SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM
N-8B-2
File No. 811-08945
REGISTRATION STATEMENT OF UNIT INVESTMENT TRUSTS WHICH ARE
CURRENTLY ISSUING SECURITIES
March 28, 2000
Pursuant to Section 8(b) of the
Investment Company Act of 1940
THE PINNACLE FAMILY OF TRUSTS, INTERNET TRUST SERIES I
(AND SUBSEQUENT SERIES)
and any other future trusts for which
McLaughlin, Piven, Vogel Securities, Inc. and/or
ING Funds Distributor, Inc. act as Depositors
-----------------------------------------
Name of Registrant
1475 Dunwoody Drive
West Chester, Pennsylvania 19380
-----------------------------------------
Address and Principal Office of Registrant
X Not the issuer of periodic payment plan certificates.
- ---
Issuer of periodic payment plan certificates.
- ---
Amended items 1, 2, 6, 7, 23, 25, 27, 28, 29 and 59.
933874.1
<PAGE>
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Furnish name of the trust and the Internal
Revenue Service Employer Identification Number.
The Pinnacle Family of Trusts, Internet Trust Series I (and
Subsequent Series) and any other future trusts for which
McLaughlin, Piven, Vogel Securities, Inc. and/or ING Funds
Distributor, Inc. act as sponsors.
The Trust has no Internal Revenue Service Employer
Identification Number.
(b) Furnish title of each class or series of
securities issued by the trust.
CERTIFICATE OF OWNERSHIP
--evidencing--
An Undivided Interest
--in--
The Pinnacle Family of Trusts, Internet Trust Series I
(and Subsequent Series)
2. Furnish name and principal business address and ZIP Code
and the Internal Revenue Service Employer Identification Number of each
depositor of the trust.
McLaughlin, Piven, Vogel ING Funds Distributor, Inc.
Securities, Inc. 1475 Dunwoody Drive
30 Wall Street West Chester, Pennsylvania
New York, New York 10005 19380
Internal Revenue Service Employer Internal Revenue Service
Identification Number 13-2887111 Employer Identification
Number: 42-1418588
6. (a) Furnish the dates of execution and termination
of any indenture or agreement currently in effect under the terms
of which the trust was organized and issued or proposes to issue
securities.
The form of Trust Indenture and Agreement among McLaughlin,
Piven, Vogel Securities, Inc. and Reich & Tang Distributors,
Inc., as Depositors, ING Mutual Funds Management Co. LLC, as
Portfolio Supervisor and The Chase Manhattan Bank, as
Trustee, to be employed by the Trust will be filed as Exhibit
99.1.1.1 to the Registration Statement on Form S-6 of the
Trust.
933874.1
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<PAGE>
The Indenture will be dated the initial date of deposit of
the securities in The Pinnacle Family of Trusts, Internet
Trust Series I and shall terminate no later than the
disposition of the last security purchased by the Trust but
no later than the Mandatory Termination Date which is
approximately fifteen months from the initial date of
deposit.
Substantially identical but separate Reference Trust
Agreements will be executed for each Series of Trusts between
the Depositors, the Portfolio Supervisor and Trustee. The
respective Reference Trust Agreements shall be dated the
initial date of deposit of the underlying securities for each
Series and shall terminate on the date of disposition of the
last security held in the Trust portfolio but no later than
the Mandatory Termination Date which is approximately fifteen
months from the initial date of deposit.
(b) Furnish the dates of execution and termination of any
indenture or agreement currently in effect pursuant to which the proceeds of
payment on securities issued or to be issued by the trust are held by the
custodian or trustee.
See Item 6(a) above.
7. Furnish in chronological order the following information
with respect to each change of name of the trust since January 1, 1930. If the
name has never been changed, so state.
McLaughlin, Piven, Vogel Family of Trusts to The Pinnacle
Family of Trusts, December 9, 1999.
23. Describe any bonding arrangement for officers, directors,
partners or employees of the depositor or principal underwriter of the trust,
including the amount of coverage and the type of bond.
ING Funds Distributor, Inc. and its directors, officers and
employees are covered by a Stockbrokers Blanket Bond in the
amount of $2,000,000, under a Financial Institution Bond Form
14.
McLaughlin, Piven, Vogel Securities, Inc. and its directors,
officers and employees are covered by a Stockbrokers Blanket
Bond in the amount of $1,000,000.
