Registration No. 333-72381
Registration No. 811-09233
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
PRE EFFECTIVE AMENDMENT TO
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 1 [X]
(Check appropriate box or boxes)
--------------------
SEPARATE ACCOUNT VA
of
THE EQUITABLE OF COLORADO, INC.
(Exact Name of Registrant)
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THE EQUITABLE OF COLORADO, INC.
(Name of Depositor)
370 17th Street, Suite 4950, Denver, Colorado 80202
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (303) 892-5700
--------------------
Joseph G. Williams, Jr.
VICE PRESIDENT AND ASSOCIATE GENERAL COUNSEL
The Equitable Life Assurance Society of the United States
1290 Avenue of the Americas, New York, New York 10104
(Name and Address of Agent for Service)
--------------------
Please send copies of all communications to:
PETER E. PANARITES
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W., Suite 825
Washington, D.C. 20036
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of the Registration Statement.
It is proposed that this filing will become effective (check
appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] On ______________ pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[ ] On (date) pursuant to paragraph (a)(1) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for
previously filed post-effective amendment.
Title of Securities Being Registered:
Units of interest in Separate Account under variable annuity contracts.
<PAGE>
EQUITABLE OF COLORADO ACCUMULATOR PLUS(SM)
A variable deferred annuity contract
April __, 1999
[Equitable of Colorado AXA Logo]
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 prospectuses for The Hudson River Trust and EQ Advisors Trust,
which contain important information about their Portfolios.
WHAT IS THE EQUITABLE OF COLORADO ACCUMULATOR PLUS? The Equitable of Colorado
Accumulator Plus ("Accumulator Plus(SM)") is an annuity contract issued by THE
EQUITABLE OF COLORADO, INC. It provides for the accumulation of retirement
savings and for income. The contract offers death benefit protection and a
number of payout options. You invest to accumulate value on a tax-deferred basis
in one or more of our variable investment options. This contract is not
available in New York.
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<CAPTION>
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VARIABLE INVESTMENT OPTIONS
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<S> <C> <C> <C> <C> <C>
o ALLIANCE MONEY MARKET o EQ/EVERGREEN o MERRILL LYNCH BASIC VALUE
o ALLIANCE HIGH YIELD o EQ/EVERGREEN FOUNDATION EQUITY
o ALLIANCE COMMON STOCK o JPM CORE BOND o MERRILL LYNCH WORLD STRATEGY
o ALLIANCE AGGRESSIVE STOCK o LAZARD LARGE CAP VALUE o MORGAN STANLEY EMERGING
o ALLIANCE SMALL CAP GROWTH o LAZARD SMALL CAP VALUE MARKETS EQUITY
o BT EQUITY 500 INDEX o MFS GROWTH WITH INCOME o EQ/PUTNAM GROWTH &
o BT SMALL COMPANY INDEX o MFS RESEARCH INCOME VALUE
o BT INTERNATIONAL EQUITY INDEX o MFS EMERGING GROWTH COMPANIES o EQ/PUTNAM INVESTORS GROWTH
o EQ/PUTNAM INTERNATIONAL
EQUITY
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</TABLE>
You may allocate amounts to any of the variable investment options.
They, in turn, invest in a corresponding securities portfolio ("Portfolio") of
The Hudson River Trust or EQ Advisors Trust. Your investment results in a
variable investment option will depend on the investment performance of the
related Portfolio. Each variable investment option is a subaccount of our
Separate Account VA.
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<CAPTION>
TYPES OF CONTRACTS. We offer the contracts for use as:
<S> <C> <C> <C>
o A nonqualified annuity ("NQ") for after o An annuity which is an investment
tax contributions only vehicle for a qualified defined
contribution or defined benefit plan ("QP")
o An individual retirement annuity ("IRA"),
either Traditional IRA or Roth IRA
</TABLE>
<PAGE>
A contribution of at least $25,000 is required to purchase a contract.
We add an amount ("credit") to your contract with each contribution you make.
A registration statement relating to this offering has been filed with
the Securities and Exchange Commission ("SEC"). The statement of additional
information ("SAI") dated April __, 1999, is a part of the registration
statement. 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 website 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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COPYRIGHT 1999 THE EQUITABLE OF COLORADO, INC. ALL RIGHTS RESERVED. THE
EQUITABLE OF COLORADO, INC. IS AN AUTHORIZED LICENSEE OF ACCUMULATOR
PLUS, A SERVICE MARK OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES.
