------------- ---------------------
1998 1997 1998 1997
----------- ----------- ------- -------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) .............................. $ 114,300 $ 192,366 $ 63 $ 52
Net realized gain (loss) .................................. 1,921,992 1,119,576 2 23
Change in unrealized appreciation (depreciation)
of investments ......................................... 941,877 912,616 1,631 1,039
----------- ----------- ------- -------
Net increase (decrease) in net assets from operations ..... 2,978,169 2,224,558 1,696 1,114
----------- ----------- ------- -------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions .......................................... 979,342 14,900,369 -- --
Transfers from other Funds and Guaranteed
Interest Rate Account (Note 1) ...................... 861,920 2,566,982 -- --
----------- ----------- ------- -------
Total ............................................... 1,841,262 17,467,351 -- --
----------- ----------- ------- -------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions .................... 692,359 160,368 -- --
Withdrawal and administrative charges ..................... 62,534 87,200 -- --
Transfers to other Funds and Guaranteed Interest Rate
Account (Note 1) ....................................... 2,475,681 1,833,943 -- --
----------- ----------- ------- -------
Total .................................................. 3,230,574 2,081,511 -- --
----------- ----------- ------- -------
Net increase in net assets from Contractowners
transactions ........................................... (1,389,312) 15,385,840 -- --
----------- ----------- ------- -------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE
IN SEPARATE ACCOUNT NO.49
(NOTE 5) .................................................. (27,724) (29,804) (1,696) (1,114)
----------- ----------- ------- -------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS ............................................ 1,561,133 17,500,594 -- --
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING
OF PERIOD ................................................. 18,000,086 419,492 -- --
----------- ----------- ------- -------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD ............................................. $19,561,219 $18,000,086 -- --
=========== =========== ======= =======
</TABLE>
- ----------
(a) Commenced operations on May 1, 1997.
See Notes to Financial Statements.
FS-11
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
BT SMALL BT
COMPANY INTERNATIONAL
BT EQUITY 500 INDEX EQUITY INDEX
INDEX FUND(a) FUND(a) FUND(a)
------------- ------------ -------------
1998 1998 1998
------------- ------------ -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) .................................. $ 30,099 $ 102,749 $ 414,205
Net realized gain (loss) ...................................... 579,907 162,586 (487,255)
Change in unrealized appreciation (depreciation) of
investments ................................................ 15,885,081 (545,108) 4,538,154
------------ ----------- -----------
Net increase (decrease) in net assets from operations ......... 16,495,087 (279,773) 4,465,104
------------ ----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions .............................................. 137,742,388 15,585,722 20,850,190
Transfers from other Funds and Guaranteed Interest Rate
Account (Note 1) ........................................ 28,395,723 4,179,014 16,741,163
------------ ----------- -----------
Total ................................................... 166,138,111 19,764,736 37,591,353
------------ ----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions ........................ 1,738,442 120,912 219,542
Withdrawal and administrative charges ......................... 14,899 1,784 2,627
Transfers to other Funds and Guaranteed Interest Rate
Account (Note 1) ........................................... 15,478,264 1,873,434 14,133,716
------------ ----------- -----------
Total ...................................................... 17,231,605 1,996,130 14,355,885
------------ ----------- -----------
Net increase in net assets from Contractowners transactions ... 148,906,506 17,768,606 23,235,468
------------ ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE
IN SEPARATE ACCOUNT NO. 49 (NOTE 5) ........................... (1,043,836) 225,647 (3,023,732)
------------ ----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS ................................................ 164,357,757 17,714,480 24,676,840
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF
PERIOD ....................................................... -- -- --
------------ ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD ......... $164,357,757 $17,714,480 $24,676,840
============ =========== ===========
<CAPTION>
LAZARD LAZARD
JPM CORE LARGE CAP SMALL CAP
BOND VALUE VALUE
FUND(a) FUND(a) FUND(a)
------------ ----------- -----------
1998 1998 1998
------------ ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) .................................. $ 1,513,869 $ 22,590 $ (113,125)
Net realized gain (loss) ...................................... 1,042,322 (156,900) (707,142)
Change in unrealized appreciation (depreciation) of
investments ................................................ 151,767 6,587,696 (1,238,546)
------------ ----------- -----------
Net increase (decrease) in net assets from operations ......... 2,707,958 6,453,386 (2,058,813)
------------ ----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions .............................................. 73,102,741 60,150,648 44,673,767
Transfers from other Funds and Guaranteed Interest Rate
Account (Note 1) ........................................ 37,948,208 9,859,740 8,257,562
------------ ----------- -----------
Total ................................................... 111,050,949 70,010,388 52,931,329
------------ ----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions ........................ 1,038,633 586,925 436,736
Withdrawal and administrative charges ......................... 18,447 5,537 5,989
Transfers to other Funds and Guaranteed Interest Rate
Account (Note 1) ........................................... 13,947,945 3,799,798 4,021,584
------------ ----------- -----------
Total ...................................................... 15,005,025 4,392,260 4,464,309
------------ ----------- -----------
Net increase in net assets from Contractowners transactions ... 96,045,924 65,618,128 48,467,020
------------ ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE LIFE
IN SEPARATE ACCOUNT NO. 49 (NOTE 5) ........................... (484,641) (631,039) 365,901
------------ ----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS ................................................ 98,269,241 71,440,475 46,774,108
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING OF
PERIOD ....................................................... -- -- --
------------ ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF PERIOD ......... $ 98,269,241 $71,440,475 $46,774,108
============ =========== ===========
</TABLE>
- ----------
(a) Commenced operations on January 1, 1998.
See Notes to Financial Statements.
FS-12
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MERRILL LYNCH
BASIC VALUE MERRILL LYNCH
EQUITY WORLD STRATEGY
FUND(a) FUND(a)
-------------------------- ------------------------
1998 1997 1998 1997
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) ........................ $ 89,750 $ 41,169 $ (16,245) $ 7,480
Net realized gain (loss) ............................ 1,689,548 62,644 (47,109) 31,803
Change in unrealized appreciation (depreciation)
of investments ................................... 80,571 (304,932) 255,572 (116,763)
----------- ----------- ---------- ----------
Net increase (decrease) in net assets from
operations ....................................... 1,859,869 (201,119) 192,218 (77,480)
----------- ----------- ---------- ----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions .................................... 38,734,895 13,505,624 4,563,199 3,230,838
Transfers from other Funds and Guaranteed Interest
Rate Account (Note 1) ......................... 4,663,103 416,478 710,326 74,498
----------- ----------- ---------- ----------
Total ......................................... 43,397,998 13,922,102 5,273,525 3,305,336
----------- ----------- ---------- ----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions .............. 524,761 1,398 157,552 583
Withdrawal and administrative charges ............... 54,926 11,188 10,898 3,955
Transfers to other Funds and Guaranteed Interest
Rate Account (Note 1) ............................ 2,334,323 7,058 627,786 44,263
----------- ----------- ---------- ----------
Total ............................................ 2,914,010 19,644 796,236 48,801
----------- ----------- ---------- ----------
Net increase in net assets from Contractowners
transactions ..................................... 40,483,988 13,902,458 4,477,289 3,256,535
----------- ----------- ---------- ----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 49 (NOTE 5) .. (25,519) 81 (6,676) 17
----------- ----------- ---------- ----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS ...................................... 42,318,338 13,701,420 4,662,831 3,179,072
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD ................................. 13,701,420 -- 3,179,072 --
----------- ----------- ---------- ----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD ...................................... $56,019,758 $13,701,420 $7,841,903 $3,179,072
=========== =========== ========== ==========
<CAPTION>
MORGAN
STANLEY
MFS EMERGING EMERGING
MFS GROWTH MARKETS
RESEARCH COMPANIES EQUITY
FUND(a) FUND(a) FUND(b)
-------------------------- --------------------------- -----------
1998 1997 1998 1997 1998
------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) ........................ $ (1,092,123) $ (81,799) $ (1,099,495) $ (69,045) $ (35,753)
Net realized gain (loss) ............................ 28,858 545,158 305,790 1,070,973 (2,128,521)
Change in unrealized appreciation (depreciation)
of investments ................................... 27,962,157 6,734 28,458,691 (858,314) 503,907
------------ ----------- ------------ ----------- -----------
Net increase (decrease) in net assets from
operations ....................................... 26,898,892 470,093 27,664,986 143,614 (1,660,367)
------------ ----------- ------------ ----------- -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions .................................... 121,807,223 59,357,999 76,639,008 40,227,730 11,589,726
Transfers from other Funds and Guaranteed Interest
Rate Account (Note 1) ......................... 23,365,292 5,000,723 25,862,262 4,340,105 12,891,618
------------ ----------- ------------ ----------- -----------
Total ......................................... 145,172,515 64,358,722 102,501,270 44,567,835 24,481,344
------------ ----------- ------------ ----------- -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions .............. 3,681,079 183,523 2,376,229 341,045 83,958
Withdrawal and administrative charges ............... 208,060 85,087 133,480 44,128 1,595
Transfers to other Funds and Guaranteed Interest
Rate Account (Note 1) ............................ 10,792,798 1,051,389 16,923,642 2,114,159 11,162,025
------------ ----------- ------------ ----------- -----------
Total ............................................ 14,681,937 1,319,999 19,433,351 2,499,332 11,247,578
------------ ----------- ------------ ----------- -----------
Net increase in net assets from Contractowners
transactions ..................................... 130,490,578 63,038,723 83,067,919 42,068,503 13,233,766
------------ ----------- ------------ ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 49 (NOTE 5) .. (131,281) (3,343) (106,304) (3,492) (830)
------------ ----------- ------------ ----------- -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS ...................................... 157,258,189 63,505,473 110,626,601 42,208,625 11,572,569
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
BEGINNING OF PERIOD ................................. 63,505,473 -- 42,208,625 -- --
------------ ----------- ------------ ----------- -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS,
END OF PERIOD ...................................... $220,763,662 $63,505,473 $152,835,226 $42,208,625 $11,572,569
============ =========== ============ =========== ===========
</TABLE>
- ----------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on December 31, 1997.
See Notes to Financial Statements.
FS-13
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQ/PUTNAM
GROWTH & INCOME EQ/PUTNAM
VALUE INVESTORS GROWTH
FUND(a) FUND(a)
---------------------------- -----------------------------
1998 1997 1998 1997
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) ........................ $ 211,417 $ 119,673 $ (962,675) $ (36,575)
Net realized gain (loss) ............................ 2,806,993 391,558 2,190,789 364,091
Change in unrealized appreciation (depreciation)
of investments ................................... 19,592,562 1,251,440 28,611,387 2,286,852
------------ ----------- ------------ -----------
Net increase (decrease) in net assets from
operations ....................................... 22,610,972 1,762,671 29,839,501 2,614,368
------------ ----------- ------------ -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions .................................... 192,282,349 89,354,305 102,305,888 29,499,045
Transfers from other Funds and Guaranteed Interest
Rate Account (Note 1) ......................... 38,949,363 8,714,901 22,084,671 3,342,187
------------ ----------- ------------ -----------
Total ......................................... 231,231,712 98,069,206 124,390,559 32,841,232
------------ ----------- ------------ -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions .............. 6,393,934 -- 2,648,953 151,674
Withdrawal and administrative charges ............... 306,018 684,612 116,410 70,276
Transfers to other Funds and Guaranteed Interest
Rate Account (Note 1) ............................ 17,366,879 1,112,466 9,084,232 573,939
------------ ----------- ------------ -----------
Total ............................................ 24,066,831 1,797,078 11,849,595 795,889
------------ ----------- ------------ -----------
Net increase in net assets from Contractowners
transactions ..................................... 207,164,881 96,272,128 112,540,964 32,045,343
------------ ----------- ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 49 (NOTE 5) .. (181,146) 5,168 (1,164,027) (1,236,705)
------------ ----------- ------------ -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS ...................................... 229,594,707 98,039,967 141,216,438 33,423,006
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING
OF PERIOD ........................................... 98,039,967 -- 33,423,006 --
------------ ----------- ------------ -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF
PERIOD .............................................. $327,634,674 $98,039,967 $174,639,444 $33,423,006
============ =========== ============ ===========
<CAPTION>
EQ/PUTNAM
INTERNATIONAL EQUITY
FUND(a)
-------------------------------
1998 1997
------------ -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss) ........................ $ (1,130,655) $ (102,449)
Net realized gain (loss) ............................ 1,085,258 259,624
Change in unrealized appreciation (depreciation)
of investments ................................... 13,282,089 (355,156)
------------ -----------
Net increase (decrease) in net assets from
operations ....................................... 13,236,692 (197,981)
------------ -----------
FROM CONTRACTOWNERS TRANSACTIONS:
Contributions and Transfers:
Contributions .................................... 72,938,890 49,901,207
Transfers from other Funds and Guaranteed Interest
Rate Account (Note 1) ......................... 29,843,626 4,211,149
------------ -----------
Total ......................................... 102,782,516 54,112,356
------------ -----------
WITHDRAWAL AND TRANSFERS:
Benefits and other policy transactions .............. 2,642,413 155,422
Withdrawal and administrative charges ............... 169,696 69,966
Transfers to other Funds and Guaranteed Interest
Rate Account (Note 1) ............................ 21,216,559 1,074,411
------------ -----------
Total ............................................ 24,028,668 1,299,799
------------ -----------
Net increase in net assets from Contractowners
transactions ..................................... 78,753,848 52,812,557
------------ -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY
EQUITABLE LIFE IN SEPARATE ACCOUNT NO. 49 (NOTE 5) .. (560,408) (475,212)
------------ -----------
INCREASE IN NET ASSETS ATTRIBUTABLE TO
CONTRACTOWNERS ...................................... 91,430,132 52,139,364
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, BEGINNING
OF PERIOD ........................................... 52,139,364 --
------------ -----------
NET ASSETS ATTRIBUTABLE TO CONTRACTOWNERS, END OF
PERIOD .............................................. $143,569,496 $52,139,364
============ ===========
</TABLE>
- ----------
(a) Commenced operations on May 1, 1997.
See Notes to Financial Statements.
FS-14
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. General
The Equitable Life Assurance Society of the United States (Equitable Life)
Separate Account No. 49 (the Account) is organized as a unit investment
trust, a type of investment company, and is registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 (the 1940
Act). Alliance Capital Management L.P., an indirect majority-owned
subsidiary of Equitable Life, manages The Hudson River Trust (HRT) and is
the investment adviser for all of the investment funds of HRT. EQ Financial
Consultants, Inc., ("EQFC") and Equitable Distributors Inc. ("EDI") are
indirect, wholly owned subsidiaries of Equitable Life. EQFC manages the EQ
Advisors Trust (EQAT) and has overall responsibility for general management
and administration of EQAT. The Account consists of 25 investment funds
(Funds): the Alliance Money Market Fund, Alliance High Yield Fund, Alliance
Common Stock Fund, Alliance Aggressive Stock Fund, Alliance Small Cap
Growth Fund, Alliance Global Fund, Alliance Growth Investors Fund, Alliance
Equity Index Fund, BT Equity 500 Index Fund, BT Small Company Index Fund,
BT International Equity Index Fund, EQ/Evergreen Fund, EQ/Evergreen
Foundation Fund, JPM Core Bond Fund, Lazard Large Cap Value Fund, Lazard
Small Cap Value Fund, Merrill Lynch Basic Value Equity Fund, Merrill Lynch
World Strategy Fund, MFS Research, MFS Emerging Growth Companies, MFS
Growth with Income Fund, Morgan Stanley Emerging Markets Equity Fund, EQ
Putnam Growth & Income Value Fund, EQ/Putnam Investors Growth Fund and
EQ/Putnam International Equity Fund. As of December 31, 1998, the following
funds have not yet sold units to the public and accordingly there is no
activity in the Statements of Operations and the Statement of Changes in
Net Assets: EQ/Evergreen Fund, EQ/Evergreen Foundation Fund, MFS Growth
with Income Fund. The assets in each fund are invested in Class 1B shares
of a corresponding portfolio (Portfolio) of a mutual fund of HRT or of EQAT
(collectively, the "Trusts"). Class 1A and 1B shares are offered by the
Trust at net asset value. Both classes of shares are subject to fees for
investment management and advisory services and other Trust expenses. Class
1B shares are subject to distribution fees imposed under a distribution
plan (herein, the "Rule 12b-1 Plans") adopted pursuant to Rule 12b-1 under
the 1940 Act, as amended. The Rule 12b-1 Plans provide that the Trusts, on
behalf of each Fund, may charge annually up to 0.25% of the average daily
net assets of a Fund attributable to its Class 1B Shares in respect of
activities primarily intended to result in the sale of Class 1B Shares.
These fees are reflected in the net asset value of the shares. The Trusts
are open-ended, diversified management investment companies that sell their
shares to separate accounts of insurance companies. Each Portfolio has
separate investment objectives. The Account commenced operations on October
1, 1996.
EQFC and EDI earns fees from both Trusts under distribution agreements held
with the Trusts. EQFC also earns fees under an investment management
agreement with EQAT. Alliance earns fees under an investment advisory
agreement with the HRT.
The Account is used to fund benefits for the Rollover IRA, Equitable
Accumulator IRA, Equitable Accumulator TSA, Equitable Accumulator Select
IRA and Equitable Accumulator Select TSA, qualified deferred variable
annuities, which combined the Portfolios in the Account with guaranteed
fixed rate options, and the Accumulator, Equitable Accumulator NQ and
Equitable Accumulator Select NQ, which offer the same investment options as
the Equitable Accumulator IRA and Equitable Accumulator Select IRA for the
non-qualified market. The non-qualified variable annuities are also
available for purchase by certain types of qualified plans (referred to as
Equitable Accumulator QP and Equitable Accumulator Select QP). The
Equitable Accumulator IRA, NQ, QP and TSA (including Equitable Accumulator
Select IRA, NQ, QP and TSA), collectively referred to as the Contracts, are
offered under group and individual variable annuity forms.
All Contracts are issued by Equitable Life. The assets of the Account are
the property of Equitable Life. However, the portion of the Account's
assets attributable to the Contracts will not be chargeable with
liabilities arising out of any other business Equitable Life may conduct.
Receivable/payable for policy-related transactions represent amounts due
to/from General Account predominately related to premiums, surrenders and
death benefits.
Included in the Withdrawals and Administrative Charges line of the
Statements of Changes in Net Assets are certain administrative charges
which are deducted from the Contractowners account value.
Contractowners may allocate amounts in their individual accounts to the
Funds of the Account, and/or to the guaranteed interest account of
Equitable Life's General Account, and/or to other Separate Accounts. The
net assets of any Fund of the Account may not be less than the aggregate of
the contractowners' accounts allocated to that Fund. Additional assets are
set aside in Equitable Life's General Account to provide for other policy
benefits, as required under the state insurance law. Equitable Life's
General Account is subject to creditor rights.