933874.1
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<PAGE>
II. ORGANIZATION, PERSONNEL AND AFFILIATED PERSONS OF DEPOSITOR
-----------------------------------------------------------
Organization and Operations of Depositor
----------------------------------------
25. State the form of organization of the depositor of the
trust, the name of the state or other sovereign power under the laws of which
the depositor was organized and the date of organization.
McLaughlin, Piven, Vogel Securities, Inc. is a Corporation
organized in 1977 under the laws of the State of New York.
ING Funds Distributor, Inc. is a Corporation organized in
1994 under the laws of the State of Iowa.
27. Describe the general character of the business engaged in
by the depositor including a statement as to any business other than that of
depositor of the trust. If the depositor acts or has acted in any capacity with
respect to any investment company or companies other than the trust, state the
name or names of such company or companies, their relationship, if any, to the
trust, and the nature of the depositor's activities therewith. If the depositor
has ceased to act in such named capacity, state the date of and circumstances
surrounding such cessation.
See "Trust Administration - Sponsors" in Exhibit 2. Each of
the Depositors is engaged in the underwriting and securities
brokerage business and is a member of the National
Association of Securities Dealers, Inc.
ING Funds Distributor, Inc., formerly known as Equitable of
Iowa Securities Network, Inc., is also the wholesaler of 17
mutual funds and 1 money market through affiliated and
non-affiliated broker/dealers as well as through
broker/dealers of selected banks.
Officials and Affiliated Persons of Depositor
---------------------------------------------
28. (a) Furnish as at latest practicable date the following
information with respect to the depositor of the trust, with respect to each
officer, director, or partner of the depositor, and with respect to each natural
person directly or indirectly owning, controlling or holding with power to vote
5% or more of the outstanding voting securities of the depositor.
933874.1
3
<PAGE>
With respect to McLaughlin, Piven, Vogel Securities, Inc.
reference is made to Exhibit E.I hereto.
With respect to ING Funds Distributor, Inc. reference is made
to Exhibit F.I. hereto.
(b) Furnish a brief statement of the business experience
during the last five years of each officer, director or partner of the
depositor.
With respect to McLaughlin, Piven, Vogel Securities, Inc.,
each of the officers and directors has been, during the past
five years, engaged by McLaughlin, Piven, Vogel Securities,
Inc., in the full time management and day-to-day operations
of the Depositor.
With respect to ING Funds Distributor, Inc. reference is made
to Exhibit F.II. hereto.
Companies Owning Securities of Depositor.
----------------------------------------
29. Furnish as at latest practicable date the following
information with respect to each company which directly or indirectly owns,
controls or holds with power to vote 5% or more of the outstanding voting
securities of the depositor.
With respect to McLaughlin, Piven, Vogel Securities, Inc. the
response is none.
With respect to ING Funds Distributor, Inc. reference is made
to Exhibit F.III. hereto.
III. FINANCIAL AND STATISTICAL INFORMATION
-------------------------------------
59. Financial Statements filed herewith:
(c)(1) Balance Sheet of each of the Depositors for
their last fiscal year.
With respect to McLaughlin, Piven, Vogel Securities, Inc.
incorporated by reference to Form X-17A-5 Part III filed on
November 24, 1997 (SEC File Number 8-21586).
With respect to ING Funds Distributor, Inc. reference is made
to Form X-17A-5 Part III included as Exhibit G hereto.
933874.1
4
<PAGE>
(c)(2) Profit and Loss Statement and Statement of Surplus for
each of the Depositors for their last fiscal year.
With respect to McLaughlin, Piven, Vogel Securities, Inc.
incorporated by reference to Form X-17A-5 Part III filed on
November 24, 1997 (SEC File Number 8-21586).
With respect to ING Funds Distributor, Inc. reference is made
to Form X-17A-5 Part III included as Exhibit G hereto.
933874.1
5
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Investment Company Act of
1940, the depositor of the registrant has caused this Registration Statement to
be duly signed on behalf of the registrant in the City and State of New York, on
the 28th day of March, 2000.
THE PINNACLE FAMILY OF TRUSTS,
INTERNET TRUST SERIES I
(and SUBSEQUENT SERIES)
By: MCLAUGHLIN, PIVEN, VOGEL
SECURITIES, INC.
By: /s/ ALLAN M. VOGEL
------------------
Name: Allan M. Vogel
Title: President, Chief
Financial Officer,
Secretary and Director
Attest: /s/ IRA A. COHEN
----------------
Name: Ira A. Cohen
Title: Compliance Director
ING FUNDS DISTRIBUTOR, INC.