PROS 1AMLPLUS (5/99)
<PAGE>
CONTENTS OF THIS PROSPECTUS
<TABLE>
<CAPTION>
PAGE IN
PROSPECTUS
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<S> <C>
INDEX OF KEY WORDS AND PHRASES 4
WHO IS EQUITABLE OF COLORADO? 5
HOW TO REACH US 5
ACCUMULATOR PLUS AT A GLANCE -- KEY FEATURES 8
FEE TABLE 11
Examples 14
CONTRACT FEATURES AND BENEFITS 15
How you can purchase and contribute to your contract 15
Owner and annuitant requirements 17
How you can make your contributions 17
What are your variable investment options under the contract? 18
Portfolios of The Hudson River Trust 18
Portfolios of EQ Advisors Trust 19
Allocating your contributions 20
Guaranteed minimum death benefit 21
Your right to cancel within a certain number of days 22
DETERMINING YOUR CONTRACT'S VALUE 23
Your account value 23
Your contract's value in each variable investment option 23
TRANSFERRING YOUR MONEY AMONG THE VARIABLE INVESTMENT OPTIONS 23
Transferring your account value 23
Dollar cost averaging your account value 24
Rebalancing your account value 24
ACCESSING YOUR MONEY 25
Withdrawing your account value 25
How withdrawals are taken From your account value 27
How withdrawals affect your guaranteed minimum death benefit 28
Surrendering your contract to receive its cash value 28
When to expect payments 29
Choosing your annuity payout options 29
CHARGES AND EXPENSES 32
Charges that Equitable of Colorado deducts 32
Charges that the Trusts deduct 35
Group or sponsored arrangements 35
Other distribution arrangements 36
PAYMENT OF DEATH BENEFIT 36
Your beneficiary and payment of benefit 36
How death benefit payment is made 37
Beneficiary continuation option for Traditional IRA contracts 38
TAX INFORMATION 39
Overview 39
</TABLE>
2
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<TABLE>
<CAPTION>
<S> <C>
Transfers among variable investment options 39
Taxation of nonqualified annuities 39
Special rules for NQ contracts issued in Puerto Rico 41
Individual Retirement Arrangements ("IRAs") 42
Special rules for Nonqualified contracts in qualified plans 54
Federal and state income tax withholding and information reporting 54
Impact of taxes to Equitable of Colorado 56
MORE INFORMATION 56
About our Separate Account VA 56
About The Hudson River Trust and EQ Advisors Trust 57
About the general account 57
About other methods of payment 58
Date and prices at which contract events occur 59
About Your Voting Rights 59
About our year 2000 progress 61
About legal proceedings 61
About our financial statements 62
Transfers of ownership, collateral assignments, loans, and borrowing 62
Distribution of the contracts 62
Services provided by Equitable Life 63
INVESTMENT PERFORMANCE 63
Benchmarks 64
Communicating performance data 65
APPENDIX I: PURCHASE CONSIDERATIONS FOR QP CONTRACTS 74
APPENDIX II: GUARANTEED MINIMUM DEATH BENEFIT EXAMPLE 75
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS 76
</TABLE>
"WE," "OUR" AND "US" REFERS TO EQUITABLE OF COLORADO.
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 WHICH ARE ISSUED
UNDER GROUP CONTRACTS IN SOME STATES. ALSO, TO MAKE THIS PROSPECTUS EASIER TO
READ, WE SOMETIMES USE DIFFERENT WORDS THAN IN THE CONTRACT. YOUR REGISTERED
REPRESENTATIVE CAN PROVIDE FURTHER EXPLANATION ABOUT YOUR CONTRACT.
3
<PAGE>
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.
<TABLE>
<CAPTION>
PAGE IN PAGE IN
TERM PROSPECTUS TERM PROSPECTUS
- ---- ---------- ---- ----------
<S> <C> <C> <C>
account value.......................23 NQ..........................................Cover
annuitant...........................15 payout option...............................29
beneficiary.........................36 Portfolio...................................Cover
business day........................59 Processing Office...........................5
cash value..........................23 QP..........................................Cover
contract date.......................9 required beginning date.....................47
contract year.......................9 Roth IRA....................................Cover
contributions.......................15 SAI.........................................Cover
credit..............................21 Traditional IRA.............................Cover
guaranteed minimum Unit........................................23
death benefit.....................21 variable investment options.................Cover
</TABLE>
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<PAGE>
WHO IS EQUITABLE OF COLORADO? We are The Equitable of Colorado, Inc. ("Equitable
of Colorado"), a Colorado stock life insurance company. We have been doing
business since 1984. Equitable of Colorado is a wholly owned subsidiary of The
Equitable Life Assurance Society of the United States ("Equitable Life"), a New
York stock life insurance corporation. Equitable Life has been in business since
1859 and is a wholly owned subsidiary of The Equitable Companies Incorporated
("Equitable Companies"), whose majority shareholder 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 of Colorado, Equitable Life and Equitable Companies, AXA exercises
significant influence over the operations and capital structure of Equitable
Companies and its subsidiaries. No company other than Equitable of Colorado,
however, has any legal responsibility to pay amounts that Equitable of Colorado
owes under the contract. During 1999, Equitable Companies plans to change its
name to AXA Financial, Inc.