FS-15
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. Significant Accounting Policies
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Investments are made in shares of the Trust and are valued at the net asset
values per share of the respective Portfolios. The net asset value is
determined by the Trust using the market or fair value of the underlying
assets of the Portfolio less liabilities.
Investment transactions in the Trusts are recorded on the trade date.
Realized gains and losses include gains and losses on redemptions of the
Trust's shares (determined on the identified cost basis) and Trust
distributions representing the net realized gains on Trust investment
transactions which are distributed by the Trusts at the end of each year
and automatically reinvested in additional shares.
Dividends are recorded by HRT at the end of each quarter and by EQAT in the
fourth quarter on the ex-dividend date. Capital gains are distributed by
the Trust at the end of each year.
No Federal income tax based on net income or realized and unrealized
capital gains is currently applicable to Contracts participating in the
Account by reason of applicable provisions of the Internal Revenue Code and
no Federal income tax payable by Equitable Life is expected to affect the
unit value of Contracts participating in the Account. Accordingly, no
provision for income taxes is required. However, Equitable Life retains the
right to charge for any Federal income tax which is attributable to the
Account if the law is changed.
3. Asset Charges
Charges are made directly against the net assets of the Account and are
reflected daily in the computation of the unit values of the Contracts.
Under the Contracts, Equitable Life charges the account for the following
charges:
<TABLE>
<CAPTION>
Asset-based
Mortality and Administration Distribution Aggregate
Expense Risks Charge Charge Charges
------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Accumulator and Rollover IRA issued before 0.90% 0.30% -- 1.20%
May 1, 1997
Equitable Accumulator issued after May 1, 1997 1.10% 0.25% -- 1.35%
Equitable Accumulator Select 1.10% 0.25% 0.25% 1.60%
</TABLE>
These charges may be retained in the Account by Equitable Life and to the
extent retained, participate in the net results of the Trust ratably with
assets attributable to the Contracts.
Trust shares are valued at their net asset value with investment advisory
or management fees, the 12b-1 fee, and direct operating expenses of the
Trust, in effect, passed on to the Account and reflected in the
accumulation unit values of the Contracts.
4. Contributions, Transfers and Charges:
Net accumulation units issued during the periods indicated were:
DECEMBER 31, DECEMBER 31,
1998 1997
----------- ----------
ALLIANCE MONEY MARKET FUND (IN THOUSANDS)
-------------------------
Net Issued (Redeemed) 120 b.p............ (30) 172
Net Issued (Redeemed) 135 b.p............ 4,005 1,153
Net Issued (Redeemed) 160 b.p............ 349 --
Net Issued (Redeemed) 0 b.p.............. 1,286 947
ALLIANCE HIGH YIELD FUND
-------------------------
Net Issued (Redeemed) 120 b.p............ (17) 402
Net Issued (Redeemed) 135 b.p............ 3,265 1,256
Net Issued (Redeemed) 160 b.p............ 168 2
FS-16
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. Contributions, Transfers and Charges (Continued):
Net accumulation units issued during the periods indicated were:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
ALLIANCE COMMON STOCK FUND ----------- -----------
-------------------------- (IN THOUSANDS)
<S> <C> <C> <C>
Net Issued (Redeemed) 120 b.p................................. (10) 229
Net Issued (Redeemed) 135 b.p................................. 1,108 434
Net Issued (Redeemed) 160 b.p................................. 34 1
ALLIANCE AGGRESSIVE STOCK FUND
------------------------------
Net Issued (Redeemed) 120 b.p................................. (13) 269
Net Issued (Redeemed) 135 b.p................................. 559 380
Net Issued (Redeemed) 160 b.p................................. 16 --
ALLIANCE SMALL CAP GROWTH FUND (a)
----------------------------------
Net Issued (Redeemed) 120 b.p................................. 13 89
Net Issued (Redeemed) 135 b.p................................. 3,580 2,521
Net Issued (Redeemed) 160 b.p................................. 211 --
ALLIANCE GLOBAL FUND
--------------------
Net Issued (Redeemed) 120 b.p................................. (42) 455
ALLIANCE GROWTH INVESTORS FUND
------------------------------
Net Issued (Redeemed) 120 b.p................................. (44) 582
BT EQUITY 500 INDEX FUND (b)
---------------------------
Net Issued (Redeemed) 120 b.p................................. 87 --
Net Issued (Redeemed) 135 b.p................................. 12,279 --
Net Issued (Redeemed) 160 b.p................................. 951 --
BT SMALL COMPANY INDEX FUND (b)
------------------------------
Net Issued (Redeemed) 120 b.p................................. 18 --
Net Issued (Redeemed) 135 b.p................................. 1,610 --
Net Issued (Redeemed) 160 b.p................................. 211 --
BT INTERNATIONAL EQUITY INDEX FUND (b)
--------------------------------------
Net Issued (Redeemed) 120 b.p................................. 9 --
Net Issued (Redeemed) 135 b.p................................. 1,827 --
Net Issued (Redeemed) 160 b.p................................. 248 --
JPM CORE BOND FUND (b)
----------------------
Net Issued (Redeemed) 120 b.p................................. 98 --
Net Issued (Redeemed) 135 b.p................................. 8,661 --
Net Issued (Redeemed) 160 b.p................................. 379 --
</TABLE>
- ----------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on January 1, 1998.
FS-17
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. Contributions, Transfers and Charges (Continued):
Net accumulation units issued during the periods indicated were:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
LAZARD LARGE CAP VALUE FUND (b) ----------- -----------
------------------------------- (IN THOUSANDS)
<S> <C> <C>
Net Issued (Redeemed) 120 b.p................................. 22 --
Net Issued (Redeemed) 135 b.p................................. 5,696 --
Net Issued (Redeemed) 160 b.p................................. 315 --
LAZARD SMALL CAP VALUE FUND (b)
-------------------------------
Net Issued (Redeemed) 120 b.p................................. 26 --
Net Issued (Redeemed) 135 b.p................................. 4,733 --
Net Issued (Redeemed) 160 b.p................................. 344 --
MERRILL LYNCH BASIC VALUE EQUITY FUND (a)
-----------------------------------------
Net Issued (Redeemed) 135 b.p................................. 3,207 1,182
MERRILL LYNCH WORLD STRATEGY FUND (a)
-------------------------------------
Net Issued (Redeemed) 135 b.p................................. 411 306
MFS RESEARCH FUND (a)
--------------------
Net Issued (Redeemed) 120 b.p................................. 93 263
Net Issued (Redeemed) 135 b.p................................. 9,656 5,257
Net Issued (Redeemed) 160 b.p................................. 409 2
MFS EMERGING GROWTH COMPANIES FUND (a)
--------------------------------------
Net Issued (Redeemed) 120 b.p................................. 27 149
Net Issued (Redeemed) 135 b.p................................. 5,790 3,327
Net Issued (Redeemed) 160 b.p................................. 198 3
MORGAN STANLEY EMERGING MARKETS EQUITY FUND (c)
-----------------------------------------------
Net Issued (Redeemed) 120 b.p................................. 16 --
Net Issued (Redeemed) 135 b.p................................. 1,805 --
Net Issued (Redeemed) 160 b.p................................. 203 --
EQ/PUTNAM GROWTH & INCOME VALUE FUND (a)
----------------------------------------
Net Issued (Redeemed) 120 b.p................................. 123 383
Net Issued (Redeemed) 135 b.p................................. 16,230 8,113
Net Issued (Redeemed) 160 b.p................................. 697 17
EQ/PUTNAM INVESTORS GROWTH FUND (a)
-----------------------------------
Net Issued (Redeemed) 120 b.p................................. 36 124
Net Issued (Redeemed) 135 b.p................................. 7,491 2,581
Net Issued (Redeemed) 160 b.p................................. 282 --
</TABLE>
- ----------
(a) Commenced operations on May 1, 1997.
(b) Commenced operations on January 1, 1998.
(c) Commenced operations on December 31, 1997.
FS-18
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
4. Contributions, Transfers and Charges (Concluded):
Net accumulation units issued during the periods indicated were:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
EQ/PUTNAM INTERNATIONAL EQUITY FUND (a) ---------- ----------
--------------------------------------- (IN THOUSANDS)
<S> <C> <C>
Net Issued (Redeemed) 120 b.p................................. 3 187
Net Issued (Redeemed) 135 b.p................................. 5,998 4,609
Net Issued (Redeemed) 160 b.p................................. 418 5
</TABLE>
- ----------
(a) Commenced operations on May 1, 1997.
5. Amounts retained by Equitable Life in Separate Account No. 49
The amount retained by Equitable Life in the Account arises principally
from (1) contributions from Equitable Life, (2) mortality and expense
charges and Asset-based administrative charges accumulated in the account,
and (3) that portion, determined ratably, of the Account's investment
results applicable to those assets in the Account in excess of the net
assets for the Contracts. Amounts retained by Equitable Life are not
subject to charges for mortality and expense risks and Asset-based
administrative expenses.
Amounts retained by Equitable Life in the Account may be transferred at any
time by Equitable Life to its General Account.
The following table shows the contributions (withdrawals) in net amounts
retained by Equitable Life by investment fund:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
INVESTMENT FUND 1998 1997
--------------- --------------------- --------------------
<S> <C> <C>
Alliance Money Market Fund................................ $ (1,183,691) $ (105,000)
Alliance High Yield Fund.................................. (1,528,340) (85,000)
Alliance Common Stock Fund................................ (3,823,234) (180,000)
Alliance Aggressive Stock Fund............................ (983,127) (110,000)
Alliance Small Cap Growth Fund............................ (792,824) 5,000
Alliance Global Fund...................................... (225,129) (90,000)
Alliance Growth Investors Fund............................ (336,002) (97,000)
Alliance Equity Index Fund................................ -- 5,000
BT Equity 500 Index Fund(2)............................... (1,331,361) 1,000
BT Small Company Index Fund(2)............................ 9,933,857 1,000
BT International Equity Index Fund(2)..................... 14,902,319 1,000
EQ/Evergreen Fund(3) ..................................... 1,000 --
EQ/Evergreen Foundation Fund(3)........................... 1,000 --
JPM Core Bond Fund(2)..................................... 4,150,198 1,000
Lazard Large Cap Value Fund(2)............................ 2,234,287 1,000
Lazard Small Cap Value Fund(2)............................ 4,310,749 1,000
Merrill Lynch Basic Value Equity Fund(1).................. (433,013) --
Merrill Lynch World Strategy Fund(1)...................... (64,920) --
MFS Research Fund(1)...................................... (1,751,938) --
MFS Emerging Growth Companies Fund(1)..................... (1,150,981) --
MFS Growth with Income Fund(3) ........................... -- --
Morgan Stanley Emerging Markets Equity Fund(4)............ (48,664) --
EQ/Putnam Growth & Income Value Fund(1)................... (2,678,339) --
EQ/Putnam Investors Growth Fund(1)........................ (8,168,474) 5,000,000
EQ/Putnam International Equity Fund(1).................... (7,148,298) 5,000,000
</TABLE>
- ----------
(1) Commenced operations on May 1, 1997.
(2) Initial capital received on December 31, 1997.
(3) Initial capital received on December 31, 1998.
(4) Commenced operations on December 31, 1997.
FS-19
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996
--------------- -------------- -----------------
ALLIANCE MONEY MARKET FUND
- --------------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period...................... $25.64 $24.68 $24.43
1.20% Unit value, end of period............................ $26.62 $25.64 $24.68
1.35% Unit value, beginning of period (a).................. $25.00 $24.38 --
1.35% Unit value, end of period (a)........................ $25.92 $25.00 --
1.60% Unit value, beginning of period (b).................. $23.98 $23.78 --
1.60% Unit value, end of period (b)........................ $24.80 $23.98 --
0% Unit value, beginning of period (a)..................... $31.27 $30.21 --
0% Unit value, end of period (a)........................... $32.86 $31.27 --
Number of units outstanding, end of period (000's)
1.20%................................................... 329 359 127
1.35%................................................... 5,158 1,153 --
1.60%................................................... 349 -- --
0%...................................................... 2,233 947 --
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996
--------------- -------------- -----------------
ALLIANCE HIGH YIELD FUND
- ------------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period...................... $30.46 $26.09 $25.33
1.20% Unit value, end of period............................ $28.48 $30.46 $26.09
1.35% Unit value, beginning of period (a).................. $29.96 $26.35 --
1.35% Unit value, end of period (a)........................ $27.96 $29.96 --
1.60% Unit value, beginning of period (b).................. $29.13 $28.79 --
1.60% Unit value, end of period (b)........................ $27.12 $29.13 --
Number of units outstanding, end of period (000's)
1.20%................................................... 422 439 24
1.35%................................................... 4,521 1,256 --
1.60%................................................... 170 2 --
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996
--------------- -------------- -----------------
ALLIANCE COMMON STOCK FUND
- --------------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period..................... $192.60 $151.23 $139.82
1.20% Unit value, end of period........................... $245.58 $192.60 $151.23
1.35% Unit value, beginning of period (a)................. $186.29 $146.89 --
1.35% Unit value, end of period (a)....................... $237.18 $186.29 --
1.60% Unit value, beginning of period (b)................. $176.22 $172.77 --
1.60% Unit value, end of period (b)....................... $223.79 $176.22 --
Number of units outstanding, end of period (000's)
1.20%.................................................. 230 240 8
1.35%.................................................. 1,542 434 --
1.60%.................................................. 35 1 --
</TABLE>
- ----------
(a) Units were made available for sale on May 1, 1997.
(b) Units were made available for sale on October 1, 1997.
FS-20
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1998 1997 1996
--------------- -------------- ----------
ALLIANCE AGGRESSIVE STOCK FUND
- ------------------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period....................... $71.57 $65.53 $64.24
1.20% Unit value, end of period............................. $70.74 $71.57 $65.53
1.35% Unit value, beginning of period (a)................... $70.28 $61.42 --
1.35% Unit value, end of period (a)......................... $69.37 $70.28 --
1.60% Unit value, beginning of period (b)................... $68.19 $75.44 --
1.60% Unit value, end of period (b)......................... $67.13 $68.19 --
Number of units outstanding, end of period (000's)
1.20%.................................................... 266 279 9
1.35%.................................................... 939 380 --
1.60%.................................................... 16 -- --
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1998 1997
------------------------- --------------------
ALLIANCE SMALL CAP GROWTH FUND
- ------------------------------
<S> <C> <C>
1.20% Unit value, beginning of period (a)..................... $12.55 $10.00
1.20% Unit value, end of period (a)...................... $11.85 $12.55
1.35% Unit value, beginning of period (a)................ $12.54 $10.00
1.35% Unit value, end of period (a)...................... $11.82 $12.54
1.60% Unit value, beginning of period (b)................ $12.52 $13.22
1.60% Unit value, end of period (b)...................... $11.77 $12.52
Number of units outstanding, end of period (000's)
1.20%...................................................... 102 89
1.35%...................................................... 6,101 2,521
1.60%...................................................... 211 --
</TABLE>
- ----------
(a) Units were made available for sale on May 1, 1997.
(b) Units were made available for sale on October 1, 1997.
FS-21
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------
1998 1997 1996
--------------------- ------------------- -----------------
ALLIANCE GLOBAL FUND
- --------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period....................... $27.61 $25.12 $26.00
1.20% Unit value, end of period............................. $33.15 $27.61 $25.12
Number of units outstanding, end of period (000's)
1.20%.................................................... 422 464 9
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996
--------------------- ------------------- ------------------
ALLIANCE GROWTH INVESTORS FUND
- ------------------------------
<S> <C> <C> <C>
1.20% Unit value, beginning of period....................... $30.09 $26.15 $25.06
1.20% Unit value, end of period............................. $35.33 $30.09 $26.15
Number of units outstanding, end of period (000's) 544
1.20%.................................................... 598 16
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997
------------------------------- ------------------------------
ALLIANCE EQUITY INDEX FUND
- -----------------------------
<S> <C> <C>
1.35% Unit value, beginning of period (a)................... $21.21 $17.51
1.35% Unit value, end of period (a)......................... $26.73 $21.21
Number of units outstanding, end of period (000's)
1.35%.................................................... -- --
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 (b)
------------------------------- ------------------------------
BT EQUITY 500 INDEX FUND
- -----------------------------
<S> <C> <C>
1.20% Unit value, beginning of period....................... $10.00 $10.00
1.20% Unit value, end of period............................. $12.36 $10.00
1.35% Unit value, beginning of period....................... $10.00 $10.00
1.35% Unit value, end of period............................. $12.34 $10.00
1.60% Unit value, beginning of period....................... $10.00 $10.00
1.60% Unit value, end of period............................. $12.31 $10.00
Number of units outstanding, end of period (000's)
1.20%.................................................... 87 --
1.35%.................................................... 12,279 --
1.60%.................................................... 951 --
</TABLE>
- ----------
(a) Units were made available for sale on May 1, 1997.
(b) Initial capital was received on December 31, 1997.
FS-22
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1998 1997 (a)
-------------------------- --------------------------
BT SMALL COMPANY INDEX FUND
- ---------------------------
<S> <C> <C>
1.20% Unit value, beginning of period..................... $10.00 $10.00
1.20% Unit value, end of period........................... $9.65 $10.00
1.35% Unit value, beginning of period..................... $10.00 $10.00
1.35% Unit value, end of period........................... $9.64 $10.00
1.60% Unit value, beginning of period..................... $10.00 $10.00
1.60% Unit value, end of period........................... $9.61 $10.00
Number of units outstanding, end of period (000's)
1.20%.................................................. 18 --
1.35%.................................................. 1,610 --
1.60%.................................................. 211 --
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1998 1997 (a)
-------------------------- --------------------------
BT INTERNATIONAL EQUITY INDEX FUND
- ----------------------------------
<S> <C> <C>
1.20% Unit value, beginning of period..................... $10.00 $10.00
1.20% Unit value, end of period........................... $11.87 $10.00
1.35% Unit value, beginning of period..................... $10.00 $10.00
1.35% Unit value, end of period........................... $11.85 $10.00
1.60% Unit value, beginning of period..................... $10.00 $10.00
1.60% Unit value, end of period........................... $11.82 $10.00
Number of units outstanding, end of period (000's)
1.20%.................................................. 9 --
1.35%.................................................. 1,827 --
1.60%.................................................. 248 --
<CAPTION>
DECEMBER 31, 1998 (b)
---------------------------
EQ/EVERGREEN FUND
- -----------------
<S> <C>
1.35% Unit value, beginning of period..................... $10.00
1.35% Unit value, end of period........................... $10.00
1.60% Unit value, beginning of period..................... $10.00
1.60% Unit value, end of period........................... $10.00
</TABLE>
- ----------
(a) Initial capital was received on December 31, 1997.
(b) Initial capital was received on December 31, 1998.