By: /s/ PETER J. DEMARCO
--------------------
Name: Peter J. DeMarco
Title: Senior Vice President
Attest: /s/ DONALD E. BROSTROM
----------------
Name: Donald E. Brostrom
Title: Chief Financial Officer
& Treasurer
933874.1
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<PAGE>
IV. EXHIBITS
--------
No. Description
- --- -----------
1. Form of Trust Indenture and Agreement (filed as Exhibit 99.1.1.1 to the
Registration Statement on Form S-6 of the Trust and incorporated herein
by reference).
2. Form of Prospectus for the Trust (filed with Registration Statement on
Form S-6 of the Trust and incorporated herein by reference).
3. Certificate of Incorporation of McLaughlin, Piven, Vogel Securities,
Inc. dated March 8, 1977 and, as amended on January 16, 1979, June 8,
1979, August 27, 1979, May 3, 1982, December 20, 1983 and September 25,
1989 (filed as Exhibit 99.1.3.7 to the Registration Statement No.
333-60915 on Form S-6 of McLaughlin, Piven, Vogel Family of Trusts, The
Pinnacle Trust on August 7, 1998 and incorporated herein by reference).
4. Bylaws of McLaughlin, Piven, Vogel Securities, Inc. (filed as Exhibit
99.1.3.8 to the Registration Statement No. 333- 60915 on Form S-6 of
McLaughlin, Piven, Vogel Family of Trusts, The Pinnacle Trust on August
7, 1998 and incorporated herein by reference).
5. Articles of Incorporation and Articles of Amendment of ING Funds
Distributor, Inc. (filed as Exhibit 99.1.3.5 to the Form S-6
Registration Statement of the Trust and incorporated herein by
reference).
6. Bylaws of ING Funds Distributor, Inc. (filed as Exhibit 99. 1.3.6 to
the Form S-6 Registration Statement of the Trust and incorporated
herein by reference).
933874.1
<PAGE>
EXHIBIT E.I
-----------
Ownership of Securities of
McLaughlin, Piven, Vogel Securities, Inc.
-----------------------------------------
<TABLE>
<CAPTION>
Securities Owned of Securities Owned
Name and Principal Securities Owned of Record but not Beneficially but
Business Address Record and Beneficially Beneficially Not of Record
- ------------------ ----------------------- ------------------- ----------------
<S> <C> <C> <C>
James J. McLaughlin 533.785 shares (52.31%) 0 0
30 Wall Street
New York, NY 10005
James C. McLaughlin 375 shares (36.75%) 0 0
30 Wall Street
New York, NY 10005
Mark G. McLaughlin 61.215 shares (6.00%) 0 0
30 Wall Street
New York, NY 10005
Allan M. Vogel 30 shares (2.94%) 0 0
30 Wall Street
New York, NY 10005
James M. Kennedy 10.153 shares (1.00%) 0 0
30 Wall Street
New York, NY 10005
Edward T. Brienza 5.051 Shares (0.50%) 0 0
30 Wall Street
New York, NY 10005
David Dawkins 5.051 shares (0.50%) 0 0
30 Wall Street
New York, NY 10005
</TABLE>
933874.1
-i-
<PAGE>
EXHIBIT E.I (Contd.)
-----------
Ownership of Securities of the Trust
------------------------------------
None
Other Companies of which each Person
Named Above is an Officer, Director or Partner
----------------------------------------------
<TABLE>
<CAPTION>
Name Name and Address Business of Company Nature of
of Company Affiliation
with Company
<S> <C> <C> <C>
James C. McLaughlin McLaughlin, Piven, Credit card services Shareholder, Officer &
Vogel of Nevada Inc. Director
1325 Airmotive Way
Suite 175F
Reno, Nevada 89502
Media Production Marketing Shareholder, Officer &
Services of Nevada Inc. Director
1325 Airmotive Way
Suite 175F
Reno, Nevada 89502
James J. McLaughlin McLaughlin, Piven, Credit card services Shareholder, Officer &
Vogel of Nevada Inc. Director
1325 Airmotive Way
Suite 175F
Reno, Nevada 89502
Media Production Marketing Shareholder, Officer &
Services of Nevada Inc. Director
1325 Airmotive Way
Suite 175F
Reno, Nevada 89502
Allan M. Vogel McLaughlin, Piven, Credit card services Shareholder, Officer &
Vogel of Nevada Inc. Director
1325 Airmotive Way
Suite 175F
Reno, Nevada 89502
Media Production Marketing Shareholder, Officer &
Services of Nevada Inc. Director
1325 Airmotive Way
Suite 175F
Reno, Nevada 89502
</TABLE>
933874.1
-ii-
<PAGE>
EXHIBIT F
As of March 28, 2000
I. Information as to each officer, director or partner of ING Funds
Distributor, Inc., and with respect to each natural person
directly or indirectly owning, controlling or holding with power to
vote 5% or more of the outstanding voting securities of ING Funds
Distributor, Inc.