Equitable Companies and its consolidated subsidiaries, including Equitable of
Colorado, managed approximately $347.5 billion in assets as of December 31,
1998. Equitable of Colorado is authorized to sell life insurance in forty-six
states, and annuities in twenty-one states and Puerto Rico. Our home office is
located at 370 17th Street, Denver, Colorado 80202.
HOW TO REACH US. You may communicate with our Processing Office as listed below
for any of the following purposes:
<TABLE>
<CAPTION>
<S> <C>
o FOR CONTRIBUTIONS SENT BY REGULAR MAIL: o FOR CONTRIBUTIONS SENT BY EXPRESS DELIVERY:
Equitable of Colorado Accumulator Plus Equitable of Colorado Accumulator Plus
P.O. Box 13014 c/o First Chicago National Processing Center
Newark, NJ 07188-0014 300 Harmon Meadow Boulevard, 3rd Floor
Attn: Box 13014
Secaucus, NJ 07094
o FOR ALL OTHER COMMUNICATIONS (E.G., o FOR ALL OTHER COMMUNICATIONS (E.G.,
REQUESTS FOR TRANSFERS, WITHDRAWALS, REQUESTS FOR TRANSFERS, WITHDRAWALS,
OR REQUIRED NOTICES) SENT BY REGULAR OR REQUIRED NOTICES) SENT BY EXPRESS
MAIL: DELIVERY:
Equitable of Colorado Accumulator Plus Equitable of Colorado Accumulator Plus
P.O. Box 1547 200 Plaza Drive, 4th Floor
Secaucus, NJ 07096-1547 Secaucus, NJ 07094
</TABLE>
o CUSTOMER SERVICE REPRESENTATIVE: You may use our toll-free number
(1-800-789-7771) to speak with one of our customer service representatives or
to make telephone transfers among the variable investment options. Our
customer service representatives are available on any business day from 8:30
a.m. until 5:30 p.m., Eastern time.
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
5
<PAGE>
transfers. We will not be liable for following telephone instructions we
reasonably believe to be genuine.
o REPORTS WE PROVIDE:
o written confirmation of every financial transaction;
o statement at the close of each calendar quarter (three per year);
o annual statement as of the close of the calendar year.
---------------------
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 transfer by your registered representative;
(2) cancellation of your Roth IRA contract and return to a Traditional IRA
contract;
(3) election of the automatic investment program;
(4) election of the rebalancing program;
(5) tax withholding election; and
(6) beneficiary continuation option election.
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 variable investment options;
(4) withdrawal requests; and
(5) contract surrender.
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.
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) dollar cost averaging;
(3) rebalancing;
(4) substantially equal withdrawals;
6
<PAGE>
(5) systematic withdrawals; and
(6) the date annuity payments are to begin.
SIGNATURES: The proper person to sign forms, notices and requests would normally
be the owner. If there are joint owners both must sign. Any irrevocable
beneficiary or assignee that we have on our records also must sign certain types
of requests.
7
<PAGE>
ACCUMULATOR PLUS AT A GLANCE -- KEY FEATURES
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<CAPTION>
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<S> <C>
PROFESSIONAL Accumulator Plus' variable investment options invest in 22 different
INVESTMENT Portfolios managed by professional investment advisers.
MANAGEMENT
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TAX ADVANTAGES O ON EARNINGS No tax on any dividends, interest or capital gains until you
INSIDE THE make withdrawals or receive annuity payments from your
CONTRACT contract. However, all earnings will be taxed at your
ordinary income tax rate when they are withdrawn or annuity
payments are made.
O ON TRANSFERS No tax on transfers among the variable investment options.
INSIDE THE
CONTRACT
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CONTRIBUTION AMOUNTS o INITIAL MINIMUM: $25,000
o ADDITIONAL MINIMUM: $1,000
$100 monthly, $300 quarterly under our
automatic investment program (NQ contracts
only)
Maximum investment limitations may apply.
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CREDIT We allocate a credit to your account value at
the time you make a contribution. The amount of
the credit is equal to 3% of each contribution.
The credit is subject to recovery by us in
certain limited circumstances.
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ACCESS TO YOUR o Lump sum withdrawals
MONEY o Several withdrawal options on a periodic basis
o Contract surrender
You may incur a withdrawal charge for certain
withdrawals. You may also incur income tax and a
tax penalty.