FS-23
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
DECEMBER 31, 1998 (b)
------------------------------
EQ/EVERGREEN FOUNDATION FUND
- ----------------------------------
<S> <C>
1.35% Unit value, beginning of period......................... $10.00
1.35% Unit value, end of period............................... $10.00
1.60% Unit value, beginning of period......................... $10.00
1.60% Unit value, end of period............................... $10.00
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 (a)
----------------------- ----------------------
JPM CORE BOND FUND
- ------------------
<S> <C> <C>
1.20% Unit value, beginning of period......................... $10.00 $10.00
1.20% Unit value, end of period............................... $10.77 $10.00
1.35% Unit value, beginning of period......................... $10.00 $10.00
1.35% Unit value, end of period............................... $10.76 $10.00
1.60% Unit value, beginning of period......................... $10.00 $10.00
1.60% Unit value, end of period............................... $10.73 $10.00
Number of units outstanding, end of period (000's)
1.20%...................................................... 98 --
1.35%...................................................... 8,661 --
1.60%...................................................... 379 --
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 (a)
----------------------- ----------------------
LAZARD LARGE CAP VALUE FUND
- ---------------------------
<S> <C> <C>
1.20% Unit value, beginning of period......................... $10.00 $10.00
1.20% Unit value, end of period............................... $11.86 $10.00
1.35% Unit value, beginning of period......................... $10.00 $10.00
1.35% Unit value, end of period............................... $11.84 $10.00
1.60% Unit value, beginning of period......................... $10.00 $10.00
1.60% Unit value, end of period............................... $11.81 $10.00
Number of units outstanding, end of period (000's)
1.20%...................................................... 22 --
1.35%...................................................... 5,696 --
1.60%...................................................... 315 --
</TABLE>
- ----------
(a) Initial capital was received on December 31, 1997.
(b) Initial capital was received on December 31, 1998.
FS-24
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 (b)
----------------------- ----------------------
LAZARD SMALL CAP VALUE FUND
- ---------------------------
<S> <C> <C>
1.20% Unit value, beginning of period......................... $10.00 $10.00
1.20% Unit value, end of period............................... $9.18 $10.00
1.35% Unit value, beginning of period......................... $10.00 $10.00
1.35% Unit value, end of period............................... $9.17 $10.00
1.60% Unit value, beginning of period......................... $10.00 $10.00
1.60% Unit value, end of period............................... $9.14 $10.00
Number of units outstanding, end of period (000's)
1.20%...................................................... 26 --
1.35%...................................................... 4,733 --
1.60%...................................................... 344 --
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1998 1997
----------------------- ----------------------
MERRILL LYNCH BASIC VALUE EQUITY FUND (a)
- -----------------------------------------
<S> <C> <C>
1.35% Unit value, beginning of period......................... $11.60 $9.99
1.35% Unit value, end of period............................... $12.76 $11.60
1.60% Unit value, beginning of period (c)..................... $11.58 $12.15
1.60% Unit value, end of period (c) .......................... $12.71 $11.58
Number of units outstanding, end of period (000's)
1.35%...................................................... 4,389 1,182
1.60%...................................................... -- --
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1998 1997
----------------------- ----------------------
MERRILL LYNCH WORLD STRATEGY FUND (a)
- -------------------------------------
<S> <C> <C>
1.35% Unit value, beginning of period......................... $10.38 $10.00
1.35% Unit value, end of period............................... $10.94 $10.38
1.60% Unit value, beginning of period (c)..................... $10.36 $11.13
1.60% Unit value, end of period (c)........................... $10.89 $10.36
Number of units outstanding, end of period (000's)
1.35%...................................................... 717 306
1.60%...................................................... -- --
</TABLE>
- ----------
(a) Units were made available for sale on May 1, 1997.
(b) Initial capital was received on December 31, 1997.
(c) Units were made available for sale on October 1, 1997.
FS-25
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 (a)
----------------------- ----------------------
MFS RESEARCH FUND
- -----------------
<S> <C> <C>
1.20% Unit value, beginning of period......................... $11.51 $10.00
1.20% Unit value, end of period............................... $14.12 $11.51
1.35% Unit value, beginning of period......................... $11.50 $10.00
1.35% Unit value, end of period............................... $14.08 $11.50
1.60% Unit value, beginning of period (c).................... $11.48 $11.77
1.60% Unit value, end of period (c)........................... $14.02 $11.48
Number of units outstanding, end of period (000's)
1.20%...................................................... 356 263
1.35%...................................................... 14,913 5,257
1.60%...................................................... 410 1
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1998 1997 (a)
----------------------- ----------------------
MFS EMERGING GROWTH COMPANIES FUND
- ----------------------------------
<S> <C> <C>
1.20% Unit value, beginning of period......................... $12.14 $10.00
1.20% Unit value, end of period............................... $16.14 $12.14
1.35% Unit value, beginning of period......................... $12.13 $10.00
1.35% Unit value, end of period............................... $16.10 $12.13
1.60% Unit value, beginning of period (c)..................... $12.11 $12.60
1.60% Unit value, end of period (c)........................... $16.03 $12.11
Number of units outstanding, end of period (000's)
1.20%...................................................... 176 149
1.35%...................................................... 9,117 3,327
1.60%...................................................... 200 2
<CAPTION>
DECEMBER 31, 1998 (b)
-------------------------
MFS EMERGING GROWTH WITH INCOME FUND
- ------------------------------------
<C> <C>
1.20% Unit value, beginning of period......................... $10.00
1.20% Unit value, end of period............................... $10.00
1.35% Unit value, beginning of period......................... $10.00
1.35% Unit value, end of period............................... $10.00
1.60% Unit value, beginning of period......................... $10.00
1.60% Unit value, end of period............................... $10.00
</TABLE>
(a) Units were made available for sale on May 1, 1997.
(b) Initial capital was received on December 31, 1998.
(c) Units were made available for sale on October 1, 1997.
FS-26
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Continued):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997
--------------------------- ---------------------------
MORGAN STANLEY EMERGING MARKETS EQUITY FUND
- -------------------------------------------
<S> <C> <C>
1.20% Unit value, beginning of period (c) .................... $7.95 $7.95
1.20% Unit value, end of period (c)........................... $5.73 $7.95
1.35% Unit value, beginning of period (c)..................... $7.94 $7.94
1.35% Unit value, end of period (c)........................... $5.72 $7.94
1.60% Unit value, beginning of period (c)..................... $7.93 $7.93
1.60% Unit value, end of period (c)........................... $5.70 $7.93
Number of units outstanding, end of period (000's)
1.20%...................................................... 16 --
1.35%...................................................... 1,805 --
1.60%...................................................... 203 --
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997(a)
--------------------------- ---------------------------
EQ/PUTNAM GROWTH & INCOME VALUE FUND
- ------------------------------------
<S> <C> <C>
1.20% Unit value, beginning of period......................... $11.53 $10.00
1.20% Unit value, end of period............................... $12.85 $11.53
1.35% Unit value, beginning of period......................... $11.52 $10.00
1.35% Unit value, end of period............................... $12.82 $11.52
1.60% Unit value, beginning of period (c)..................... $11.50 $11.63
1.60% Unit value, end of period (c)........................... $12.76 $11.50
Number of units outstanding, end of period (000's)
1.20%...................................................... 506 383
1.35%...................................................... 24,343 8,113
1.60%...................................................... 714 17
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997(a)
--------------------------- ---------------------------
EQ/PUTNAM INVESTORS GROWTH FUND
- -------------------------------
<S> <C> <C>
1.20% Unit value, beginning of period......................... $12.37 $10.00
1.20% Unit value, end of period............................... $16.65 $12.37
1.35% Unit value, beginning of period......................... $12.35 $10.00
1.35% Unit value, end of period............................... $16.61 $12.35
1.60% Unit value, beginning of period (c) .................... $12.33 $12.12
1.60% Unit value, end of period (c) .......................... $16.54 $12.33
Number of units outstanding, end of period (000's)
1.20%...................................................... 160 124
1.35%...................................................... 10,072 2,581
1.60%...................................................... 282 --
</TABLE>
- ----------
(a) Units were made available for sale on May 1, 1997.
(b) Units were made available for sale on May 1, 1998.
(c) Units were made available for sale on December 31, 1997.
FS-27
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT NO. 49
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
DECEMBER 31, 1998
6. Accumulation Unit Values (Concluded):
Shown below is accumulation unit value information for a unit outstanding
throughout the period shown.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1998 1997(a)
--------------------------- -----------------------
EQ/PUTNAM INTERNATIONAL EQUITY FUND
- -----------------------------------
<S> <C> <C>
1.20% Unit value, beginning of period......................... $10.87 $10.00
1.20% Unit value, end of period............................... $12.83 $10.87
1.35% Unit value, beginning of period......................... $10.86 $10.00
1.35% Unit value, end of period............................... $12.80 $10.86
1.60% Unit value, beginning of period (c)..................... $10.84 $11.52
1.60% Unit value, end of period (c)........................... $12.75 $10.84
Number of units outstanding, end of period (000's)
1.20%...................................................... 190 187
1.35%...................................................... 10,607 4,609
1.60%...................................................... 422 4
</TABLE>
- ----------
(a) Units were made available for sale on May 1, 1997.
(c) Units were made available for sale on October 1, 1997.
FS-28
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholder of
The Equitable Life Assurance Society of the United States
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholder's equity and comprehensive
income and of cash flows present fairly, in all material respects, the financial
position of The Equitable Life Assurance Society of the United States and its
subsidiaries ("Equitable Life") at December 31, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Equitable
Life's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, Equitable Life
changed its method of accounting for long-lived assets in 1996.
/s/PricewaterhouseCoopers LLP
- -----------------------------
PricewaterhouseCoopers LLP
New York, New York
February 8, 1999
F-1
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value............................. $ 18,993.7 $ 19,630.9
Held to maturity, at amortized cost..................................... 125.0 -
Mortgage loans on real estate............................................. 2,809.9 2,611.4
Equity real estate........................................................ 1,676.9 2,495.1
Policy loans.............................................................. 2,086.7 2,422.9
Other equity investments.................................................. 713.3 951.5
Investment in and loans to affiliates..................................... 928.5 731.1
Other invested assets..................................................... 808.2 612.2
----------------- -----------------
Total investments..................................................... 28,142.2 29,455.1
Cash and cash equivalents................................................... 1,245.5 300.5
Deferred policy acquisition costs........................................... 3,563.8 3,236.6
Amounts due from discontinued operations.................................... 2.7 572.8
Other assets................................................................ 3,051.9 2,687.4
Closed Block assets......................................................... 8,632.4 8,566.6
Separate Accounts assets.................................................... 43,302.3 36,538.7
----------------- -----------------
Total Assets................................................................ $ 87,940.8 $ 81,357.7
================= =================
LIABILITIES
Policyholders' account balances............................................. $ 20,889.7 $ 21,579.5
Future policy benefits and other policyholders' liabilities................. 4,694.2 4,553.8
Short-term and long-term debt............................................... 1,181.7 1,716.7
Other liabilities........................................................... 3,474.3 3,267.2
Closed Block liabilities.................................................... 9,077.0 9,073.7
Separate Accounts liabilities............................................... 43,211.3 36,306.3
----------------- -----------------
Total liabilities..................................................... 82,528.2 76,497.2
----------------- -----------------
Commitments and contingencies (Notes 11, 13, 14, 15 and 16)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value 2.0 million shares authorized, issued
and outstanding........................................................... 2.5 2.5
Capital in excess of par value.............................................. 3,110.2 3,105.8
Retained earnings........................................................... 1,944.1 1,235.9
Accumulated other comprehensive income...................................... 355.8 516.3
----------------- -----------------
Total shareholder's equity............................................ 5,412.6 4,860.5
----------------- -----------------
Total Liabilities and Shareholder's Equity.................................. $ 87,940.8 $ 81,357.7
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
REVENUES
Universal life and investment-type product policy fee
income...................................................... $ 1,056.2 $ 950.6 $ 874.0
Premiums...................................................... 588.1 601.5 597.6
Net investment income......................................... 2,228.1 2,282.8 2,203.6
Investment gains (losses), net................................ 100.2 (45.2) (9.8)
Commissions, fees and other income............................ 1,503.0 1,227.2 1,081.8
Contribution from the Closed Block............................ 87.1 102.5 125.0
----------------- ----------------- -----------------
Total revenues.......................................... 5,562.7 5,119.4 4,872.2
----------------- ----------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances.......... 1,153.0 1,266.2 1,270.2
Policyholders' benefits....................................... 1,024.7 978.6 1,317.7
Other operating costs and expenses............................ 2,201.2 2,203.9 2,075.7
----------------- ----------------- -----------------
Total benefits and other deductions..................... 4,378.9 4,448.7 4,663.6
----------------- ----------------- -----------------
Earnings from continuing operations before Federal
income taxes, minority interest and cumulative
effect of accounting change................................. 1,183.8 670.7 208.6
Federal income taxes.......................................... 353.1 91.5 9.7
Minority interest in net income of consolidated subsidiaries.. 125.2 54.8 81.7
----------------- ----------------- -----------------
Earnings from continuing operations before cumulative
effect of accounting change................................. 705.5 524.4 117.2
Discontinued operations, net of Federal income taxes.......... 2.7 (87.2) (83.8)
Cumulative effect of accounting change, net of Federal
income taxes................................................ - - (23.1)
----------------- ----------------- -----------------
Net Earnings.................................................. $ 708.2 $ 437.2 $ 10.3
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
Common stock, at par value, beginning and end of year......... $ 2.5 $ 2.5 $ 2.5
----------------- ----------------- -----------------
Capital in excess of par value, beginning of year............. 3,105.8 3,105.8 3,105.8
Additional capital in excess of par value..................... 4.4 - -
----------------- ----------------- -----------------
Capital in excess of par value, end of year................... 3,110.2 3,105.8 3,105.8
Retained earnings, beginning of year.......................... 1,235.9 798.7 788.4
Net earnings.................................................. 708.2 437.2 10.3
----------------- ----------------- -----------------
Retained earnings, end of year................................ 1,944.1 1,235.9 798.7
----------------- ----------------- -----------------
Accumulated other comprehensive income,
beginning of year........................................... 516.3 177.0 361.4
Other comprehensive income.................................... (160.5) 339.3 (184.4)
----------------- ----------------- -----------------
Accumulated other comprehensive income, end of year........... 355.8 516.3 177.0
----------------- ----------------- -----------------
Total Shareholder's Equity, End of Year....................... $ 5,412.6 $ 4,860.5 $ 4,084.0
================= ================= =================
COMPREHENSIVE INCOME
Net earnings.................................................. $ 708.2 $ 437.2 $ 10.3
----------------- ----------------- -----------------
Change in unrealized gains (losses), net of reclassification
adjustment.................................................. (149.5) 343.7 (206.6)
Minimum pension liability adjustment.......................... (11.0) (4.4) 22.2
----------------- ----------------- -----------------
Other comprehensive income.................................... (160.5) 339.3 (184.4)
----------------- ----------------- -----------------
Comprehensive Income.......................................... $ 547.7 $ 776.5 $ (174.1)
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
Net earnings.................................................. $ 708.2 $ 437.2 $ 10.3
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Interest credited to policyholders' account balances........ 1,153.0 1,266.2 1,270.2
Universal life and investment-type product
policy fee income......................................... (1,056.2) (950.6) (874.0)
Investment (gains) losses................................... (100.2) 45.2 9.8
Change in Federal income tax payable........................ 123.1 (74.4) (197.1)
Other, net.................................................. (324.9) 169.4 330.2
----------------- ----------------- -----------------
Net cash provided by operating activities..................... 503.0 893.0 549.4
----------------- ----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................... 2,289.0 2,702.9 2,275.1
Sales....................................................... 16,972.1 10,385.9 8,964.3
Purchases................................................... (18,578.5) (13,205.4) (12,559.6)
Decrease (increase) in short-term investments............... 102.4 (555.0) 450.3
Decrease in loans to discontinued operations................ 660.0 420.1 1,017.0
Sale of subsidiaries........................................ - 261.0 -
Other, net.................................................. (341.8) (612.6) (281.0)
----------------- ----------------- -----------------
Net cash provided (used) by investing activities.............. 1,103.2 (603.1) (133.9)
----------------- ----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits.................................................. 1,508.1 1,281.7 1,925.4
Withdrawals............................................... (1,724.6) (1,886.8) (2,385.2)
Net (decrease) increase in short-term financings............ (243.5) 419.9 (.3)
Repayments of long-term debt................................ (24.5) (196.4) (124.8)
Payment of obligation to fund accumulated deficit of
discontinued operations................................... (87.2) (83.9) -
Other, net.................................................. (89.5) (62.7) (66.5)
----------------- ----------------- -----------------
Net cash used by financing activities......................... (661.2) (528.2) (651.4)
----------------- ----------------- -----------------
Change in cash and cash equivalents........................... 945.0 (238.3) (235.9)
Cash and cash equivalents, beginning of year.................. 300.5 538.8 774.7
----------------- ----------------- -----------------
Cash and Cash Equivalents, End of Year........................ $ 1,245.5 $ 300.5 $ 538.8
================= ================= =================
Supplemental cash flow information
Interest Paid............................................... $ 130.7 $ 217.1 $ 109.9
================= ================= =================
Income Taxes Paid (Refunded)................................ $ 254.3 $ 170.0 $ (10.0)
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) ORGANIZATION
The Equitable Life Assurance Society of the United States ("Equitable
Life") is a wholly owned subsidiary of The Equitable Companies
Incorporated (the "Holding Company"). Equitable Life's insurance
business is conducted principally by Equitable Life and its wholly owned
life insurance subsidiaries, Equitable of Colorado ("EOC"), and, prior
to December 31, 1996, Equitable Variable Life Insurance Company
("EVLICO"). Effective January 1, 1997, EVLICO was merged into Equitable
Life, which continues to conduct the Company's insurance business.
Equitable Life's investment management business, which comprises the
Investment Services segment, is conducted principally by Alliance
Capital Management L.P. ("Alliance"), in which Equitable Life has a
57.7% ownership interest, and Donaldson, Lufkin & Jenrette, Inc.
("DLJ"), an investment banking and brokerage affiliate in which
Equitable Life has a 32.5% ownership interest. AXA ("AXA"), a French
holding company for an international group of insurance and related
financial services companies, is the Holding Company's largest
shareholder, owning approximately 58.5% at December 31, 1998 (53.4% if
all securities convertible into, and options on, common stock were to be
converted or exercised).
The Insurance segment offers a variety of traditional, variable and
interest-sensitive life insurance products, disability income, annuity
products, mutual fund and other investment products to individuals and
small groups. It also administers traditional participating group
annuity contracts with conversion features, generally for corporate
qualified pension plans, and association plans which provide full
service retirement programs for individuals affiliated with professional
and trade associations. This segment includes Separate Accounts for
individual insurance and annuity products.