<TABLE>
<CAPTION>
Name Title/Position Business Address
- ---- -------------- ----------------
<S> <C> <C>
John J. Pileggi Director and Chief Executive Officer 1475 Dunwoody Drive
West Chester, PA 19380
Donald E. Brostrom Director, Chief Financial Officer 1475 Dunwoody Drive
and Treasurer West Chester, PA 19380
Mitchell J. Mellen Director and President 1475 Dunwoody Drive
West Chester, PA 19380
Eric M. Rubin Director and Senior Vice President 4802 East Ray Road, Suite 22-228
Phoenix, AZ 85044
Peter J. DeMarco Senior Vice President 600 Fifth Avenue
New York, NY 10022
Rachelle I. Rehner Secretary 1475 Dunwoody Drive
West Chester, PA 19380
Gary Taiariol Assistant Treasurer 1475 Dunwoody Drive
West Chester, PA 19380
</TABLE>
As of the date hereof, none of the referenced persons own 5% or more of ING
Funds Distributor, Inc.
As of the date hereof, none of the referenced persons own any Units of the
Trust.
II. The business experience during the last five years of each
officer and director of ING Funds Distributor, Inc.
John Pileggi - Chief Executive Officer and Director of ING Funds Distributor,
Inc. since 1999. Mr. Pileggi has also served as President and Chief Executive
Officer for ING Mutual Funds Management Co. LLC since 1998, as President,
Chairman of the Board and Trustee for ING Funds Trust, as Chief Executive
Officer for ING Fund Services Co. LLC and as President, Chief Executive Officer
and Trustee for ING Variable Insurance Trust. Mr. Pileggi has been a Director of
Furman Selz LLC since 1994 and is also a Trustee for the First Choice Funds,
Intrust Funds and Performance Funds, ING Canadian Funds, ING Global Brand Names
Funds and ING American Fund.
933874.1
-iii-
<PAGE>
Donald Brostrom - Chief Financial Officer, Treasurer and Director of
ING Funds Distributor, Inc. since April, 1999. Mr. Brostrom has also
served as Executive Vice President and Chief Operating Officer for ING
Mutual Funds Management Co. LLC since 1998, as Treasurer for ING Funds
Trust, as Chief Financial Officer for ING Fund Services Co. LLC since
October, 1998 and as Treasurer for ING Variable Insurance Trust. Mr.
Brostrom was a Managing Director of Furman Selz LLC from 1984 to
September, 1998.
Mitch Mellen - President and Director of ING Funds Distributor, Inc.
since July, 1999. Mr. Mellen was formerly the National Sales Manager
for New York Life Mainstay Funds from October, 1995 to July, 1998 and
an investment broker with Piper Jaffrey from May, 1993 to June, 1995.
Eric Rubin - Director of ING Funds Distributor, Inc. since April, 1999 and
Senior Vice President since January, 2000. Formerly Vice President of Sales of
First Data Investor Services Group from January, 1997 to June, 1998 and Managing
Director of Furman Selz, LLC from July, 1995 to January, 1997. Mr. Rubin has
also served as Vice President and Managing Director of Banc One Investment
Advisors from October, 1993 to July, 1995.
Peter DeMarco - Senior Vice President of ING Funds Distributor, Inc.
since October, 1999. Mr. DeMarco was an Executive Vice President for
Reich & Tang Asset Management LP from October, 1995 to October, 1999
and a Managing Director of Bear, Stearns & Co. Inc. from 1981 to
October, 1995.
Rachelle Rehner - Secretary of ING Funds Distributor, Inc. since 1999.
Ms. Rehner has also served as Fund Legal Manager for ING Mutual Funds
Management Co. LLC since 1998. Ms. Rehner was a senior legal
assistant for Kramer, Levin, Naftalis & Frankel from 1995 to 1998 and
a compliance administrator for BISYS from 1994 to 1995.