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PAYOUT ALTERNATIVES Traditional annuity payout options
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</TABLE>
8
<PAGE>
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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
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FEES AND o Daily charges on amounts invested in variable
CHARGES investment options for mortality and expense risks,
administration, and distribution charges at an
annual rate of 1.60%.
o No sales charge deducted at the time you make
contributions and no annual contract fee.
o During the first nine 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 anniversary to
calculate the 15% amount available. The charge
begins at 8% in the first contract year
following a contribution. It declines each
year beginning in the third contract year to
1% in the ninth contract year. There is no
withdrawal charge in the tenth and later
contract years following a contribution.
o We also deduct a charge for taxes such as
premium taxes that may be imposed in your
state. This charge is generally deducted from
the amount applied to an annuity payout
option.
[Sidebar: 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." 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.]
o Annual expenses of The Hudson River Trust and
EQ Advisors Trust Portfolios are calculated as
a percentage of the average daily net assets
invested in each Portfolio. These expenses
include management and advisory fees ranging
from 0.25% to 1.15% annually, 12b-1 fees of
0.25% and other expenses.
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ANNUITANT ISSUE NQ: 0-80 IRA: 20-78 QP: 20-70
AGES
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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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<PAGE>
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. 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
prospectuses for The Hudson River Trust and EQ Advisors Trust.
CHARGES WE DEDUCT FROM YOUR VARIABLE INVESTMENT OPTIONS EXPRESSED AS AN ANNUAL
PERCENTAGE OF DAILY NET ASSETS
MORTALITY AND EXPENSE RISKS(1) 1.10%
ADMINISTRATION(2) 0.25%
DISTRIBUTION 0.25%
----
TOTAL ANNUAL EXPENSES 1.60%
====
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<CAPTION>
<S> <C>
CHARGES WE DEDUCT FROM YOUR ACCOUNT VALUE AT THE TIME YOU REQUEST CERTAIN TRANSACTIONS
WITHDRAWAL CHARGE AS A PERCENTAGE OF CONTRIBUTIONS (deducted if you CONTRACT
surrender your contract or make certain withdrawals. The withdrawal charge YEAR
percentage we use is determined by the contract year in which you make the --------
withdrawal or surrender your contract. For each contribution, we consider 1.......................8.00%
the contract year in which we receive that contribution to be "contract year 2.......................8.00
1").(3) 3.......................7.00
4.......................6.00
5.......................5.00
6.......................4.00
7.......................3.00
8.......................2.00
9.......................1.00
10+......................0.00
<CAPTION>
THE HUDSON RIVER TRUST AND EQ ADVISORS TRUST ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS IN EACH PORTFOLIO)
TOTAL
INVESTMENT OTHER ANNUAL
MANAGEMENT & EXPENSES EXPENSES
ADVISORY FEES 12B-1 FEE (4) (AS LIMITED)(6) (AS LIMITED)(4)(6)
------------- ------------- --------------- ------------------
<S> <C> <C> <C> <C>
THE HUDSON RIVER TRUST PORTFOLIOS
Alliance Money Market(5) 0.35% 0.25% 0.02% 0.62%
Alliance High Yield(5) 0.60% 0.25% 0.03% 0.88%
Alliance Common Stock(5) 0.36% 0.25% 0.03% 0.64%
Alliance Aggressive Stock(5) 0.54% 0.25% 0.03% 0.82%
Alliance Small Cap Growth(5) 0.90% 0.24% 0.06% 1.20%
EQ ADVISORS TRUST PORTFOLIOS
BT Equity 500 Index(6) 0.25% 0.25% 0.05% 0.55%
BT Small Company Index(6) 0.25% 0.25% 0.25% 0.75%
</TABLE>
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<TABLE>
<CAPTION>
TOTAL
INVESTMENT OTHER ANNUAL
MANAGEMENT & EXPENSES EXPENSES
ADVISORY FEES 12B-1 FEE (4) (AS LIMITED)(6) (AS LIMITED)(4)(6)
------------- ------------- --------------- ------------------
<S> <C> <C> <C> <C>
BT International Equity Index(6) 0.35% 0.25% 0.40% 1.00%
EQ/Evergreen(6) 0.75% 0.25% 0.05% 1.05%
EQ/Evergreen Foundation(6) 0.63% 0.25% 0.07% 0.95%
JPM Core Bond(6) 0.45% 0.25% 0.10% 0.80%
Lazard Large Cap Value(6) 0.55% 0.25% 0.15% 0.95%
Lazard Small Cap Value(6) 0.80% 0.25% 0.15% 1.20%
MFS Growth with Income(6) 0.55% 0.25% 0.05% 0.85%
MFS Research(6) 0.55% 0.25% 0.05% 0.85%
MFS Emerging Growth Companies(6) 0.55% 0.25% 0.05% 0.85%
Merrill Lynch Basic Value Equity(6) 0.55% 0.25% 0.05% 0.85%
Merrill Lynch World Strategy(6) 0.70% 0.25% 0.25% 1.20%
Morgan Stanley Emerging Markets
Equity(6) 1.15% 0.25% 0.35% 1.75%
EQ/Putnam Growth & Income
Value(6) 0.55% 0.25% 0.05% 0.85%
EQ/Putnam Investors Growth(6) 0.55% 0.25% 0.15% 0.95%
EQ/Putnam International Equity(6) 0.70% 0.25% 0.25% 1.20%
</TABLE>
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(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) Deducted upon a withdrawal of amounts in excess of the 15% free withdrawal
amount, and upon surrender of a contract.