The Investment Services segment includes Alliance, the results of DLJ
which are accounted for on an equity basis, and, through June 10, 1997,
Equitable Real Estate Investment Management, Inc. ("EREIM"), a real
estate investment management subsidiary which was sold. Alliance
provides diversified investment fund management services to a variety of
institutional clients, including pension funds, endowments, and foreign
financial institutions, as well as to individual investors, principally
through a broad line of mutual funds. This segment includes
institutional Separate Accounts which provide various investment options
for large group pension clients, primarily deferred benefit contribution
plans, through pooled or single group accounts. DLJ's businesses include
securities underwriting, sales and trading, merchant banking, financial
advisory services, investment research, venture capital, correspondent
brokerage services, online interactive brokerage services and asset
management. DLJ serves institutional, corporate, governmental and
individual clients both domestically and internationally. EREIM provided
real estate investment management services, property management
services, mortgage servicing and loan asset management, and agricultural
investment management.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles ("GAAP") which
require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The accompanying consolidated financial statements include the accounts
of Equitable Life and its wholly owned life insurance subsidiary
(collectively, the "Insurance Group"); non-insurance subsidiaries,
principally Alliance and EREIM (see Note 5); and those partnerships and
joint ventures in which Equitable Life or its subsidiaries has control
F-6
<PAGE>
and a majority economic interest (collectively, including its
consolidated subsidiaries, the "Company"). The Company's investment in
DLJ is reported on the equity basis of accounting. Closed Block assets,
liabilities and results of operations are presented in the consolidated
financial statements as single line items (see Note 7). Unless
specifically stated, all other footnote disclosures contained herein
exclude the Closed Block related amounts.
All significant intercompany transactions and balances except those with
the Closed Block and discontinued operations (see Note 8) have been
eliminated in consolidation. The years "1998," "1997" and "1996" refer
to the years ended December 31, 1998, 1997 and 1996, respectively.
Certain reclassifications have been made in the amounts presented for
prior periods to conform these periods with the 1998 presentation.
Closed Block
On July 22, 1992, Equitable Life established the Closed Block for the
benefit of certain individual participating policies which were in force
on that date. The assets allocated to the Closed Block, together with
anticipated revenues from policies included in the Closed Block, were
reasonably expected to be sufficient to support such business, including
provision for payment of claims, certain expenses and taxes, and for
continuation of dividend scales payable in 1991, assuming the experience
underlying such scales continues.
Assets allocated to the Closed Block inure solely to the benefit of the
Closed Block policyholders and will not revert to the benefit of the
Holding Company. No reallocation, transfer, borrowing or lending of
assets can be made between the Closed Block and other portions of
Equitable Life's General Account, any of its Separate Accounts or any
affiliate of Equitable Life without the approval of the New York
Superintendent of Insurance (the "Superintendent"). Closed Block assets
and liabilities are carried on the same basis as similar assets and
liabilities held in the General Account. The excess of Closed Block
liabilities over Closed Block assets represents the expected future
post-tax contribution from the Closed Block which would be recognized in
income over the period the policies and contracts in the Closed Block
remain in force.
Discontinued Operations
Discontinued operations include the Group Non-Participating Wind-Up
Annuities ("Wind-Up Annuities") and the Guaranteed Interest Contract
("GIC") lines of business. An allowance was established for the premium
deficiency reserve for Wind-Up Annuities and estimated future losses of
the GIC line of business. Management reviews the adequacy of the
allowance each quarter and believes the allowance for future losses at
December 31, 1998 is adequate to provide for all future losses; however,
the quarterly allowance review continues to involve numerous estimates
and subjective judgments regarding the expected performance of
Discontinued Operations Investment Assets. There can be no assurance the
losses provided for will not differ from the losses ultimately realized.
To the extent actual results or future projections of the discontinued
operations differ from management's current best estimates and
assumptions underlying the allowance for future losses, the difference
would be reflected in the consolidated statements of earnings in
discontinued operations. In particular, to the extent income, sales
proceeds and holding periods for equity real estate differ from
management's previous assumptions, periodic adjustments to the allowance
are likely to result (see Note 8).
Accounting Changes
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosures about Segments of an Enterprise and Related Information".
SFAS No. 131 establishes standards for public companies to report
information about operating segments in annual and interim financial
statements issued to shareholders. It also specifies related disclosure
requirements for products and services, geographic areas and major
customers. Generally, financial information must be reported using the
basis management uses to make operating decisions and to evaluate
business performance. The Company implemented SFAS No. 131 effective
December 31, 1998 and continues to identify two operating segments to
reflect its major businesses: Insurance and Investment Services. While
the segment descriptions are the same as those previously reported,
certain amounts have been reattributed between the two reportable
segments. Prior period comparative segment information has been
restated.
F-7
<PAGE>
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use,"
which requires capitalization of external and certain internal costs
incurred to obtain or develop internal-use computer software during the
application development stage. The Company applied the provisions of SOP
98-1 prospectively effective January 1, 1998. The adoption of SOP 98-1
did not have a material impact on the Company's consolidated financial
statements. Capitalized internal-use software is amortized on a
straight-line basis over the estimated useful life of the software.
The Company implemented SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of
January 1, 1996. SFAS No. 121 requires long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate the carrying value of such assets may
not be recoverable. Effective with SFAS No. 121's adoption, impaired
real estate is written down to fair value with the impairment loss being
included in investment gains (losses), net. Before implementing SFAS No.
121, valuation allowances on real estate held for the production of
income were computed using the forecasted cash flows of the respective
properties discounted at a rate equal to the Company's cost of funds.
Adoption of the statement resulted in the release of valuation
allowances of $152.4 million and recognition of impairment losses of
$144.0 million on real estate held for production of income. Real estate
which management intends to sell or abandon is classified as real estate
held for sale. Valuation allowances on real estate held for sale
continue to be computed using the lower of depreciated cost or estimated
fair value, net of disposition costs. Initial adoption of the impairment
requirements of SFAS No. 121 to other assets to be disposed of resulted
in a charge for the cumulative effect of an accounting change of $23.1
million, net of a Federal income tax benefit of $12.4 million, due to
the writedown to fair value of building improvements relating to
facilities vacated in 1996.
New Accounting Pronouncements
In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage
Loans Held for Sale by a Mortgage Banking Enterprise," which amends
existing accounting and reporting standards for certain activities of
mortgage banking enterprises and other enterprises that conduct
operations that are substantially similar to the primary operations of a
mortgage banking enterprise. This statement is effective for the first
fiscal quarter beginning after December 15, 1998. This statement is not
expected to have a material impact on the Company's consolidated
financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain
derivatives embedded in other contracts, and for hedging activities. It
requires all derivatives to be recognized on the balance sheet at fair
value. The accounting for changes in the fair value of a derivative
depends on its intended use. Derivatives not used in hedging activities
must be adjusted to fair value through earnings. Changes in the fair
value of derivatives used in hedging activities will, depending on the
nature of the hedge, either be offset in earnings against the change in
fair value of the hedged item attributable to the risk being hedged or
recognized in other comprehensive income until the hedged item affects
earnings. For all hedging activities, the ineffective portion of a
derivative's change in fair value will be immediately recognized in
earnings.
SFAS No. 133 requires adoption in fiscal years beginning after June 15,
1999 and permits early adoption as of the beginning of any fiscal
quarter following issuance of the statement. Retroactive application to
financial statements of prior periods is prohibited. The Company expects
to adopt SFAS No. 133 effective January 1, 2000. Adjustments resulting
from initial adoption of the new requirements will be reported in a
manner similar to the cumulative effect of a change in accounting
principle and will be reflected in net income or accumulated other
comprehensive income based upon existing hedging relationships, if any.
Management currently is assessing the impact of adoption. However,
Alliance's adoption is not expected to have a significant impact on the
Company's consolidated balance sheet or statement of earnings. Also,
since most of DLJ's derivatives are carried at fair values, the
Company's consolidated earnings and financial position are not expected
to be significantly affected by DLJ's adoption of the new requirements.
F-8
<PAGE>
In late 1998, the AICPA issued SOP 98-7, "Deposit Accounting: Accounting
for Insurance and Reinsurance Contracts that Do Not Transfer Insurance
Risk". This SOP, effective for fiscal years beginning after June 15,
1999, provides guidance to both the insured and insurer on how to apply
the deposit method of accounting when it is required for insurance and
reinsurance contracts that do not transfer insurance risk. The SOP does
not address or change the requirements as to when deposit accounting
should be applied. SOP 98-7 applies to all entities and all insurance
and reinsurance contracts that do not transfer insurance risk except for
long-duration life and health insurance contracts. This SOP is not
expected to have a material impact on the Company's consolidated
financial statements.
In December 1997, the AICPA issued SOP 97-3, "Accounting by Insurance
and Other Enterprises for Insurance-Related Assessments". SOP 97-3
provides guidance for assessments related to insurance activities and
requirements for disclosure of certain information. SOP 97-3 is
effective for financial statements issued for periods beginning after
December 31, 1998. Restatement of previously issued financial statements
is not required. SOP 97-3 is not expected to have a material impact on
the Company's consolidated financial statements.
Valuation of Investments
Fixed maturities identified as available for sale are reported at
estimated fair value. Fixed maturities, which the Company has both the
ability and the intent to hold to maturity, are stated principally at
amortized cost. The amortized cost of fixed maturities is adjusted for
impairments in value deemed to be other than temporary.
Valuation allowances are netted against the asset categories to which
they apply.
Mortgage loans on real estate are stated at unpaid principal balances,
net of unamortized discounts and valuation allowances. Valuation
allowances are based on the present value of expected future cash flows
discounted at the loan's original effective interest rate or the
collateral value if the loan is collateral dependent. However, if
foreclosure is or becomes probable, the measurement method used is
collateral value.
Real estate, including real estate acquired in satisfaction of debt, is
stated at depreciated cost less valuation allowances. At the date of
foreclosure (including in-substance foreclosure), real estate acquired
in satisfaction of debt is valued at estimated fair value. Impaired real
estate is written down to fair value with the impairment loss being
included in investment gains (losses), net. Valuation allowances on real
estate held for sale are computed using the lower of depreciated cost or
current estimated fair value, net of disposition costs. Depreciation is
discontinued on real estate held for sale. Prior to the adoption of SFAS
No. 121, valuation allowances on real estate held for production of
income were computed using the forecasted cash flows of the respective
properties discounted at a rate equal to the Company's cost of funds.
Policy loans are stated at unpaid principal balances.
Partnerships and joint venture interests in which the Company does not
have control or a majority economic interest are reported on the equity
basis of accounting and are included either with equity real estate or
other equity investments, as appropriate.
Common stocks are carried at estimated fair value and are included in
other equity investments.
Short-term investments are stated at amortized cost which approximates
fair value and are included with other invested assets.
F-9
<PAGE>
Cash and cash equivalents includes cash on hand, amounts due from banks
and highly liquid debt instruments purchased with an original maturity
of three months or less.
All securities are recorded in the consolidated financial statements on
a trade date basis.
Net Investment Income, Investment Gains, Net and Unrealized Investment
Gains (Losses)
Net investment income and realized investment gains (losses)
(collectively, "investment results") related to certain participating
group annuity contracts which are passed through to the contractholders
are reflected as interest credited to policyholders' account balances.
Realized investment gains (losses) are determined by specific
identification and are presented as a component of revenue. Changes in
valuation allowances are included in investment gains (losses).
Unrealized investment gains and losses on equity securities and fixed
maturities available for sale held by the Company are accounted for as a
separate component of accumulated comprehensive income, net of related
deferred Federal income taxes, amounts attributable to discontinued
operations, participating group annuity contracts and deferred policy
acquisition costs ("DAC") related to universal life and investment-type
products and participating traditional life contracts.
Recognition of Insurance Income and Related Expenses
Premiums from universal life and investment-type contracts are reported
as deposits to policyholders' account balances. Revenues from these
contracts consist of amounts assessed during the period against
policyholders' account balances for mortality charges, policy
administration charges and surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the
period in excess of related policyholders' account balances.
Premiums from participating and non-participating traditional life and
annuity policies with life contingencies generally are recognized as
income when due. Benefits and expenses are matched with such income so
as to result in the recognition of profits over the life of the
contracts. This match is accomplished by means of the provision for
liabilities for future policy benefits and the deferral and subsequent
amortization of policy acquisition costs.
For contracts with a single premium or a limited number of premium
payments due over a significantly shorter period than the total period
over which benefits are provided, premiums are recorded as income when
due with any excess profit deferred and recognized in income in a
constant relationship to insurance in force or, for annuities, the
amount of expected future benefit payments.
Premiums from individual health contracts are recognized as income over
the period to which the premiums relate in proportion to the amount of
insurance protection provided.
Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
underwriting, agency and policy issue expenses, all of which vary with
and are primarily related to the production of new business, are
deferred. DAC is subject to recoverability testing at the time of policy
issue and loss recognition testing at the end of each accounting period.
For universal life products and investment-type products, DAC is
amortized over the expected total life of the contract group (periods
ranging from 25 to 35 years and 5 to 17 years, respectively) as a
constant percentage of estimated gross profits arising principally from
investment results, mortality and expense margins and surrender charges
based on historical and anticipated future experience, updated at the
end of each accounting period. The effect on the amortization of DAC of
revisions to estimated gross profits is reflected in earnings in the
period such estimated gross profits are revised. The effect on the DAC
asset that would result from realization of unrealized gains (losses) is
recognized with an offset to accumulated other comprehensive income in
consolidated shareholder's equity as of the balance sheet date.
F-10
<PAGE>
For participating traditional life policies (substantially all of which
are in the Closed Block), DAC is amortized over the expected total life
of the contract group (40 years) as a constant percentage based on the
present value of the estimated gross margin amounts expected to be
realized over the life of the contracts using the expected investment
yield. At December 31, 1998, the expected investment yield, excluding
policy loans, generally ranged from 7.29% grading to 6.5% over a 20 year
period. Estimated gross margin includes anticipated premiums and
investment results less claims and administrative expenses, changes in
the net level premium reserve and expected annual policyholder
dividends. The effect on the amortization of DAC of revisions to
estimated gross margins is reflected in earnings in the period such
estimated gross margins are revised. The effect on the DAC asset that
would result from realization of unrealized gains (losses) is recognized
with an offset to accumulated comprehensive income in consolidated
shareholder's equity as of the balance sheet date.
For non-participating traditional life and annuity policies with life
contingencies, DAC is amortized in proportion to anticipated premiums.
Assumptions as to anticipated premiums are estimated at the date of
policy issue and are consistently applied during the life of the
contracts. Deviations from estimated experience are reflected in
earnings in the period such deviations occur. For these contracts, the
amortization periods generally are for the total life of the policy.
For individual health benefit insurance, DAC is amortized over the
expected average life of the contracts (10 years for major medical
policies and 20 years for disability income ("DI") products) in
proportion to anticipated premium revenue at time of issue.
Policyholders' Account Balances and Future Policy Benefits
Policyholders' account balances for universal life and investment-type
contracts are equal to the policy account values. The policy account
values represents an accumulation of gross premium payments plus
credited interest less expense and mortality charges and withdrawals.
For participating traditional life policies, future policy benefit
liabilities are calculated using a net level premium method on the basis
of actuarial assumptions equal to guaranteed mortality and dividend fund
interest rates. The liability for annual dividends represents the
accrual of annual dividends earned. Terminal dividends are accrued in
proportion to gross margins over the life of the contract.
For non-participating traditional life insurance policies, future policy
benefit liabilities are estimated using a net level premium method on
the basis of actuarial assumptions as to mortality, persistency and
interest established at policy issue. Assumptions established at policy
issue as to mortality and persistency are based on the Insurance Group's
experience which, together with interest and expense assumptions,
includes a margin for adverse deviation. When the liabilities for future
policy benefits plus the present value of expected future gross premiums
for a product are insufficient to provide for expected future policy
benefits and expenses for that product, DAC is written off and
thereafter, if required, a premium deficiency reserve is established by
a charge to earnings. Benefit liabilities for traditional annuities
during the accumulation period are equal to accumulated contractholders'
fund balances and after annuitization are equal to the present value of
expected future payments. Interest rates used in establishing such
liabilities range from 2.25% to 11.5% for life insurance liabilities and
from 2.25% to 13.5% for annuity liabilities.
During the fourth quarter of 1996 a loss recognition study of
participating group annuity contracts and conversion annuities ("Pension
Par") was completed which included management's revised estimate of
assumptions, such as expected mortality and future investment returns.
The study's results prompted management to establish a premium
deficiency reserve which decreased earnings from continuing operations
and net earnings by $47.5 million ($73.0 million pre-tax).
Individual health benefit liabilities for active lives are estimated
using the net level premium method and assumptions as to future
morbidity, withdrawals and interest. Benefit liabilities for disabled
lives are estimated using the present value of benefits method and
experience assumptions as to claim terminations, expenses and interest.
F-11
<PAGE>
During the fourth quarter of 1996, the Company completed a loss
recognition study of the DI business which incorporated management's
revised estimates of future experience with regard to morbidity,
investment returns, claims and administration expenses and other
factors. The study indicated DAC was not recoverable and the reserves
were not sufficient. Earnings from continuing operations and net
earnings decreased by $208.0 million ($320.0 million pre-tax) as a
result of strengthening DI reserves by $175.0 million and writing off
unamortized DAC of $145.0 million related to DI products issued prior to
July 1993. The determination of DI reserves requires making assumptions
and estimates relating to a variety of factors, including morbidity and
interest rates, claims experience and lapse rates based on then known
facts and circumstances. Such factors as claim incidence and termination
rates can be affected by changes in the economic, legal and regulatory
environments and work ethic. While management believes its Pension Par
and DI reserves have been calculated on a reasonable basis and are
adequate, there can be no assurance reserves will be sufficient to
provide for future liabilities.
Claim reserves and associated liabilities for individual DI and major
medical policies were $938.6 million and $886.7 million at December 31,
1998 and 1997, respectively. Incurred benefits (benefits paid plus
changes in claim reserves) and benefits paid for individual DI and major
medical policies (excluding reserve strengthening in 1996) are
summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Incurred benefits related to current year.......... $ 202.1 $ 190.2 $ 189.0
Incurred benefits related to prior years........... 22.2 2.1 69.1
----------------- ---------------- -----------------
Total Incurred Benefits............................ $ 224.3 $ 192.3 $ 258.1
================= ================ =================
Benefits paid related to current year.............. $ 17.0 $ 28.8 $ 32.6
Benefits paid related to prior years............... 155.4 146.2 153.3
----------------- ---------------- -----------------
Total Benefits Paid................................ $ 172.4 $ 175.0 $ 185.9
================= ================ =================
</TABLE>
Policyholders' Dividends
The amount of policyholders' dividends to be paid (including those on
policies included in the Closed Block) is determined annually by
Equitable Life's board of directors. The aggregate amount of
policyholders' dividends is related to actual interest, mortality,
morbidity and expense experience for the year and judgment as to the
appropriate level of statutory surplus to be retained by Equitable Life.
At December 31, 1998, participating policies, including those in the
Closed Block, represent approximately 19.9% ($49.3 billion) of directly
written life insurance in force, net of amounts ceded.