Gary Taiariol - Assistant Treasurer of ING Funds Distributor, Inc.
since April, 1999. Mr. Taiariol has also served as Treasurer for ING
Mutual Funds Management Co. LLC and ING Fund Services Co. LLC since
December, 1998. Mr. Taiariol was an Accounting Manager for Novacare,
Inc. from January, 1995, to December, 1998 and a Senior Accountant for
Christian Dior Perfumes from June, 1992 to January, 1995.
933874.1
-iv-
<PAGE>
III. Each Company which directly or indirectly owns, controls or holds with
power to vote 5% or more of the outstanding voting securities of ING
Funds Distributor, Inc.
Equitable of Iowa Companies, Inc. 100% direct ownership of the
909 Locust Street Principal Underwriter
Des Moines, Iowa 50309
ING America Insurance Holdings, Inc. 100% direct ownership of
5780 Powers Ferry Road N.W. Equitable of Iowa Companies,
Atlanta, Georgia 30327 Inc.
ING Insurance International B.V. 100% direct ownership of ING
America Insurance Holdings,
Inc.
ING Verzekeringen, N.V. 100% direct ownership of ING
Insurance International B.V.
ING Groep N.V. 100% direct ownership of ING
Strawinskylaan 2631 Verzekeringen, N.V.
1077 ZZ
Amsterdam
The Netherlands
933874.1
-v-
<PAGE>
RIDER G
EXHIBIT G
---------
ING Funds Distributor, Inc.
<TABLE>
<CAPTION>
Statements of Financial Condition
December 31
Assets 1999 1998
----------------------------------
<S> <C> <C>
Cash $ 88,071 $ $30,000
Short-terms investments 755,000 --
Management fee receivable 440,821 --
Due from affiliate (including $3,002,709 in 1999
under tax allocation agreement) 3,352,513 --
Deferred sales costs 485,536 --
Prepaid expenses 219,805 --
----------------------------------
Total assets $ 5,341,746 $ 30,000
==================================
Liability and stockholder's equity
Liability-- accounts payable and other accrued
expenses $ 686,196 --
Stockholder's equity:
Common stock, without par value (stated value
$1.00 per share) -- authorized
50,000 shares,
issued and outstanding 1,000 shares 1,000 $ 1,000
Additional paid-in capital 9,329,000 29,000
Retained earnings (deficit) (4,674,450) --
-----------------------------------
Total stockholder's equity 4,655,550 30,000
-----------------------------------
Total liability and stockholder's equity $ 5,341,746 $ 30,000
===================================
</TABLE>
See accompanying notes.
933874.1
i
<PAGE>
ING Funds Distributor, Inc.
<TABLE>
<CAPTION>
Statements of Operations
Year ended December 31
1999 1998
---------------------------------
<S> <C> <C>
Income:
Commissions $ 581,928 --
Distribution fees 475,307 --
Shareholder servicing fees 1,427,792 --
Interest 31,626 --
Other 1,100 --
Expense reimbursement from Equitable Life
Insurance Company of Iowa -- $ 8,545
---------------------------------
2,517,753 8,545
Expenses:
Commissions and promotional payments 4,138,008 --
Salaries and benefits 3,609,755 --
Travel and entertainment 1,519,342 --
Conferences 705,796 --
Professional fees 43,867 6,300
Other 178,144 2,245
---------------------------------
10,194,912 8,545
---------------------------------
Loss before income taxes (7,677,159) --
Income tax benefit (3,002,709) --
---------------------------------
Net loss $ (4,674,450) $ --
=================================
</TABLE>
See accompanying notes.
933874.1
ii
<PAGE>
ING Funds Distributor, Inc.
<TABLE>
<CAPTION>
Statements of Changes in Stockholder's Equity
Additional Retained Total
Common Paid-In Earnings Stockholder's
Stock Capital (Deficit) Equity
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $1,000 $24,000 -- $25,000
Contribution of capital -- 5,000 -- 5,000
-------------------------------------------------------------------------
Balance at December 31, 1998 1,000 29,000 -- 30,000
Contribution of capital -- 9,300,000 -- 9,300,000
Net loss -- -- $(4,674,450) (4,674,450)
-------------------------------------------------------------------------
Balance at December 31, 1998 $1,000 $9,329,000 $(4,674,450) $4,655,550
=========================================================================
</TABLE>
See accompanying notes.
933874.1
iii
<PAGE>
<TABLE>
<CAPTION>
ING Funds Distributor, Inc.