(4) Portfolio shares are all subject to fees imposed under distribution plans
(the "Rule 12b-1 Plans") adopted by The Hudson River Trust and EQ Advisors
Trust pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended. The 12b-1 fee will not be increased for the life of the contracts.
The Rule 12b-1 Plan for the Alliance Small Cap Growth Portfolio provides
that Equitable Distributors, Inc. ("EDI") will receive an annual fee not to
exceed the lesser of (a) 0.25% of the average daily net assets of the
Portfolio attributable to Class IB shares and (b) an amount that, when
added to certain other expenses of the Class IB shares, would result in the
ratio of expenses to average daily net assets attributable to Class IB
shares equaling 1.20%. Absent the expense limitation, the total annual
expenses for 1998 for the Alliance Small Cap Growth Portfolio would have
been 1.21%.
(5) The fees and expenses shown for all Portfolios are for the year ended
December 31, 1998. The investment management and advisory fees for each
Portfolio of The Hudson River Trust may vary from year to year depending
upon the average daily net assets of the respective Portfolio. The maximum
investment management and advisory fees, however, cannot be increased
without a vote of that Portfolio's shareholders. See the prospectus for The
Hudson River Trust. The other direct operating expenses will also fluctuate
from year to year depending on actual expenses.
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(6) The maximum investment management and advisory fees for each Portfolio of
EQ Advisors Trust cannot be increased without a vote of that Portfolio's
shareholders. See the prospectus for EQ Advisors Trust. The amounts shown
as "Other Expenses" will fluctuate from year to year depending on actual
expenses. However, EQ Financial Consultants, Inc. ("EQF"), EQ Advisors
Trust's manager, has entered into an expense limitation agreement with
respect to each Portfolio. Under this agreement EQF has agreed to waive or
limit its fees and assume other expenses. Under the expense limitation
agreement, total annual operating expenses of each Portfolio (other than
interest, taxes, brokerage commissions, capitalized expenditures,
extraordinary expenses, and 12b-1 fees) are limited for the average daily
net assets of each Portfolio as follows: 0.30% for BT Equity 500 Index;
0.50% for BT Small Company Index; 0.75% for BT International Equity Index;
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. During 1999, EQF plans to change its name to AXA Advisors,
Inc.
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: 0.76% for
EQ/Evergreen; 0.86% for EQ/Evergreen Foundation; 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.
Each Portfolio may at a later date make a reimbursement to EQF for any of
the management fees waived or limited and other expenses assumed and paid
by EQF 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.