Federal Income Taxes
The Company files a consolidated Federal income tax return with the
Holding Company and its consolidated subsidiaries. Current Federal
income taxes are charged or credited to operations based upon amounts
estimated to be payable or recoverable as a result of taxable operations
for the current year. Deferred income tax assets and liabilities are
recognized based on the difference between financial statement carrying
amounts and income tax bases of assets and liabilities using enacted
income tax rates and laws.
Separate Accounts
Separate Accounts are established in conformity with the New York State
Insurance Law and generally are not chargeable with liabilities that
arise from any other business of the Insurance Group. Separate Accounts
assets are subject to General Account claims only to the extent the
value of such assets exceeds Separate Accounts liabilities.
F-12
<PAGE>
Assets and liabilities of the Separate Accounts, representing net
deposits and accumulated net investment earnings less fees, held
primarily for the benefit of contractholders, and for which the
Insurance Group does not bear the investment risk, are shown as separate
captions in the consolidated balance sheets. The Insurance Group bears
the investment risk on assets held in one Separate Account; therefore,
such assets are carried on the same basis as similar assets held in the
General Account portfolio. Assets held in the other Separate Accounts
are carried at quoted market values or, where quoted values are not
available, at estimated fair values as determined by the Insurance
Group.
The investment results of Separate Accounts on which the Insurance Group
does not bear the investment risk are reflected directly in Separate
Accounts liabilities. For 1998, 1997 and 1996, investment results of
such Separate Accounts were $4,591.0 million, $3,411.1 million and
$2,970.6 million, respectively.
Deposits to Separate Accounts are reported as increases in Separate
Accounts liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges on all Separate Accounts are
included in revenues.
Employee Stock Option Plan
The Company accounts for stock option plans sponsored by the Holding
Company, DLJ and Alliance in accordance with the provisions of
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. In accordance
with the Statement, compensation expense is recorded on the date of
grant only if the current market price of the underlying stock exceeds
the option price. See Note 22 for the pro forma disclosures for the
Holding Company, DLJ and Alliance required by SFAS No. 123, "Accounting
for Stock-Based Compensation".
F-13
<PAGE>
3) INVESTMENTS
The following tables provide additional information relating to fixed
maturities and equity securities:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------------- ----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C> <C>
December 31, 1998
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 14,520.8 $ 793.6 $ 379.6 $ 14,934.8
Mortgage-backed.................... 1,807.9 23.3 .9 1,830.3
U.S. Treasury securities and
U.S. government and
agency securities................ 1,464.1 107.6 .7 1,571.0
States and political subdivisions.. 55.0 9.9 - 64.9
Foreign governments................ 363.3 20.9 30.0 354.2
Redeemable preferred stock......... 242.7 7.0 11.2 238.5
----------------- ----------------- ---------------- -----------------
Total Available for Sale............... $ 18,453.8 $ 962.3 $ 422.4 $ 18,993.7
================= ================= ================ =================
Held to Maturity: Corporate......... $ 125.0 $ - $ - $ 125.0
================= ================= ================ =================
Equity Securities:
Common stock......................... $ 58.3 $ 114.9 $ 22.5 $ 150.7
================= ================= ================ =================
December 31, 1997
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 14,850.5 $ 785.0 $ 74.5 $ 15,561.0
Mortgage-backed.................... 1,702.8 23.5 1.3 1,725.0
U.S. Treasury securities and
U.S. government and
agency securities................ 1,583.2 83.9 .6 1,666.5
States and political subdivisions.. 52.8 6.8 .1 59.5
Foreign governments................ 442.4 44.8 2.0 485.2
Redeemable preferred stock......... 128.0 6.7 1.0 133.7
----------------- ----------------- ---------------- -----------------
Total Available for Sale............... $ 18,759.7 $ 950.7 $ 79.5 $ 19,630.9
================= ================= ================ =================
Equity Securities:
Common stock......................... $ 408.4 $ 48.7 $ 15.0 $ 442.1
================= ================= ================ =================
</TABLE>
For publicly traded fixed maturities and equity securities, estimated
fair value is determined using quoted market prices. For fixed
maturities without a readily ascertainable market value, the Company
determines an estimated fair value using a discounted cash flow
approach, including provisions for credit risk, generally based on the
assumption such securities will be held to maturity. Estimated fair
values for equity securities, substantially all of which do not have a
readily ascertainable market value, have been determined by the Company.
Such estimated fair values do not necessarily represent the values for
which these securities could have been sold at the dates of the
consolidated balance sheets. At December 31, 1998 and 1997, securities
without a readily ascertainable market value having an amortized cost of
$3,539.9 million and $3,759.2 million, respectively, had estimated fair
values of $3,748.5 million and $3,903.9 million, respectively.
F-14
<PAGE>
The contractual maturity of bonds at December 31, 1998 is shown below:
<TABLE>
<CAPTION>
Available for Sale
------------------------------------
Amortized Estimated
Cost Fair Value
---------------- -----------------
(In Millions)
<S> <C> <C>
Due in one year or less................................................ $ 324.8 $ 323.4
Due in years two through five.......................................... 3,778.2 3,787.9
Due in years six through ten........................................... 6,543.4 6,594.1
Due after ten years.................................................... 5,756.8 6,219.5
Mortgage-backed securities............................................. 1,807.9 1,830.3
---------------- -----------------
Total.................................................................. $ 18,211.1 $ 18,755.2
================ =================
</TABLE>
Corporate bonds held to maturity with an amortized cost and estimated
fair value of $125.0 million are due in one year or less.
Bonds not due at a single maturity date have been included in the above
table in the year of final maturity. Actual maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
The Insurance Group's fixed maturity investment portfolio includes
corporate high yield securities consisting of public high yield bonds,
redeemable preferred stocks and directly negotiated debt in leveraged
buyout transactions. The Insurance Group seeks to minimize the higher
than normal credit risks associated with such securities by monitoring
concentrations in any single issuer or a particular industry group.
Certain of these corporate high yield securities are classified as other
than investment grade by the various rating agencies, i.e., a rating
below Baa or National Association of Insurance Commissioners ("NAIC")
designation of 3 (medium grade), 4 or 5 (below investment grade) or 6
(in or near default). At December 31, 1998, approximately 15.1% of the
$18,336.1 million aggregate amortized cost of bonds held by the Company
was considered to be other than investment grade.
In addition, the Insurance Group is an equity investor in limited
partnership interests which primarily invest in securities considered to
be other than investment grade.
Fixed maturity investments with restructured or modified terms are not
material.
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Balances, beginning of year........................ $ 384.5 $ 137.1 $ 325.3
SFAS No. 121 release............................... - - (152.4)
Additions charged to income........................ 86.2 334.6 125.0
Deductions for writedowns and
asset dispositions............................... (240.1) (87.2) (160.8)
----------------- ---------------- -----------------
Balances, End of Year.............................. $ 230.6 $ 384.5 $ 137.1
================= ================ =================
Balances, end of year comprise:
Mortgage loans on real estate.................... $ 34.3 $ 55.8 $ 50.4
Equity real estate............................... 196.3 328.7 86.7
----------------- ---------------- -----------------
Total.............................................. $ 230.6 $ 384.5 $ 137.1
================= ================ =================
</TABLE>
F-15
<PAGE>
At December 31, 1998, the carrying value of fixed maturities which are
non-income producing for the twelve months preceding the consolidated
balance sheet date was $60.8 million.
At December 31, 1998 and 1997, mortgage loans on real estate with
scheduled payments 60 days (90 days for agricultural mortgages) or more
past due or in foreclosure (collectively, "problem mortgage loans on
real estate") had an amortized cost of $7.0 million (0.2% of total
mortgage loans on real estate) and $23.4 million (0.9% of total mortgage
loans on real estate), respectively.
The payment terms of mortgage loans on real estate may from time to time
be restructured or modified. The investment in restructured mortgage
loans on real estate, based on amortized cost, amounted to $115.1
million and $183.4 million at December 31, 1998 and 1997, respectively.
Gross interest income on restructured mortgage loans on real estate that
would have been recorded in accordance with the original terms of such
loans amounted to $10.3 million, $17.2 million and $35.5 million in
1998, 1997 and 1996, respectively. Gross interest income on these loans
included in net investment income aggregated $8.3 million, $12.7 million
and $28.2 million in 1998, 1997 and 1996, respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1998 1997
------------------- -------------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses.................. $ 125.4 $ 196.7
Impaired mortgage loans without provision for losses............... 8.6 3.6
------------------- -------------------
Recorded investment in impaired mortgage loans..................... 134.0 200.3
Provision for losses............................................... (29.0) (51.8)
------------------- -------------------
Net Impaired Mortgage Loans........................................ $ 105.0 $ 148.5
=================== ===================
</TABLE>
Impaired mortgage loans without provision for losses are loans where the
fair value of the collateral or the net present value of the expected
future cash flows related to the loan equals or exceeds the recorded
investment. Interest income earned on loans where the collateral value
is used to measure impairment is recorded on a cash basis. Interest
income on loans where the present value method is used to measure
impairment is accrued on the net carrying value amount of the loan at
the interest rate used to discount the cash flows. Changes in the
present value attributable to changes in the amount or timing of
expected cash flows are reported as investment gains or losses.
During 1998, 1997 and 1996, respectively, the Company's average recorded
investment in impaired mortgage loans was $161.3 million, $246.9 million
and $552.1 million. Interest income recognized on these impaired
mortgage loans totaled $12.3 million, $15.2 million and $38.8 million
($.9 million, $2.3 million and $17.9 million recognized on a cash basis)
for 1998, 1997 and 1996, respectively.
The Insurance Group's investment in equity real estate is through direct
ownership and through investments in real estate joint ventures. At
December 31, 1998 and 1997, the carrying value of equity real estate
held for sale amounted to $836.2 million and $1,023.5 million,
respectively. For 1998, 1997 and 1996, respectively, real estate of $7.1
million, $152.0 million and $58.7 million was acquired in satisfaction
of debt. At December 31, 1998 and 1997, the Company owned $552.3 million
and $693.3 million, respectively, of real estate acquired in
satisfaction of debt.
Depreciation of real estate held for production of income is computed
using the straight-line method over the estimated useful lives of the
properties, which generally range from 40 to 50 years. Accumulated
depreciation on real estate was $374.8 million and $541.1 million at
December 31, 1998 and 1997, respectively. Depreciation expense on real
estate totaled $30.5 million, $74.9 million and $91.8 million for 1998,
1997 and 1996, respectively.
F-16
<PAGE>
4) JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information for real estate joint ventures
(25 and 29 individual ventures as of December 31, 1998 and 1997,
respectively) and for limited partnership interests accounted for under
the equity method, in which the Company has an investment of $10.0
million or greater and an equity interest of 10% or greater, is as
follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
BALANCE SHEETS
Investments in real estate, at depreciated cost........................ $ 913.7 $ 1,700.9
Investments in securities, generally at estimated fair value........... 636.9 1,374.8
Cash and cash equivalents.............................................. 85.9 105.4
Other assets........................................................... 279.8 584.9
---------------- -----------------
Total Assets........................................................... $ 1,916.3 $ 3,766.0
================ =================
Borrowed funds - third party........................................... $ 367.1 $ 493.4
Borrowed funds - the Company........................................... 30.1 31.2
Other liabilities...................................................... 197.2 284.0
---------------- -----------------
Total liabilities...................................................... 594.4 808.6
---------------- -----------------
Partners' capital...................................................... 1,321.9 2,957.4
---------------- -----------------
Total Liabilities and Partners' Capital................................ $ 1,916.3 $ 3,766.0
================ =================
Equity in partners' capital included above............................. $ 312.9 $ 568.5
Equity in limited partnership interests not included above............. 442.1 331.8
Other.................................................................. .7 4.3
---------------- -----------------
Carrying Value......................................................... $ 755.7 $ 904.6
================ =================
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures............. $ 246.1 $ 310.5 $ 348.9
Revenues of other limited partnership interests.... 128.9 506.3 386.1
Interest expense - third party..................... (33.3) (91.8) (111.0)
Interest expense - the Company..................... (2.6) (7.2) (30.0)
Other expenses..................................... (197.0) (263.6) (282.5)
----------------- ---------------- -----------------
Net Earnings....................................... $ 142.1 $ 454.2 $ 311.5
================= ================ =================
Equity in net earnings included above.............. $ 59.6 $ 76.7 $ 73.9
Equity in net earnings of limited partnership
interests not included above..................... 22.7 69.5 35.8
Other.............................................. - (.9) .9
----------------- ---------------- -----------------
Total Equity in Net Earnings....................... $ 82.3 $ 145.3 $ 110.6
================= ================ =================
</TABLE>
F-17
<PAGE>
5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Fixed maturities................................... $ 1,489.0 $ 1,459.4 $ 1,307.4
Mortgage loans on real estate...................... 235.4 260.8 303.0
Equity real estate................................. 356.1 390.4 442.4
Other equity investments........................... 83.8 156.9 122.0
Policy loans....................................... 144.9 177.0 160.3
Other investment income............................ 185.7 181.7 217.4
----------------- ---------------- -----------------
Gross investment income.......................... 2,494.9 2,626.2 2,552.5
Investment expenses.............................. (266.8) (343.4) (348.9)
----------------- ---------------- -----------------
Net Investment Income.............................. $ 2,228.1 $ 2,282.8 $ 2,203.6
================= ================ =================
</TABLE>
Investment gains (losses), net, including changes in the valuation
allowances, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Fixed maturities................................... $ (24.3) $ 88.1 $ 60.5
Mortgage loans on real estate...................... (10.9) (11.2) (27.3)
Equity real estate................................. 74.5 (391.3) (79.7)
Other equity investments........................... 29.9 14.1 18.9
Sale of subsidiaries............................... (2.6) 252.1 -
Issuance and sales of Alliance Units............... 19.8 - 20.6
Issuance and sale of DLJ common stock.............. 18.2 3.0 -
Other.............................................. (4.4) - (2.8)
----------------- ---------------- -----------------
Investment Gains (Losses), Net..................... $ 100.2 $ (45.2) $ (9.8)
================= ================ =================
</TABLE>
Writedowns of fixed maturities amounted to $101.6 million, $11.7 million
and $29.9 million for 1998, 1997 and 1996, respectively, and writedowns
of equity real estate subsequent to the adoption of SFAS No. 121
amounted to $136.4 million for 1997. In the fourth quarter of 1997, the
Company reclassified $1,095.4 million depreciated cost of equity real
estate from real estate held for the production of income to real estate
held for sale. Additions to valuation allowances of $227.6 million were
recorded upon these transfers. Additionally, in fourth quarter 1997,
$132.3 million of writedowns on real estate held for production of
income were recorded.
For 1998, 1997 and 1996, respectively, proceeds received on sales of
fixed maturities classified as available for sale amounted to $15,961.0
million, $9,789.7 million and $8,353.5 million. Gross gains of $149.3
million, $166.0 million and $154.2 million and gross losses of $95.1
million, $108.8 million and $92.7 million, respectively, were realized
on these sales. The change in unrealized investment gains (losses)
related to fixed maturities classified as available for sale for 1998,
1997 and 1996 amounted to $(331.7) million, $513.4 million and $(258.0)
million, respectively.
For 1998, 1997 and 1996, investment results passed through to certain
participating group annuity contracts as interest credited to
policyholders' account balances amounted to $136.9 million, $137.5
million and $136.7 million, respectively.
F-18
<PAGE>
On June 10, 1997, Equitable Life sold EREIM (other than its interest in
Column Financial, Inc.) ("ERE") to Lend Lease Corporation Limited ("Lend
Lease"), a publicly traded, international property and financial
services company based in Sydney, Australia. The total purchase price
was $400.0 million and consisted of $300.0 million in cash and a $100.0
million note which was paid in 1998. The Company recognized an
investment gain of $162.4 million, net of Federal income tax of $87.4
million as a result of this transaction. Equitable Life entered into
long-term advisory agreements whereby ERE continues to provide
substantially the same services to Equitable Life's General Account and
Separate Accounts, for substantially the same fees, as provided prior to
the sale.
Through June 10, 1997 and for the year ended December 31, 1996,
respectively, the businesses sold reported combined revenues of $91.6
million and $226.1 million and combined net earnings of $10.7 million
and $30.7 million.
In 1996, Alliance acquired the business of Cursitor Holdings L.P. and
Cursitor Holdings Limited (collectively, "Cursitor") for approximately
$159.0 million. The purchase price consisted of $94.3 million in cash,
1.8 million of Alliance's publicly traded units ("Alliance Units"), 6%
notes aggregating $21.5 million payable ratably over four years, and
additional consideration to be determined at a later date but currently
estimated to not exceed $10.0 million. The excess of the purchase price,
including acquisition costs and minority interest, over the fair value
of Cursitor's net assets acquired resulted in the recognition of
intangible assets consisting of costs assigned to contracts acquired and
goodwill of approximately $122.8 million and $38.3 million,
respectively. The Company recognized an investment gain of $20.6 million
as a result of the issuance of Alliance Units in this transaction. On
June 30, 1997, Alliance reduced the recorded value of goodwill and
contracts associated with Alliance's acquisition of Cursitor by $120.9
million. This charge reflected Alliance's view that Cursitor's
continuing decline in assets under management and its reduced
profitability, resulting from relative investment underperformance, no
longer supported the carrying value of its investment. As a result, the
Company's earnings from continuing operations before cumulative effect
of accounting change for 1997 included a charge of $59.5 million, net of
a Federal income tax benefit of $10.0 million and minority interest of
$51.4 million. The remaining balance of intangible assets is being
amortized over its estimated useful life of 20 years. At December 31,
1998, the Company's ownership of Alliance Units was approximately 56.7%.