Statements of Cash Flows
Year ended December 31
1999 1998
-------------------------------------
<S> <C> <C>
Operating activities
Net loss $ (4,674,450) --
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
Management fee receivable (440,821) --
Due from affiliate (3,352,513) $1,550
Deferred sales costs (485,536) --
Prepaid expenses (219,805) --
Accounts payable and other accrued expenses 686,196 1,000
-------------------------------------
Net cash provided by (used in) operating activities (8,486,929) 550
Financing activity
Contribution of capital by parent 9,300,000 5,000
-------------------------------------
Net cash provided by financing activity 9,300,000 5,000
Investing activity
Purchase of short-term investments (755,000) --
-------------------------------------
Net cash used in investing activity (755,000) --
-------------------------------------
Increase in cash and cash equivalents 58,071 5,550
Cash at beginning of year 30,000 24,450
-------------------------------------
Cash at end of year $ 88,071 $ 30,000
=====================================
</TABLE>
See accompanying notes.
933874.1
iv
<PAGE>
ING Funds Distributor, Inc.
Notes to Financial Statements
December 31, 1999
1. Significant Accounting Policies
Organization
As of October 22, 1998, Equitable of Iowa Securities Network, a wholly owned
subsidiary of Equitable of Iowa Companies, Inc. ("EIC" or the "Parent"), was
renamed ING Funds Distributor, Inc. (the "Company"). EIC is an indirect wholly
owned subsidiary of ING Groep N.V., a global financial services holding company
based in The Netherlands. The Company engages primarily in the sale of shares of
mutual funds of sixteen open-end investment companies (the "Funds") comprising
the ING Funds Trust (the "Trust"), an affiliate. Pursuant to a distribution
agreement approved annually by the Trust's Board of Trustees, the Company
derives commission income from the sale of mutual fund shares, as well as
distribution and shareholder servicing fees from the Funds.
Prior to October 22, 1998, the Company operated as a broker-dealer, dealing
primarily in the sale of certain variable annuity contracts issued by Equitable
Life Insurance Company of Iowa Separate Account A. Commissions due on the sale
of certain variable annuity contracts issued by Equitable Life Insurance Company
of Iowa Separate Account A were paid by Equitable Life Insurance Company of Iowa
("Equitable Life"), an affiliate, directly to third-party wholesalers. On
October 28, 1998, the Company entered into a membership agreement with the
National Association of Securities Dealers, Inc. and began operating as a
broker-dealer dealing primarily with the distribution of mutual funds.
Cash and Cash Equivalents
The Company considers all liquid investments with a maturity of three months or
less when purchased to be cash equivalents.
Deferred Income Taxes
Deferred income tax assets or liabilities are computed based on the difference
between the financial statement and income tax bases of assets and liabilities
using the enacted marginal tax rate. Deferred income tax expense or benefit are
based on the changes in the asset or liability from period to period.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles may require management to make certain estimates and
assumptions that affect the reported amounts of assets
933874.1
v
<PAGE>
and liabilities at the date of these financial statements and the reported
amounts of income and expenses during the reporting period. Actual results could
differ from those estimates.
Reclassifications
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 financial statement presentation.
2. Income Taxes
The results of the Company's operations are included in the consolidated tax
returns of EIC. The Parent and its subsidiaries each report current income tax
expense as allocated under a consolidated tax allocation agreement. Generally,
this allocation results in profitable companies recognizing a tax provision as
if the individual company filed a separate return and loss companies recognizing
benefits to the extent their losses contribute to reduce consolidated taxes.
Income tax benefit consists of the following:
Year ended December 31
1999 1998
---------------------------------------------------
Federal $ (2,627,370) $ --
State (375,339) --
---------------------------------------------------
$ (3,002,709) $ --
===================================================
Income tax benefit differs from the amount computed by applying the statutory
federal income tax rate to income before income taxes due to non-deductible
meals and entertainment and state income taxes.
3. Regulatory Requirements
The Company is subject to the Securities and Exchange Commission uniform net
capital rule (Rule 15c3-1), which requires the maintenance of minimum net
capital and requires that the ratio of aggregate indebtedness to net capital,
both as defined therein, shall not exceed 15 to 1. At December 31, 1999, the
Company had defined net capital of $582,596, which was $536,850 in excess of its
required net capital of $45,746. The Company's ratio of aggregate indebtedness
to net capital was 1.18 to 1.
4. Principal Broker-Dealer Agreement
Prior to October 22, 1998, pursuant to a Principal Broker-Dealer Agreement, the
operating costs paid by the Company were reimbursed by Equitable Life in
connection with services performed.
933874.1
vi