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EXAMPLES
The examples below show the expenses that a hypothetical contract owner would
pay in the two situations (surrender and nonsurrender) illustrated. We assume
that a $1,000 contribution plus a $30 credit is invested in one of the variable
investment options listed, and a 5% annual return is earned on the assets in
that option.(1)
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 IF YOU DO NOT SURRENDER YOUR
CONTRACT AT THE END OF EACH CONTRACT AT THE END OF EACH
PERIOD SHOWN, THE EXPENSES PERIOD SHOWN, THE EXPENSES
WOULD BE: WOULD BE:
-------------------------------------------------------------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
- ---------------------------------------------------------------------------------------------------------
THE HUDSON RIVER TRUST OPTIONS
- ------------------------------
<S> <C> <C> <C> <C>
Alliance Money Market $103.23 $141.59 $23.23 $71.59
Alliance High Yield $105.88 $149.57 $25.88 $79.57
Alliance Common Stock $103.43 $142.20 $23.43 $72.20
Alliance Aggressive Stock $105.27 $147.74 $25.27 $77.74
Alliance Small Cap Growth $109.15 $159.34 $29.15 $89.34
EQ ADVISORS TRUST OPTIONS
- -------------------------
BT Equity 500 Index $102.51 $139.43 $22.51 $69.43
BT Small Company Index $104.56 $145.59 $24.56 $75.59
BT International Equity Index $107.11 $153.24 $27.11 $83.24
EQ/Evergreen $107.62 $154.77 $27.62 $84.77
EQ/Evergreen Foundation $106.60 $151.71 $26.60 $81.71
JPM Core Bond $105.07 $147.12 $25.07 $77.12
Lazard Large Cap Value $106.60 $151.71 $26.60 $81.71
Lazard Small Cap Value $109.15 $159.34 $29.15 $89.34
MFS Growth with Income $105.58 $148.65 $25.58 $78.65
MFS Research $105.58 $148.65 $25.58 $78.65
MFS Emerging Growth Companies $105.58 $148.65 $25.58 $78.65
Merrill Lynch Basic Value Equity $105.58 $148.65 $25.58 $78.65
Merrill Lynch World Strategy $109.15 $159.34 $29.15 $89.34
Morgan Stanley Emerging Markets Equity
$114.77 $175.99 $34.77 $105.99
EQ/Putnam Growth & Income Value $105.58 $148.65 $25.58 $78.65
EQ/Putnam Investors Growth $106.60 $151.71 $26.60 $81.71
EQ/Putnam International Equity $109.15 $159.34 $29.15 $89.34
</TABLE>
- --------------------
(1) The amount accumulated from the $1,000 contribution plus $30 credit could
not be paid in the form of an annuity at the end of any of the periods
shown in the examples. This is because if the amount applied to purchase an
annuity 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 as payments under an
annuity payout option. See "Accessing Your Money."
14
<PAGE>
CONTRACT FEATURES AND BENEFITS
HOW YOU CAN PURCHASE AND CONTRIBUTE TO YOUR CONTRACT
You may purchase a contract by making payments to us we call
"contributions." We require a minimum initial contribution of $25,000 for you to
purchase a contract. You may make additional contributions of at least $1,000
each, subject to limitations noted below. 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.
[Sidebar: 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 FOR LIMITATIONS ON
CONTRACT TYPE ANNUITANT ISSUE AGES SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- ----------------------- ----------------------- ------------------------------------------ --------------------------
<S> <C> <C> <C>
NQ 0 through 80 o After-tax money. o No additional
contributions after
o Paid to us by check or transfer age 81.
of contract value in a tax-deferred
exchange under Section 1035 of the
Internal Revenue Code.
- ----------------------- ----------------------- ------------------------------------------ ---------------------------
Traditional IRA 20 through 78 o Rollovers from a qualified plan. o No additional
o Rollovers from an Internal rollover or direct
Revenue Code Section 403(b) tax transfer contributions
sheltered annuity ("TSA"). after age 79.
o Rollovers from another
traditional individual retirement o Contributions after
arrangement. age 70 1/2 must be net
o Direct custodian-to-custodian of required minimum
transfers from another traditional distributions.
individual retirement arrangement.
o "Regular" IRA contributions are
not permitted.
- ----------------------- ----------------------- ------------------------------------------ ---------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
AVAILABLE FOR LIMITATIONS ON
CONTRACT TYPE ANNUITANT ISSUE AGES SOURCE OF CONTRIBUTIONS CONTRIBUTIONS
- ----------------------- ----------------------- ------------------------------------------ ---------------------------
<S> <C> <C> <C>
Roth IRA 20 through 78 o Rollovers from another Roth IRA. o No additional rollover
o Conversion rollovers from a or direct transfer
Traditional IRA. contributions after
o Direct transfers from another age 79.
Roth IRA.
o "Regular" after-tax o Conversion rollovers
contributions are not permitted. 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.
- ----------------------- ----------------------- ------------------------------------------ ---------------------------
QP 20 through 70 o Only transfer contributions o Regular ongoing payroll
from an existing qualified plan contributions are not
trust as a change of investment permitted.
vehicle under the plan.
o The plan must be qualified o No additional transfer
under Section 401(a) of the contributions after
Internal Revenue Code. age 71.
o For 401(k) plans, transferred
contributions may only include
employee pre-tax contributions.
o For defined benefit plans,
employee contributions are not
permitted.
- ----------------------- ----------------------- ------------------------------------------ ---------------------------
</TABLE>
16
<PAGE>
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 of Colorado
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" later in this prospectus.
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 IRA 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 I for more
information on QP contracts.
HOW YOU CAN MAKE YOUR CONTRIBUTIONS
Except as noted below, contributions must be by check drawn on a bank
in the U.S. clearing through the Federal Reserve System, in U.S. dollars, and
made payable to Equitable of Colorado. 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.
[Sidebar: Our "business day" generally is any day on which the New York
Stock Exchange is open for trading.]