F-19
<PAGE>
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of accumulated comprehensive income and
the changes for the corresponding years, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Balance, beginning of year......................... $ 533.6 $ 189.9 $ 396.5
Changes in unrealized investment gains (losses).... (242.4) 543.3 (297.6)
Changes in unrealized investment losses
(gains) attributable to:
Participating group annuity contracts.......... (5.7) 53.2 -
DAC............................................ 13.2 (89.0) 42.3
Deferred Federal income taxes.................. 85.4 (163.8) 48.7
----------------- ---------------- -----------------
Balance, End of Year............................... $ 384.1 $ 533.6 $ 189.9
================= ================ =================
Balance, end of year comprises:
Unrealized investment gains on:
Fixed maturities............................... $ 539.9 $ 871.2 $ 357.8
Other equity investments....................... 92.4 33.7 31.6
Other, principally Closed Block................ 111.1 80.9 53.1
----------------- ---------------- -----------------
Total........................................ 743.4 985.8 442.5
Amounts of unrealized investment gains
attributable to:
Participating group annuity contracts........ (24.7) (19.0) (72.2)
DAC.......................................... (127.8) (141.0) (52.0)
Deferred Federal income taxes................ (206.8) (292.2) (128.4)
----------------- ---------------- -----------------
Total.............................................. $ 384.1 $ 533.6 $ 189.9
================= ================ =================
</TABLE>
6) ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income represents cumulative gains and
losses on items that are not reflected in earnings. The balances for the
years 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Unrealized gains on investments.................... $ 384.1 $ 533.6 $ 189.9
Minimum pension liability.......................... (28.3) (17.3) (12.9)
----------------- ---------------- -----------------
Total Accumulated Other
Comprehensive Income............................. $ 355.8 $ 516.3 $ 177.0
================= ================ =================
</TABLE>
F-20
<PAGE>
The components of other comprehensive income for the years 1998, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Net unrealized gains (losses) on investment
securities:
Net unrealized gains (losses) arising during
the period..................................... $ (186.1) $ 564.0 $ (249.8)
Reclassification adjustment for (gains) losses
included in net earnings....................... (56.3) (20.7) (47.8)
----------------- ---------------- -----------------
Net unrealized gains (losses) on investment
securities....................................... (242.4) 543.3 (297.6)
Adjustments for policyholder liabilities,
DAC and deferred
Federal income taxes............................. 92.9 (199.6) 91.0
----------------- ---------------- -----------------
Change in unrealized gains (losses), net of
reclassification and adjustments................. (149.5) 343.7 (206.6)
Change in minimum pension liability................ (11.0) (4.4) 22.2
----------------- ---------------- -----------------
Total Other Comprehensive Income................... $ (160.5) $ 339.3 $ (184.4)
================= ================ =================
</TABLE>
7) CLOSED BLOCK
Summarized financial information for the Closed Block follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
Assets
Fixed Maturities:
Available for sale, at estimated fair value (amortized cost,
$4,149.0 and $4,059.4)........................................... $ 4,373.2 $ 4,231.0
Mortgage loans on real estate........................................ 1,633.4 1,341.6
Policy loans......................................................... 1,641.2 1,700.2
Cash and other invested assets....................................... 86.5 282.0
DAC.................................................................. 676.5 775.2
Other assets......................................................... 221.6 236.6
----------------- -----------------
Total Assets......................................................... $ 8,632.4 $ 8,566.6
================= =================
Liabilities
Future policy benefits and policyholders' account balances........... $ 9,013.1 $ 8,993.2
Other liabilities.................................................... 63.9 80.5
----------------- -----------------
Total Liabilities.................................................... $ 9,077.0 $ 9,073.7
================= =================
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Revenues
Premiums and other revenue......................... $ 661.7 $ 687.1 $ 724.8
Investment income (net of investment
expenses of $15.5, $27.0 and $27.3).............. 569.7 574.9 546.6
Investment losses, net............................. .5 (42.4) (5.5)
----------------- ---------------- -----------------
Total revenues............................... 1,231.9 1,219.6 1,265.9
----------------- ---------------- -----------------
Benefits and Other Deductions
Policyholders' benefits and dividends.............. 1,082.0 1,066.7 1,106.3
Other operating costs and expenses................. 62.8 50.4 34.6
----------------- ---------------- -----------------
Total benefits and other deductions.......... 1,144.8 1,117.1 1,140.9
----------------- ---------------- -----------------
Contribution from the Closed Block................. $ 87.1 $ 102.5 $ 125.0
================= ================ =================
</TABLE>
At December 31, 1998 and 1997, problem mortgage loans on real estate had
an amortized cost of $5.1 million and $8.1 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had an amortized cost of $26.0 million and $70.5 million,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses...................... $ 55.5 $ 109.1
Impaired mortgage loans without provision for losses................... 7.6 .6
---------------- -----------------
Recorded investment in impaired mortgages.............................. 63.1 109.7
Provision for losses................................................... (10.1) (17.4)
---------------- -----------------
Net Impaired Mortgage Loans............................................ $ 53.0 $ 92.3
================ =================
</TABLE>
During 1998, 1997 and 1996, the Closed Block's average recorded
investment in impaired mortgage loans was $85.5 million, $110.2 million
and $153.8 million, respectively. Interest income recognized on these
impaired mortgage loans totaled $4.7 million, $9.4 million and $10.9
million ($1.5 million, $4.1 million and $4.7 million recognized on a
cash basis) for 1998, 1997 and 1996, respectively.
Valuation allowances amounted to $11.1 million and $18.5 million on
mortgage loans on real estate and $15.4 million and $16.8 million on
equity real estate at December 31, 1998 and 1997, respectively. As of
January 1, 1996, the adoption of SFAS No. 121 resulted in the
recognition of impairment losses of $5.6 million on real estate held for
production of income. Writedowns of fixed maturities amounted to $3.5
million and $12.8 million for 1997 and 1996, respectively. Writedowns of
equity real estate subsequent to the adoption of SFAS No. 121 amounted
to $28.8 million for 1997.
In the fourth quarter of 1997, $72.9 million depreciated cost of equity
real estate held for production of income was reclassified to equity
real estate held for sale. Additions to valuation allowances of $15.4
million were recorded upon these transfers. Additionally, in fourth
quarter 1997, $28.8 million of writedowns on real estate held for
production of income were recorded.
Many expenses related to Closed Block operations are charged to
operations outside of the Closed Block; accordingly, the contribution
from the Closed Block does not represent the actual profitability of the
Closed Block operations. Operating costs and expenses outside of the
Closed Block are, therefore, disproportionate to the business outside of
the Closed Block.
F-22
<PAGE>
8) DISCONTINUED OPERATIONS
Summarized financial information for discontinued operations follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
Assets
Mortgage loans on real estate........................................ $ 553.9 $ 635.2
Equity real estate................................................... 611.0 874.5
Other equity investments............................................. 115.1 209.3
Other invested assets................................................ 24.9 152.4
----------------- -----------------
Total investments.................................................. 1,304.9 1,871.4
Cash and cash equivalents............................................ 34.7 106.8
Other assets......................................................... 219.0 243.8
----------------- -----------------
Total Assets......................................................... $ 1,558.6 $ 2,222.0
================= =================
Liabilities
Policyholders' liabilities........................................... $ 1,021.7 $ 1,048.3
Allowance for future losses.......................................... 305.1 259.2
Amounts due to continuing operations................................. 2.7 572.8
Other liabilities.................................................... 229.1 341.7
----------------- -----------------
Total Liabilities.................................................... $ 1,558.6 $ 2,222.0
================= =================
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Revenues
Investment income (net of investment
expenses of $63.3, $97.3 and $127.5)............. $ 160.4 $ 188.6 $ 245.4
Investment gains (losses), net..................... 35.7 (173.7) (18.9)
Policy fees, premiums and other income............. (4.3) .2 .2
----------------- ---------------- -----------------
Total revenues..................................... 191.8 15.1 226.7
Benefits and other deductions...................... 141.5 169.5 250.4
Earnings added (losses charged) to allowance
for future losses................................ 50.3 (154.4) (23.7)
----------------- ---------------- -----------------
Pre-tax loss from operations....................... - - -
Pre-tax earnings from releasing (loss from
strengthening) of the allowance for future
losses........................................... 4.2 (134.1) (129.0)
Federal income tax (expense) benefit............... (1.5) 46.9 45.2
----------------- ---------------- -----------------
Earnings (Loss) from Discontinued Operations....... $ 2.7 $ (87.2) $ (83.8)
================= ================ =================
</TABLE>
The Company's quarterly process for evaluating the allowance for future
losses applies the current period's results of the discontinued
operations against the allowance, re-estimates future losses and adjusts
the allowance, if appropriate. Additionally, as part of the Company's
annual planning process which takes place in the fourth quarter of each
year, investment and benefit cash flow projections are prepared. These
updated assumptions and estimates resulted in a release of allowance in
1998 and strengthening of allowance in 1997 and 1996.
F-23
<PAGE>
In the fourth quarter of 1997, $329.9 million depreciated cost of equity
real estate was reclassified from equity real estate held for production
of income to real estate held for sale. Additions to valuation
allowances of $79.8 million were recognized upon these transfers.
Additionally, in fourth quarter 1997, $92.5 million of writedowns on
real estate held for production of income were recognized.
Benefits and other deductions includes $26.6 million, $53.3 million and
$114.3 million of interest expense related to amounts borrowed from
continuing operations in 1998, 1997 and 1996, respectively.
Valuation allowances amounted to $3.0 million and $28.4 million on
mortgage loans on real estate and $34.8 million and $88.4 million on
equity real estate at December 31, 1998 and 1997, respectively. As of
January 1, 1996, the adoption of SFAS No. 121 resulted in a release of
existing valuation allowances of $71.9 million on equity real estate and
recognition of impairment losses of $69.8 million on real estate held
for production of income. Writedowns of equity real estate subsequent to
the adoption of SFAS No. 121 amounted to $95.7 million and $12.3 million
for 1997 and 1996, respectively.
At December 31, 1998 and 1997, problem mortgage loans on real estate had
amortized costs of $1.1 million and $11.0 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had amortized costs of $3.5 million and $109.4 million,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses...................... $ 6.7 $ 101.8
Impaired mortgage loans without provision for losses................... 8.5 .2
---------------- -----------------
Recorded investment in impaired mortgages.............................. 15.2 102.0
Provision for losses................................................... (2.1) (27.3)
---------------- -----------------
Net Impaired Mortgage Loans............................................ $ 13.1 $ 74.7
================ =================
</TABLE>
During 1998, 1997 and 1996, the discontinued operations' average
recorded investment in impaired mortgage loans was $73.3 million, $89.2
million and $134.8 million, respectively. Interest income recognized on
these impaired mortgage loans totaled $4.7 million, $6.6 million and
$10.1 million ($3.4 million, $5.3 million and $7.5 million recognized on
a cash basis) for 1998, 1997 and 1996, respectively.
At December 31, 1998 and 1997, discontinued operations had carrying
values of $50.0 million and $156.2 million, respectively, of real estate
acquired in satisfaction of debt.
F-24
<PAGE>
9) SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1998 1997
----------------- -----------------
(In Millions)
<S> <C> <C>
Short-term debt...................................................... $ 179.3 $ 422.2
----------------- -----------------
Long-term debt:
Equitable Life:
6.95% surplus notes scheduled to mature 2005....................... 399.4 399.4
7.70% surplus notes scheduled to mature 2015....................... 199.7 199.7
Other.............................................................. .3 .3
----------------- -----------------
Total Equitable Life........................................... 599.4 599.4
----------------- -----------------
Wholly Owned and Joint Venture Real Estate:
Mortgage notes, 5.91% - 12.00%, due through 2017................... 392.2 676.6
----------------- -----------------
Alliance:
Other.............................................................. 10.8 18.5
----------------- -----------------
Total long-term debt................................................. 1,002.4 1,294.5
----------------- -----------------
Total Short-term and Long-term Debt.................................. $ 1,181.7 $ 1,716.7
================= =================
</TABLE>
Short-term Debt
Equitable Life has a $350.0 million bank credit facility available to
fund short-term working capital needs and to facilitate the securities
settlement process. The credit facility consists of two types of
borrowing options with varying interest rates and expires in September
2000. The interest rates are based on external indices dependent on the
type of borrowing and at December 31, 1998 range from 5.23% to 7.75%.
There were no borrowings outstanding under this bank credit facility at
December 31, 1998.
Equitable Life has a commercial paper program with an issue limit of
$500.0 million. This program is available for general corporate purposes
used to support Equitable Life's liquidity needs and is supported by
Equitable Life's existing $350.0 million bank credit facility. At
December 31, 1998, there were no borrowings outstanding under this
program.
During July 1998, Alliance entered into a $425.0 million five-year
revolving credit facility with a group of commercial banks which
replaced a $250.0 million revolving credit facility. Under the facility,
the interest rate, at the option of Alliance, is a floating rate
generally based upon a defined prime rate, a rate related to the London
Interbank Offered Rate ("LIBOR") or the Federal Funds Rate. A facility
fee is payable on the total facility. During September 1998, Alliance
increased the size of its commercial paper program from $250.0 million
to $425.0 million. Borrowings from these two sources may not exceed
$425.0 million in the aggregate. The revolving credit facility provides
backup liquidity for commercial paper issued under Alliance's commercial
paper program and can be used as a direct source of borrowing. The
revolving credit facility contains covenants which require Alliance to,
among other things, meet certain financial ratios. As of December 31,
1998, Alliance had commercial paper outstanding totaling $179.5 million
at an effective interest rate of 5.5% and there were no borrowings
outstanding under Alliance's revolving credit facility.
Long-term Debt
Several of the long-term debt agreements have restrictive covenants
related to the total amount of debt, net tangible assets and other
matters. The Company is in compliance with all debt covenants.
F-25
<PAGE>
The Company has pledged real estate, mortgage loans, cash and securities
amounting to $640.2 million and $1,164.0 million at December 31, 1998
and 1997, respectively, as collateral for certain short-term and
long-term debt.
At December 31, 1998, aggregate maturities of the long-term debt based
on required principal payments at maturity for 1999 and the succeeding
four years are $322.8 million, $6.9 million, $1.7 million, $1.8 million
and $2.0 million, respectively, and $668.0 million thereafter.
10) FEDERAL INCOME TAXES
A summary of the Federal income tax expense in the consolidated
statements of earnings is shown below:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current.......................................... $ 283.3 $ 186.5 $ 97.9
Deferred......................................... 69.8 (95.0) (88.2)
----------------- ---------------- -----------------
Total.............................................. $ 353.1 $ 91.5 $ 9.7
================= ================ =================
</TABLE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings before
Federal income taxes and minority interest by the expected Federal
income tax rate of 35%. The sources of the difference and the tax
effects of each are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Expected Federal income tax expense................ $ 414.3 $ 234.7 $ 73.0
Non-taxable minority interest...................... (33.2) (38.0) (28.6)
Adjustment of tax audit reserves................... 16.0 (81.7) 6.9
Equity in unconsolidated subsidiaries.............. (39.3) (45.1) (32.3)
Other.............................................. (4.7) 21.6 (9.3)
----------------- ---------------- -----------------
Federal Income Tax Expense......................... $ 353.1 $ 91.5 $ 9.7
================= ================ =================
</TABLE>
The components of the net deferred Federal income taxes are as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
--------------------------------- ---------------------------------
Assets Liabilities Assets Liabilities
--------------- ---------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
Compensation and related benefits...... $ 235.3 $ - $ 257.9 $ -
Other.................................. 27.8 - 30.7 -
DAC, reserves and reinsurance.......... - 231.4 - 222.8
Investments............................ - 364.4 - 405.7
--------------- ---------------- --------------- ---------------
Total.................................. $ 263.1 $ 595.8 $ 288.6 $ 628.5
=============== ================ =============== ===============
</TABLE>
F-26
<PAGE>
The deferred Federal income taxes impacting operations reflect the net
tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. The sources of these temporary differences
and the tax effects of each are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
DAC, reserves and reinsurance...................... $ (7.7) $ 46.2 $ (156.2)
Investments........................................ 46.8 (113.8) 78.6
Compensation and related benefits.................. 28.6 3.7 22.3
Other.............................................. 2.1 (31.1) (32.9)
----------------- ---------------- -----------------
Deferred Federal Income Tax
Expense (Benefit)................................ $ 69.8 $ (95.0) $ (88.2)
================= ================ =================
</TABLE>
The Internal Revenue Service (the "IRS") is in the process of examining
the Holding Company's consolidated Federal income tax returns for the
years 1992 through 1996. Management believes these audits will have no
material adverse effect on the Company's results of operations.
11) REINSURANCE AGREEMENTS
The Insurance Group assumes and cedes reinsurance with other insurance
companies. The Insurance Group evaluates the financial condition of its
reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies. Ceded reinsurance does not relieve the originating insurer
of liability. The effect of reinsurance (excluding group life and
health) is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Direct premiums.................................... $ 438.8 $ 448.6 $ 461.4
Reinsurance assumed................................ 203.6 198.3 177.5
Reinsurance ceded.................................. (54.3) (45.4) (41.3)
----------------- ---------------- -----------------
Premiums........................................... $ 588.1 $ 601.5 $ 597.6
================= ================ =================
Universal Life and Investment-type Product
Policy Fee Income Ceded.......................... $ 75.7 $ 61.0 $ 48.2
================= ================ =================
Policyholders' Benefits Ceded...................... $ 85.9 $ 70.6 $ 54.1
================= ================ =================
Interest Credited to Policyholders' Account
Balances Ceded................................... $ 39.5 $ 36.4 $ 32.3
================= ================ =================
</TABLE>
Beginning in May 1997, the Company began reinsuring on a yearly renewal
term basis 90% of the mortality risk on new issues of certain term,
universal and variable life products. During 1996, the Company's
retention limit on joint survivorship policies was increased to $15.0
million. Effective January 1, 1994, all in force business above $5.0
million was reinsured. The Insurance Group also reinsures the entire
risk on certain substandard underwriting risks as well as in certain
other cases.
The Insurance Group cedes 100% of its group life and health business to
a third party insurance company. Premiums ceded totaled $1.3 million,
$1.6 million and $2.4 million for 1998, 1997 and 1996, respectively.
Ceded death and disability benefits totaled $15.6 million, $4.3 million
and $21.2 million for 1998, 1997 and 1996, respectively. Insurance
liabilities ceded totaled $560.3 million and $593.8 million at December
31, 1998 and 1997, respectively.
F-27
<PAGE>
12) EMPLOYEE BENEFIT PLANS
The Company sponsors qualified and non-qualified defined benefit plans
covering substantially all employees (including certain qualified
part-time employees), managers and certain agents. The pension plans are
non-contributory. Equitable Life's benefits are based on a cash balance
formula or years of service and final average earnings, if greater,
under certain grandfathering rules in the plans. Alliance's benefits are
based on years of credited service, average final base salary and
primary social security benefits. The Company's funding policy is to
make the minimum contribution required by the Employee Retirement Income
Security Act of 1974 ("ERISA").
Components of net periodic pension cost (credit) for the qualified and
non-qualified plans are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Service cost....................................... $ 33.2 $ 32.5 $ 33.8
Interest cost on projected benefit obligations..... 129.2 128.2 120.8
Actual return on assets............................ (175.6) (307.6) (181.4)
Net amortization and deferrals..................... 6.1 166.6 43.4
----------------- ---------------- -----------------
Net Periodic Pension Cost (Credit)................. $ (7.1) $ 19.7 $ 16.6
================= ================ =================
</TABLE>
The plan's projected benefit obligation under the qualified and
non-qualified plans was comprised of:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Benefit obligation, beginning of year.................................. $ 1,801.3 $ 1,765.5
Service cost........................................................... 33.2 32.5
Interest cost.......................................................... 129.2 128.2
Actuarial (gains) losses............................................... 108.4 (15.5)
Benefits paid.......................................................... (138.7) (109.4)
---------------- -----------------
Benefit Obligation, End of Year........................................ $ 1,933.4 $ 1,801.3
================ =================
</TABLE>
The funded status of the qualified and non-qualified pension plans is as
follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Plan assets at fair value, beginning of year........................... $ 1,867.4 $ 1,626.0
Actual return on plan assets........................................... 338.9 307.5
Contributions.......................................................... - 30.0
Benefits paid and fees................................................. (123.2) (96.1)
---------------- -----------------
Plan assets at fair value, end of year................................. 2,083.1 1,867.4
Projected benefit obligations.......................................... 1,933.4 1,801.3
---------------- -----------------
Projected benefit obligations less than plan assets.................... 149.7 66.1
Unrecognized prior service cost........................................ (7.5) (9.9)
Unrecognized net loss from past experience different
from that assumed.................................................... 38.7 95.0
Unrecognized net asset at transition................................... 1.5 3.1
---------------- -----------------
Prepaid Pension Cost.................................................. $ 182.4 $ 154.3
================ =================
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of projected benefit
obligations were 7.0% and 3.83%, respectively, at December 31, 1998 and
7.25% and 4.07%, respectively, at December 31, 1997. As of January 1,
1998 and 1997, the expected long-term rate of return on assets for the
retirement plan was 10.25%.