17
<PAGE>
SECTION 1035 EXCHANGES
You may apply the value of an existing nonqualified deferred annuity
contract (or life insurance or endowment contract) to purchase an Accumulator
Plus 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 VARIABLE INVESTMENT OPTIONS UNDER THE CONTRACT?
We allocate your contributions among the variable investment options
available under the contracts as you direct us to.
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.
[Sidebar: You can choose among 22 variable investment options.]
<TABLE>
<CAPTION>
PORTFOLIOS OF THE HUDSON RIVER TRUST
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME OBJECTIVE ADVISER
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Money Market High level of current income while Alliance Capital Management L.P.
preserving assets and maintaining
liquidity
- ----------------------------------------------------------------------------------------------------------------------
Alliance High Yield High return by maximizing current Alliance Capital Management L.P.
income and, to the extent
consistent with that objective,
capital appreciation
- ----------------------------------------------------------------------------------------------------------------------
Alliance Common Stock Long-term growth of capital and Alliance Capital Management L.P.
increasing 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.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIOS OF EQ ADVISORS TRUST
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME OBJECTIVE ADVISER
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BT Equity 500 Index Replicate as closely as possible Bankers Trust Company
(before 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 Bankers Trust Company
(before deduction of Portfolio
expenses) the total return of the
Russell 2000 Index
- ----------------------------------------------------------------------------------------------------------------------
BT International Equity Index Replicate as closely as possible Bankers Trust Company
(before deduction of Portfolio
expenses) the total return of the
Morgan Stanley Capital
International Europe, Australia,
Far East Index
- ----------------------------------------------------------------------------------------------------------------------
EQ/Evergreen Capital appreciation Evergreen Asset Management Corp.
- ----------------------------------------------------------------------------------------------------------------------
EQ/Evergreen Foundation In order of priority, reasonable Evergreen Asset Management Corp.
income, conservation of capital,
and capital appreciation
- ----------------------------------------------------------------------------------------------------------------------
JPM Core Bond High total return consistent with J.P. Morgan Investment Management Inc.
moderate risk of capital and
maintenance of liquidity
- ----------------------------------------------------------------------------------------------------------------------
Lazard Large Cap Value Capital appreciation Lazard Asset Management
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PORTFOLIO NAME OBJECTIVE ADVISER
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lazard Small Cap Value Capital appreciation Lazard Asset Management
- ----------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Reasonable current income and Massachusetts Financial Services Company
long-term growth of capital and
income
- ----------------------------------------------------------------------------------------------------------------------
MFS Research Long-term growth of capital and Massachusetts Financial Services Company
future income
- ----------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Long-term capital growth Massachusetts Financial Services Company
Companies
- ----------------------------------------------------------------------------------------------------------------------
Merrill Lynch Basic Value Capital appreciation and Merrill Lynch Asset Management, L.P.
Equity secondarily, income
- ----------------------------------------------------------------------------------------------------------------------
Merrill Lynch World High total investment return Merrill Lynch Asset Management, L.P.
Strategy
- ----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Emerging Long-term capital appreciation Morgan Stanley Asset Management Inc.
Markets Equity
- ----------------------------------------------------------------------------------------------------------------------
EQ/Putnam Growth Capital growth, current income is Putnam Investment Management, Inc.
& Income Value a secondary objective
- ----------------------------------------------------------------------------------------------------------------------
EQ/Putnam Investors Growth Long-term growth of capital and Putnam Investment Management, Inc.
any increased income that results
from this growth
- ----------------------------------------------------------------------------------------------------------------------
EQ/Putnam International Capital appreciation Putnam Investment Management, Inc.
Equity
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Other important information about the Portfolios is included in the
separate prospectuses for The Hudson River Trust and EQ Advisors Trust attached
at the end of this prospectus.
ALLOCATING YOUR CONTRIBUTIONS
You may allocate your contributions to one or more, or all, of the
variable investment 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%.
20
<PAGE>
CREDITS
A credit will be allocated to your account value when we receive a
contribution from you. The credit is equal to 3% of the amount of each
contribution. Credits are allocated to the same variable investment options
based on the same percentages used to allocate your contributions.
We will recover the amount of the credit if you exercise your right to
cancel the contract. See "Your right to cancel within a certain number of days"
below. Also, if you start receiving annuity payments within three years of
making any additional contribution, we will recover the amount of the credit
that applies to that contribution.
We do not consider credits to be contributions for purposes of any
discussion in this prospectus. Credits are also not considered to be your
investment in the contract for tax purposes.