F-28
<PAGE>
The Company recorded, as a reduction of shareholders' equity an
additional minimum pension liability of $28.3 million and $17.3 million,
net of Federal income taxes, at December 31, 1998 and 1997,
respectively, primarily representing the excess of the accumulated
benefit obligation of the qualified pension plan over the accrued
liability.
The pension plan's assets include corporate and government debt
securities, equity securities, equity real estate and shares of group
trusts managed by Alliance.
Prior to 1987, the qualified plan funded participants' benefits through
the purchase of non-participating annuity contracts from Equitable Life.
Benefit payments under these contracts were approximately $31.8 million,
$33.2 million and $34.7 million for 1998, 1997 and 1996, respectively.
The Company provides certain medical and life insurance benefits
(collectively, "postretirement benefits") for qualifying employees,
managers and agents retiring from the Company (i) on or after attaining
age 55 who have at least 10 years of service or (ii) on or after
attaining age 65 or (iii) whose jobs have been abolished and who have
attained age 50 with 20 years of service. The life insurance benefits
are related to age and salary at retirement. The costs of postretirement
benefits are recognized in accordance with the provisions of SFAS No.
106. The Company continues to fund postretirement benefits costs on a
pay-as-you-go basis and, for 1998, 1997 and 1996, the Company made
estimated postretirement benefits payments of $28.4 million, $18.7
million and $18.9 million, respectively.
The following table sets forth the postretirement benefits plan's
status, reconciled to amounts recognized in the Company's consolidated
financial statements:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Service cost....................................... $ 4.6 $ 4.5 $ 5.3
Interest cost on accumulated postretirement
benefits obligation.............................. 33.6 34.7 34.6
Net amortization and deferrals..................... .5 1.9 2.4
----------------- ---------------- -----------------
Net Periodic Postretirement Benefits Costs......... $ 38.7 $ 41.1 $ 42.3
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Accumulated postretirement benefits obligation, beginning
of year.............................................................. $ 490.8 $ 388.5
Service cost........................................................... 4.6 4.5
Interest cost.......................................................... 33.6 34.7
Contributions and benefits paid........................................ (28.4) 72.1
Actuarial (gains) losses............................................... (10.2) (9.0)
---------------- -----------------
Accumulated postretirement benefits obligation, end of year............ 490.4 490.8
Unrecognized prior service cost........................................ 31.8 40.3
Unrecognized net loss from past experience different
from that assumed and from changes in assumptions.................... (121.2) (140.6)
---------------- -----------------
Accrued Postretirement Benefits Cost................................... $ 401.0 $ 390.5
================ =================
</TABLE>
Since January 1, 1994, costs to the Company for providing these medical
benefits available to retirees under age 65 are the same as those
offered to active employees and medical benefits will be limited to 200%
of 1993 costs for all participants.
F-29
<PAGE>
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefits obligation was 8.0% in 1998,
gradually declining to 2.5% in the year 2009, and in 1997 was 8.75%,
gradually declining to 2.75% in the year 2009. The discount rate used in
determining the accumulated postretirement benefits obligation was 7.0%
and 7.25% at December 31, 1998 and 1997, respectively.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefits obligation as of December 31, 1998
would be increased 4.83%. The effect of this change on the sum of the
service cost and interest cost would be an increase of 4.57%. If the
health care cost trend rate assumptions were decreased by 1% the
accumulated postretirement benefits obligation as of December 31, 1998
would be decreased by 5.6%. The effect of this change on the sum of the
service cost and interest cost would be a decrease of 5.4%.
13) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives
The Insurance Group primarily uses derivatives for asset/liability risk
management and for hedging individual securities. Derivatives mainly are
utilized to reduce the Insurance Group's exposure to interest rate
fluctuations. Accounting for interest rate swap transactions is on an
accrual basis. Gains and losses related to interest rate swap
transactions are amortized as yield adjustments over the remaining life
of the underlying hedged security. Income and expense resulting from
interest rate swap activities are reflected in net investment income.
The notional amount of matched interest rate swaps outstanding at
December 31, 1998 and 1997, respectively, was $880.9 million and
$1,353.4 million. The average unexpired terms at December 31, 1998
ranged from 1 month to 4.3 years. At December 31, 1998, the cost of
terminating swaps in a loss position was $8.0 million. Equitable Life
has implemented an interest rate cap program designed to hedge crediting
rates on interest-sensitive individual annuities contracts. The
outstanding notional amounts at December 31, 1998 of contracts purchased
and sold were $8,450.0 million and $875.0 million, respectively. The net
premium paid by Equitable Life on these contracts was $54.8 million and
is being amortized ratably over the contract periods ranging from 1 to 5
years. Income and expense resulting from this program are reflected as
an adjustment to interest credited to policyholders' account balances.
Substantially all of DLJ's activities related to derivatives are, by
their nature trading activities which are primarily for the purpose of
customer accommodations. DLJ enters into certain contractual agreements
referred to as derivatives or off-balance-sheet financial instruments
involving futures, forwards and options. DLJ's derivative activities
consist of writing over-the-counter ("OTC") options to accommodate its
customer needs, trading in forward contracts in U.S. government and
agency issued or guaranteed securities and in futures contracts on
equity-based indices, interest rate instruments and currencies and
issuing structured products based on emerging market financial
instruments and indices. DLJ's involvement in swap contracts and
commodity derivative instruments is not significant.
Fair Value of Financial Instruments
The Company defines fair value as the quoted market prices for those
instruments that are actively traded in financial markets. In cases
where quoted market prices are not available, fair values are estimated
using present value or other valuation techniques. The fair value
estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument,
including estimates of the timing and amount of expected future cash
flows and the credit standing of counterparties. Such estimates do not
reflect any premium or discount that could result from offering for sale
at one time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of
unrealized gains or losses. In many cases, the fair value estimates
cannot be substantiated by comparison to independent markets, nor can
the disclosed value be realized in immediate settlement of the
instrument.
Certain financial instruments are excluded, particularly insurance
liabilities other than financial guarantees and investment contracts.
Fair market value of off-balance-sheet financial instruments of the
Insurance Group was not material at December 31, 1998 and 1997.
F-30
<PAGE>
Fair values for mortgage loans on real estate are estimated by
discounting future contractual cash flows using interest rates at which
loans with similar characteristics and credit quality would be made.
Fair values for foreclosed mortgage loans and problem mortgage loans are
limited to the estimated fair value of the underlying collateral if
lower.
Fair values of policy loans are estimated by discounting the face value
of the loans from the time of the next interest rate review to the
present, at a rate equal to the excess of the current estimated market
rates over the current interest rate charged on the loan.
The estimated fair values for the Company's association plan contracts,
supplementary contracts not involving life contingencies ("SCNILC") and
annuities certain, which are included in policyholders' account
balances, and guaranteed interest contracts are estimated using
projected cash flows discounted at rates reflecting expected current
offering rates.
The estimated fair values for variable deferred annuities and single
premium deferred annuities ("SPDA"), which are included in
policyholders' account balances, are estimated by discounting the
account value back from the time of the next crediting rate review to
the present, at a rate equal to the excess of current estimated market
rates offered on new policies over the current crediting rates.
Fair values for long-term debt are determined using published market
values, where available, or contractual cash flows discounted at market
interest rates. The estimated fair values for non-recourse mortgage debt
are determined by discounting contractual cash flows at a rate which
takes into account the level of current market interest rates and
collateral risk. The estimated fair values for recourse mortgage debt
are determined by discounting contractual cash flows at a rate based
upon current interest rates of other companies with credit ratings
similar to the Company. The Company's carrying value of short-term
borrowings approximates their estimated fair value.
The following table discloses carrying value and estimated fair value
for financial instruments not otherwise disclosed in Notes 3, 7 and 8:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1998 1997
--------------------------------- ---------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
--------------- ---------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
Consolidated Financial Instruments:
Mortgage loans on real estate.......... $ 2,809.9 $ 2,961.8 $ 2,611.4 $ 2,822.8
Other limited partnership interests.... 562.6 562.6 509.4 509.4
Policy loans........................... 2,086.7 2,370.7 2,422.9 2,493.9
Policyholders' account balances -
investment contracts................. 12,892.0 13,396.0 12,611.0 12,714.0
Long-term debt......................... 1,002.4 1,025.2 1,294.5 1,257.0
Closed Block Financial Instruments:
Mortgage loans on real estate.......... 1,633.4 1,703.5 1,341.6 1,420.7
Other equity investments............... 56.4 56.4 86.3 86.3
Policy loans........................... 1,641.2 1,929.7 1,700.2 1,784.2
SCNILC liability....................... 25.0 25.0 27.6 30.3
Discontinued Operations Financial
Instruments:
Mortgage loans on real estate.......... 553.9 599.9 655.5 779.9
Fixed maturities....................... 24.9 24.9 38.7 38.7
Other equity investments............... 115.1 115.1 209.3 209.3
Guaranteed interest contracts.......... 37.0 34.0 37.0 34.0
Long-term debt......................... 147.1 139.8 296.4 297.6
</TABLE>
F-31
<PAGE>
14) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has provided, from time to time, certain guarantees or
commitments to affiliates, investors and others. These arrangements
include commitments by the Company, under certain conditions: to make
capital contributions of up to $142.9 million to affiliated real estate
joint ventures; and to provide equity financing to certain limited
partnerships of $287.3 million at December 31, 1998, under existing loan
or loan commitment agreements.
Equitable Life is the obligor under certain structured settlement
agreements which it had entered into with unaffiliated insurance
companies and beneficiaries. To satisfy its obligations under these
agreements, Equitable Life owns single premium annuities issued by
previously wholly owned life insurance subsidiaries. Equitable Life has
directed payment under these annuities to be made directly to the
beneficiaries under the structured settlement agreements. A contingent
liability exists with respect to these agreements should the previously
wholly owned subsidiaries be unable to meet their obligations.
Management believes the satisfaction of those obligations by Equitable
Life is remote.
The Insurance Group had $24.7 million of letters of credit outstanding
at December 31, 1998.
15) LITIGATION
Major Medical Insurance Cases
Equitable Life agreed to settle, subject to court approval, previously
disclosed cases involving lifetime guaranteed renewable major medical
insurance policies issued by Equitable Life in five states. Plaintiffs
in these cases claimed that Equitable Life's method for determining
premium increases breached the terms of certain forms of the policies
and was misrepresented. In certain cases plaintiffs also claimed that
Equitable Life misrepresented to policyholders that premium increases
had been approved by insurance departments, and that it determined
annual rate increases in a manner that discriminated against the
policyholders.
In December 1997, Equitable Life entered into a settlement agreement,
subject to court approval, which would result in creation of a
nationwide class consisting of all persons holding, and paying premiums
on, the policies at any time since January 1, 1988 and the dismissal
with prejudice of the pending actions and the resolution of all similar
claims on a nationwide basis. Under the terms of the settlement, which
involves approximately 127,000 former and current policyholders,
Equitable Life would pay $14.2 million in exchange for release of all
claims and will provide future relief to certain current policyholders
by restricting future premium increases, estimated to have a present
value of $23.3 million. This estimate is based upon assumptions about
future events that cannot be predicted with certainty and accordingly
the actual value of the future relief may vary. In October 1998, the
court entered a judgment approving the settlement agreement and, in
November, a member of the national class filed a notice of appeal of the
judgment. In January 1999, the Court of Appeals granted Equitable Life's
motion to dismiss the appeal.
Life Insurance and Annuity Sales Cases
A number of lawsuits are pending as individual claims and purported
class actions against Equitable Life and its subsidiary insurance
companies Equitable Variable Life Insurance Company ("EVLICO," which was
merged into Equitable Life effective January 1, 1997) and The Equitable
of Colorado, Inc. ("EOC"). These actions involve, among other things,
sales of life and annuity products for varying periods from 1980 to the
present, and allege, among other things, sales practice
misrepresentation primarily involving: the number of premium payments
required; the propriety of a product as an investment vehicle; the
propriety of a product as a replacement of an existing policy; and
failure to disclose a product as life insurance. Some actions are in
state courts and others are in U.S. District Courts in varying
jurisdictions, and are in varying stages of discovery and motions for
class certification.
F-32
<PAGE>
In general, the plaintiffs request an unspecified amount of damages,
punitive damages, enjoinment from the described practices, prohibition
against cancellation of policies for non-payment of premium or other
remedies, as well as attorneys' fees and expenses. Similar actions have
been filed against other life and health insurers and have resulted in
the award of substantial judgments, including material amounts of
punitive damages, or in substantial settlements. Although the outcome of
litigation cannot be predicted with certainty, particularly in the early
stages of an action, The Equitable's management believes that the
ultimate resolution of these cases should not have a material adverse
effect on the financial position of The Equitable. The Equitable's
management cannot make an estimate of loss, if any, or predict whether
or not any such litigation will have a material adverse effect on The
Equitable's results of operations in any particular period.
Discrimination Case
Equitable Life is a defendant in an action, certified as a class action
in September 1997, in the United States District Court for the Northern
District of Alabama, Southern Division, involving alleged discrimination
on the basis of race against African-American applicants and potential
applicants in hiring individuals as sales agents. Plaintiffs seek a
declaratory judgment and affirmative and negative injunctive relief,
including the payment of back-pay, pension and other compensation.
Although the outcome of litigation cannot be predicted with certainty,
The Equitable's management believes that the ultimate resolution of this
matter should not have a material adverse effect on the financial
position of The Equitable. The Equitable's management cannot make an
estimate of loss, if any, or predict whether or not such matter will
have a material adverse effect on The Equitable's results of operations
in any particular period.
Alliance Capital
In July 1995, a class action complaint was filed against Alliance North
American Government Income Trust, Inc. (the "Fund"), Alliance and
certain other defendants affiliated with Alliance, including the Holding
Company, alleging violations of Federal securities laws, fraud and
breach of fiduciary duty in connection with the Fund's investments in
Mexican and Argentine securities. The original complaint was dismissed
in 1996; on appeal, the dismissal was affirmed. In October 1996,
plaintiffs filed a motion for leave to file an amended complaint,
alleging the Fund failed to hedge against currency risk despite
representations that it would do so, the Fund did not properly disclose
that it planned to invest in mortgage-backed derivative securities and
two Fund advertisements misrepresented the risks of investing in the
Fund. In October 1998, the U.S. Court of Appeals for the Second Circuit
issued an order granting plaintiffs' motion to file an amended complaint
alleging that the Fund misrepresented its ability to hedge against
currency risk and denying plaintiffs' motion to file an amended
complaint containing the other allegations. Alliance believes that the
allegations in the amended complaint, which was filed in February 1999,
are without merit and intends to defend itself vigorously against these
claims. While the ultimate outcome of this matter cannot be determined
at this time, Alliance's management does not expect that it will have a
material adverse effect on Alliance's results of operations or financial
condition.
DLJSC
DLJSC is a defendant along with certain other parties in a class action
complaint involving the underwriting of units, consisting of notes and
warrants to purchase common shares, of Rickel Home Centers, Inc.
("Rickel"), which filed a voluntary petition for reorganization pursuant
to Chapter 11 of the Bankruptcy Code. The complaint seeks unspecified
compensatory and punitive damages from DLJSC, as an underwriter and as
an owner of 7.3% of the common stock, for alleged violation of Federal
securities laws and common law fraud for alleged misstatements and
omissions contained in the prospectus and registration statement used in
the offering of the units. DLJSC is defending itself vigorously against
all the allegations contained in the complaint. Although there can be no
assurance, DLJ's management does not believe that the ultimate outcome
of this litigation will have a material adverse effect on DLJ's
consolidated financial condition. Due to the early stage of this
litigation, based on the information currently available to it, DLJ's
management cannot predict whether or not such litigation will have a
material adverse effect on DLJ's results of operations in any particular
period.
F-33
<PAGE>
DLJSC is a defendant in a purported class action filed in a Texas State
Court on behalf of the holders of $550 million principal amount of
subordinated redeemable discount debentures of National Gypsum
Corporation ("NGC"). The debentures were canceled in connection with a
Chapter 11 plan of reorganization for NGC consummated in July 1993. The
litigation seeks compensatory and punitive damages for DLJSC's
activities as financial advisor to NGC in the course of NGC's Chapter 11
proceedings. Trial is expected in early May 1999. DLJSC intends to
defend itself vigorously against all the allegations contained in the
complaint. Although there can be no assurance, DLJ's management does not
believe that the ultimate outcome of this litigation will have a
material adverse effect on DLJ's consolidated financial condition. Based
upon the information currently available to it, DLJ's management cannot
predict whether or not such litigation will have a material adverse
effect on DLJ's results of operations in any particular period.
DLJSC is a defendant in a complaint which alleges that DLJSC and a
number of other financial institutions and several individual defendants
violated civil provisions of RICO by inducing plaintiffs to invest over
$40 million in The Securities Groups, a number of tax shelter limited
partnerships, during the years 1978 through 1982. The plaintiffs seek
recovery of the loss of their entire investment and an approximately
equivalent amount of tax-related damages. Judgment for damages under
RICO are subject to trebling. Discovery is complete. Trial has been
scheduled for May 17, 1999. DLJSC believes that it has meritorious
defenses to the complaints and will continue to contest the suits
vigorously. Although there can be no assurance, DLJ's management does
not believe that the ultimate outcome of this litigation will have a
material adverse effect on DLJ's consolidated financial condition. Based
upon the information currently available to it, DLJ's management cannot
predict whether or not such litigation will have a material adverse
effect on DLJ's results of operations in any particular period.
DLJSC is a defendant along with certain other parties in four actions
involving Mid-American Waste Systems, Inc. ("Mid-American"), which filed
a voluntary petition for reorganization pursuant to Chapter 11 of the
Bankruptcy Code in January 1997. Three actions seek rescission,
compensatory and punitive damages for DLJSC's role in underwriting notes
of Mid-American. The other action, filed by the Plan Administrator for
the bankruptcy estate of Mid-American, alleges that DLJSC is liable as
an underwriter for alleged misrepresentations and omissions in the
prospectus for the notes, and liable as financial advisor to
Mid-American for allegedly failing to advise Mid-American about its
financial condition. DLJSC believes that it has meritorious defenses to
the complaints and will continue to contest the suits vigorously.
Although there can be no assurance, DLJ's management does not believe
that the ultimate outcome of this litigation will have a material
adverse effect on DLJ's consolidated financial condition. Based upon
information currently available to it, DLJ's management cannot predict
whether or not such litigation will have a material adverse effect on
DLJ's results of operations in any particular period.
Other Matters
In addition to the matters described above, the Holding Company and its
subsidiaries are involved in various legal actions and proceedings in
connection with their businesses. Some of the actions and proceedings
have been brought on behalf of various alleged classes of claimants and
certain of these claimants seek damages of unspecified amounts. While
the ultimate outcome of such matters cannot be predicted with certainty,
in the opinion of management no such matter is likely to have a material
adverse effect on the Company's consolidated financial position or
results of operations.
16) LEASES
The Company has entered into operating leases for office space and
certain other assets, principally data processing equipment and office
furniture and equipment. Future minimum payments under noncancelable
leases for 1999 and the succeeding four years are $98.7 million, $92.7
million, $73.4 million, $59.9 million, $55.8 million and $550.1 million
thereafter. Minimum future sublease rental income on these noncancelable
leases for 1999 and the succeeding four years is $7.6 million, $5.6
million, $4.6 million, $2.3 million, $2.3 million and $25.4 million
thereafter.
F-34
<PAGE>
At December 31, 1998, the minimum future rental income on noncancelable
operating leases for wholly owned investments in real estate for 1999
and the succeeding four years is $189.2 million, $177.0 million, $165.5
million, $145.4 million, $122.8 million and $644.7 million thereafter.
17) OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Compensation costs................................. $ 772.0 $ 721.5 $ 704.8
Commissions........................................ 478.1 409.6 329.5
Short-term debt interest expense................... 26.1 31.7 8.0
Long-term debt interest expense.................... 84.6 121.2 137.3
Amortization of policy acquisition costs........... 292.7 287.3 405.2
Capitalization of policy acquisition costs......... (609.1) (508.0) (391.9)
Rent expense, net of sublease income............... 100.0 101.8 113.7
Cursitor intangible assets writedown............... - 120.9 -
Other.............................................. 1,056.8 917.9 769.1
----------------- ---------------- -----------------
Total.............................................. $ 2,201.2 $ 2,203.9 $ 2,075.7
================= ================ =================
</TABLE>
During 1997 and 1996, the Company restructured certain operations in
connection with cost reduction programs and recorded pre-tax provisions
of $42.4 million and $24.4 million, respectively. The amounts paid
during 1998, associated with cost reduction programs, totaled $22.6
million. At December 31, 1998, the liabilities associated with cost
reduction programs amounted to $39.4 million. The 1997 cost reduction
program included costs related to employee termination and exit costs.
The 1996 cost reduction program included restructuring costs related to
the consolidation of insurance operations' service centers. Amortization
of DAC in 1996 included a $145.0 million writeoff of DAC related to DI
contracts.
18) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION
Equitable Life is restricted as to the amounts it may pay as dividends
to the Holding Company. Under the New York Insurance Law, the
Superintendent has broad discretion to determine whether the financial
condition of a stock life insurance company would support the payment of
dividends to its shareholders. For 1998, 1997 and 1996, statutory net
income (loss) totaled $384.4 million, $(351.7) million and $(351.1)
million, respectively. Statutory surplus, capital stock and Asset
Valuation Reserve ("AVR") totaled $4,728.0 million and $3,907.1 million
at December 31, 1998 and 1997, respectively. No dividends have been paid
by Equitable Life to the Holding Company to date.
At December 31, 1998, the Insurance Group, in accordance with various
government and state regulations, had $25.6 million of securities
deposited with such government or state agencies.
The differences between statutory surplus and capital stock determined
in accordance with Statutory Accounting Principles ("SAP") and total
shareholders' equity on a GAAP basis are primarily attributable to: (a)
inclusion in SAP of an AVR intended to stabilize surplus from
fluctuations in the value of the investment portfolio; (b) future policy
benefits and policyholders' account balances under SAP differ from GAAP
due to differences between actuarial assumptions and reserving
methodologies; (c) certain policy acquisition costs are expensed under
SAP but deferred under GAAP and amortized over future periods to achieve
a matching of revenues and expenses; (d) Federal income taxes are
generally accrued under SAP based upon revenues and expenses in the
Federal income tax return while under GAAP deferred taxes are provided
for timing differences between recognition of revenues and expenses for
financial reporting and income tax purposes; (e) valuation of assets
under SAP and GAAP differ due to different investment valuation and
depreciation methodologies, as well as the deferral of interest-related
realized capital gains and losses on fixed income investments; and (f)
differences in the accrual methodologies for post-employment and
retirement benefit plans.
F-35
<PAGE>
19) BUSINESS SEGMENT INFORMATION
The Company's operations consist of Insurance and Investment Services.
The Company's management evaluates the performance of each of these
segments independently and allocates resources based on current and
future requirements of each segment. Management evaluates the
performance of each segment based upon operating results adjusted to
exclude the effect of unusual or non-recurring events and transactions
and certain revenue and expense categories not related to the base
operations of the particular business net of minority interest.
Information for all periods is presented on a comparable basis.
Intersegment investment advisory and other fees of approximately $61.8
million, $84.1 million and $129.2 million for 1998, 1997 and 1996,
respectively, are included in total revenues of the Investment Services
segment. These fees, excluding amounts related to discontinued
operations of $.5 million, $4.2 million and $13.3 million for 1998, 1997
and 1996, respectively, are eliminated in consolidation.
The following tables reconcile each segment's revenues and operating
earnings to total revenues and earnings from continuing operations
before Federal income taxes and cumulative effect of accounting change
as reported on the consolidated statements of earnings and the segments'
assets to total assets on the consolidated balance sheets, respectively.
<TABLE>
<CAPTION>
Investment
Insurance Services Elimination Total
--------------- ----------------- --------------- ----------------
(In Millions)
<S> <C> <C> <C> <C>
1998
Segment revenues..................... $ 4,029.8 $ 1,438.4 $ (5.7) $ 5,462.5
Investment gains..................... 64.8 35.4 - 100.2
--------------- ----------------- --------------- ----------------
Total Revenues....................... $ 4,094.6 $ 1,473.8 $ (5.7) $ 5,562.7
=============== ================= =============== ================
Pre-tax operating earnings........... $ 688.6 $ 284.3 $ - $ 972.9
Investment gains , net of
DAC and other charges.............. 41.7 27.7 - 69.4
Pre-tax minority interest............ - 141.5 - 141.5
--------------- ----------------- --------------- ----------------
Earnings from Continuing
Operations......................... $ 730.3 $ 453.5 $ - $ 1,183.8
=============== ================= =============== ================
Total Assets......................... $ 75,626.0 $ 12,379.2 $ (64.4) $ 87,940.8
=============== ================= =============== ================
1997
Segment revenues..................... $ 3,990.8 $ 1,200.0 $ (7.7) $ 5,183.1
Investment gains (losses)............ (318.8) 255.1 - (63.7)
--------------- ----------------- --------------- ----------------
Total Revenues....................... $ 3,672.0 $ 1,455.1 $ (7.7) $ 5,119.4
=============== ================= =============== ================
Pre-tax operating earnings........... $ 507.0 $ 258.3 $ - $ 765.3
Investment gains (losses), net of
DAC and other charges.............. (292.5) 252.7 - (39.8)
Non-recurring costs and expenses..... (41.7) (121.6) - (163.3)
Pre-tax minority interest............ - 108.5 - 108.5
--------------- ----------------- --------------- ----------------
Earnings from Continuing
Operations......................... $ 172.8 $ 497.9 $ - $ 670.7
=============== ================= =============== ================
Total Assets......................... $ 67,762.4 $ 13,691.4 $ (96.1) $ 81,357.7
=============== ================= =============== ================
</TABLE>
F-36
<PAGE>
<TABLE>
<CAPTION>
Investment
Insurance Services Elimination Total
--------------- ----------------- --------------- ----------------
(In Millions)
<S> <C> <C> <C> <C>
1996
Segment revenues..................... $ 3,789.1 $ 1,105.5 $ (12.6) $ 4,882.0
Investment gains (losses)............ (30.3) 20.5 - (9.8)
--------------- ----------------- --------------- ----------------
Total Revenues....................... $ 3,758.8 $ 1,126.0 $ (12.6) $ 4,872.2
=============== ================= =============== ================
Pre-tax operating earnings........... $ 337.1 $ 224.6 $ - $ 561.7
Investment gains (losses), net of
DAC and other charges.............. (37.2) 16.9 - (20.3)
Reserve strengthening and DAC
writeoff........................... (393.0) - - (393.0)
Non-recurring costs and
expenses........................... (22.3) (1.1) - (23.4)
Pre-tax minority interest............ - 83.6 - 83.6
--------------- ----------------- --------------- ----------------
Earnings (Loss) from
Continuing Operations.............. $ (115.4) $ 324.0 $ - $ 208.6
=============== ================= =============== ================
</TABLE>
20) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations for 1998 and 1997 are summarized
below:
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- ----------------- ------------------ ------------------
(In Millions)
<S> <C> <C> <C> <C>
1998
Total Revenues................ $ 1,470.2 $ 1,422.9 $ 1,297.6 $ 1,372.0
================= ================= ================== ==================
Earnings from Continuing
Operations before
Cumulative Effect
of Accounting Change........ $ 212.8 $ 197.0 $ 136.8 $ 158.9
================= ================= ================== ==================
Net Earnings.................. $ 213.3 $ 198.3 $ 137.5 $ 159.1
================= ================= ================== ==================
1997
Total Revenues................ $ 1,266.0 $ 1,552.8 $ 1,279.0 $ 1,021.6
================= ================= ================== ==================
Earnings from Continuing
Operations before
Cumulative Effect
of Accounting Change........ $ 117.4 $ 222.5 $ 145.1 $ 39.4
================= ================= ================== ==================
Net Earnings (Loss)........... $ 114.1 $ 223.1 $ 144.9 $ (44.9)
================= ================= ================== ==================
</TABLE>
Net earnings for the three months ended December 31, 1997 includes a
charge of $212.0 million related to additions to valuation allowances on
and writeoffs of real estate of $225.2 million, and reserve
strengthening on discontinued operations of $84.3 million offset by a
reversal of prior years tax reserves of $97.5 million.
F-37
<PAGE>
21) INVESTMENT IN DLJ
At December 31, 1998, the Company's ownership of DLJ interest was
approximately 32.5%. The Company's ownership interest will be further
reduced upon the issuance of common stock after the vesting of
forfeitable restricted stock units acquired by and/or the exercise of
options granted to certain DLJ employees. DLJ restricted stock units
represents forfeitable rights to receive approximately 5.2 million
shares of DLJ common stock through February 2000.
The results of operations of DLJ are accounted for on the equity basis
and are included in commissions, fees and other income in the
consolidated statements of earnings. The Company's carrying value of DLJ
is included in investment in and loans to affiliates in the consolidated
balance sheets.
Summarized balance sheets information for DLJ, reconciled to the
Company's carrying value of DLJ, are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Assets:
Trading account securities, at market value............................ $ 13,195.1 $ 16,535.7
Securities purchased under resale agreements........................... 20,063.3 22,628.8
Broker-dealer related receivables...................................... 34,264.5 28,159.3
Other assets........................................................... 4,759.3 3,182.0
---------------- -----------------
Total Assets........................................................... $ 72,282.2 $ 70,505.8
================ =================
Liabilities:
Securities sold under repurchase agreements............................ $ 35,775.6 $ 36,006.7
Broker-dealer related payables......................................... 26,161.5 26,127.2
Short-term and long-term debt.......................................... 3,997.6 3,249.5
Other liabilities...................................................... 3,219.8 2,860.9
---------------- -----------------
Total liabilities...................................................... 69,154.5 68,244.3
DLJ's company-obligated mandatorily redeemed preferred
securities of subsidiary trust holding solely debentures of DLJ...... 200.0 200.0
Total shareholders' equity............................................. 2,927.7 2,061.5
---------------- -----------------
Total Liabilities, Cumulative Exchangeable Preferred Stock and
Shareholders' Equity................................................. $ 72,282.2 $ 70,505.8
================ =================
DLJ's equity as reported............................................... $ 2,927.7 $ 2,061.5
Unamortized cost in excess of net assets acquired in 1985
and other adjustments................................................ 23.7 23.5
The Holding Company's equity ownership in DLJ.......................... (1,002.4) (740.2)
Minority interest in DLJ............................................... (1,118.2) (729.3)
---------------- -----------------
The Company's Carrying Value of DLJ.................................... $ 830.8 $ 615.5
================ =================
</TABLE>
F-38
<PAGE>
Summarized statements of earnings information for DLJ reconciled to the
Company's equity in earnings of DLJ is as follows:
<TABLE>
<CAPTION>
1998 1997
---------------- -----------------
(In Millions)
<S> <C> <C>
Commission, fees and other income...................................... $ 3,184.7 $ 2,430.7
Net investment income.................................................. 2,189.1 1,652.1
Dealer, trading and investment gains, net.............................. 33.2 557.7
---------------- -----------------
Total revenues......................................................... 5,407.0 4,640.5
Total expenses including income taxes.................................. 5,036.2 4,232.2
---------------- -----------------
Net earnings........................................................... 370.8 408.3
Dividends on preferred stock........................................... 21.3 12.2
---------------- -----------------
Earnings Applicable to Common Shares................................... $ 349.5 $ 396.1
================ =================
DLJ's earnings applicable to common shares as reported................. $ 349.5 $ 396.1
Amortization of cost in excess of net assets acquired in 1985.......... (.8) (1.3)
The Holding Company's equity in DLJ's earnings......................... (136.8) (156.8)
Minority interest in DLJ............................................... (99.5) (109.1)
---------------- -----------------
The Company's Equity in DLJ's Earnings................................. $ 112.4 $ 128.9
================ =================
</TABLE>
22) ACCOUNTING FOR STOCK-BASED COMPENSATION
The Holding Company sponsors a stock option plan for employees of
Equitable Life. DLJ and Alliance each sponsor their own stock option
plans for certain employees. The Company has elected to continue to
account for stock-based compensation using the intrinsic value method
prescribed in APB No. 25. Had compensation expense for the Holding
Company, DLJ and Alliance Stock Option Incentive Plan options been
determined based on SFAS No. 123's fair value based method, the
Company's pro forma net earnings for 1998, 1997 and 1996 would have
been:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C>
Net Earnings:
As reported............................................. $ 708.2 $ 437.2 $ 10.3
Pro forma............................................... 678.4 426.3 3.3
</TABLE>
The fair values of options granted after December 31, 1994, used as a
basis for the above pro forma disclosures, were estimated as of the
dates of grant using the Black-Scholes option pricing model. The option
pricing assumptions for 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Holding Company DLJ Alliance
------------------------------ ------------------------------- ----------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
--------- ---------- --------- ---------- -------------------- ---------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend yield...... 0.32% 0.48% 0.80% 0.69% 0.86% 1.54% 6.50% 8.00% 8.00%
Expected volatility. 28% 20% 20% 40% 33% 25% 29% 26% 23%
Risk-free interest
rate.............. 5.48% 5.99% 5.92% 5.53% 5.96% 6.07% 4.40% 5.70% 5.80%
Expected life
in years.......... 5 5 5 5 5 5 7.2 7.2 7.4
Weighted average
fair value per
option at
grant-date........ $22.64 $12.25 $6.94 $16.27 $10.81 $4.03 $3.86 $2.18 $1.35
</TABLE>
F-39
<PAGE>
A summary of the Holding Company, DLJ and Alliance's option plans is as
follows:
<TABLE>
<CAPTION>
Holding Company DLJ Alliance
----------------------------- ----------------------------- -----------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Price of Price of Price of
Shares Options Shares Options Units Options
(In Millions) Outstanding (In Millions) Outstanding (In Millions) Outstanding
--------------- ------------- --------------- ------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1996........ 6.7 $20.27 18.4 $13.50 9.6 $ 8.86
Granted................ .7 $24.94 4.2 $16.27 1.4 $12.56
Exercised.............. (.1) $19.91 - (.8) $ 6.82
Expired................ - - -
Forfeited.............. (.6) $20.21 (.4) $13.50 (.2) $ 9.66
--------------- ------------- ---------------
Balance as of
December 31, 1996...... 6.7 $20.79 22.2 $14.03 10.0 $ 9.54
Granted................ 3.2 $41.85 6.4 $30.54 2.2 $18.28
Exercised.............. (1.6) $20.26 (.2) $16.01 (1.2) $ 8.06
Forfeited.............. (.4) $23.43 (.2) $13.79 (.4) $10.64
--------------- ------------- ---------------
Balance as of
December 31, 1997...... 7.9 $29.05 28.2 $17.78 10.6 $11.41
Granted................ 4.3 $66.26 1.5 $38.59 2.8 $26.28
Exercised.............. (1.1) $21.18 (1.4) $14.91 (.9) $ 8.91
Forfeited.............. (.4) $47.01 (.1) $17.31 (.2) $13.14
--------------- ------------- ---------------
Balance as of
December 31, 1998...... 10.7 $44.00 28.2 $19.04 12.3 $14.94
=============== ============= ===============
</TABLE>
F-40
<PAGE>
Information about options outstanding and exercisable at December 31,
1998 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- -----------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices (In Millions) Life (Years) Price (In Millions) Price
--------------------------------------- ----------------- ---------------- ------------------- ---------------
Holding
Company
----------------------
<S> <C> <C> <C> <C> <C>
$18.125 -$27.75 3.7 5.19 $20.97 3.0 $20.33
$28.50 -$45.25 3.0 8.68 $41.79 -
$50.63 -$66.75 2.1 9.21 $52.73 -
$81.94 -$82.56 1.9 9.62 $82.56 -
----------------- -------------------
$18.125 -$82.56 10.7 7.75 $44.00 3.0 $20.33
================= ================= ================ ==================== ==============
DLJ
----------------------
$13.50 -$25.99 22.3 7.1 $14.59 21.4 $15.05
$26.00 -$38.99 5.0 8.8 $33.94 -
$39.00 -$52.875 .9 9.4 $44.65 -
----------------- -------------------
$13.50 -$52.875 28.2 7.5 $19.04 21.4 $15.05
================= ================== ============== ===================== =============
Alliance
----------------------
$ 3.03 -$ 9.69 3.1 4.5 $ 8.03 2.4 $ 7.57
$ 9.81 -$10.69 2.0 5.3 $10.05 1.6 $10.07
$11.13 -$13.75 2.4 7.5 $11.92 1.0 $11.77
$18.47 -$18.78 2.0 9.0 $18.48 .4 $18.48
$22.50 -$26.31 2.8 9.9 $26.28 - -
----------------- -------------------
$ 3.03 -$26.31 12.3 7.2 $14.94 5.4 $ 9.88
================= =================== ============= ===================== =============
</TABLE>
F-41