---------------------
GUARANTEED MINIMUM DEATH BENEFIT
Applicable for annuitant ages 0 through 79 at issue of NQ contracts; 20
through 78 at issue of Traditional IRA and Roth IRA contracts; and 20
through 70 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 plus the credit. 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% except for
amounts invested in the Alliance Money Market option. The effective annual
interest rate is 3% for the Alliance Money Market option. 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 plus the amount of the credit on the date the contribution is
allocated to your variable 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.
ANNUAL RATCHET TO AGE 80. On the contract date, your guaranteed minimum
death benefit equals your initial contribution plus the credit. 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 death benefit to equal your account value. On the other hand, if your
account value on
21
<PAGE>
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 plus
the amount of the credit on the date the contribution is allocated to your
variable 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 an annuitant who is age 80 when the contract is issued.
On the contract date, your guaranteed minimum death benefit equals your
initial contribution plus the credit. 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 guaranteed minimum death benefit"
under "Accessing Your Money" for information on how withdrawals affect your
guaranteed minimum death benefit.
See Appendix II 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.
Your refund will equal your account value under the contract and will
reflect any investment gain or loss in the variable investment options through
the date we receive your contract. Please note that you will forfeit the credit
by exercising this right of cancellation. Some states or Federal income tax
regulations may require us to calculate the refund differently. If you cancel
your contract during the free look period, we may require that you wait six
months before you may apply for a contract with us again.
We follow these same procedures if you change your mind before you
receive your contract, but after you have made a contribution. Please see "Tax
Information" for possible consequences of canceling your contract.
If you fully convert an existing Traditional IRA contract to a Roth IRA
contract, you may cancel your Roth IRA contract and return to a Traditional IRA
contract. Our Processing Office, or your registered representative, can provide
you with the cancellation instructions. Ask for the form entitled "Request for
Full Conversion."
22
<PAGE>
DETERMINING YOUR CONTRACT'S VALUE
YOUR ACCOUNT VALUE
Your "account value" is the total value of your contributions plus the
credit allocated to the variable investment options. These amounts are subject
to certain fees and charges discussed under "Charges and Expenses."
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
any withdrawal charge that may apply if you surrender your contract. Please see
"Surrendering your contract to receive its cash value" below.
YOUR CONTRACT'S VALUE IN EACH VARIABLE INVESTMENT OPTION
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.
Your value will also be reduced by the dollar amount of any withdrawals that you
make.
[Sidebar: Units measure your value in each variable investment
option.]
The unit value for each variable investment option depends on the
investment performance of that option, minus daily charges for mortality and
expense risks, administration, and distribution expenses. On any day, your value
in any variable investment option equals the number of units credited to 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
between variable investment options. In addition, when we deduct any withdrawal
charge the number of units credited to your contract will be reduced. A
description of how unit values are calculated is found in the SAI.
TRANSFERRING YOUR MONEY AMONG THE VARIABLE 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 variable investment
options.
You must send all transfer requests directly to our Processing
Office. You may request a transfer in writing or by telephone. Transfer requests
should specify:
(1) the contract number,
23
<PAGE>
(2) the dollar amounts or percentages of your current account
value to be transferred, and
(3) the variable 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.
DOLLAR COST AVERAGING YOUR ACCOUNT VALUE
Dollar cost averaging allows you to gradually transfer amounts from the
Alliance Money Market option to the other 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. This plan of
investing, however, does not guarantee that you will earn a profit or be
protected against losses.
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.
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 in the next 12 months.
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 dollar cost averaging program will
then end. You may change the transfer amount once each contract year, or cancel
this program at any time.
Dollar cost averaging may not be elected if you are participating in
the rebalancing program.
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
24
<PAGE>
(b) how often you want the rebalancing to occur (quarterly,
semiannually, or annually on a contract year basis. However, it
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.
[Sidebar: 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
the dollar cost averaging program.
ACCESSING YOUR MONEY
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
- -------- -------- ---------- ----- ------------
NQ Yes Yes No No
Traditional IRA Yes Yes Yes Yes
Roth IRA Yes Yes Yes No
QP Yes No No No
LUMP SUM WITHDRAWALS
(All contracts)
You may take lump sum withdrawals from your account value at any time.
The minimum amount you may withdraw is $1,000. If you request to withdraw more
than 90% of a contract's
25
<PAGE>
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.
SYSTEMATIC WITHDRAWALS
(NQ, Traditional IRA, and Roth IRA contracts only)
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 a
Traditional IRA or Roth IRA contract, you may elect this withdrawal method only
if you are between ages 59 1/2 and 70 1/2.
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.
SUBSTANTIALLY EQUAL WITHDRAWALS
(Traditional IRA and Roth IRA contracts only)
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
26
<PAGE>
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 based on the method you choose from the choices we offer. 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.
Substantially equal withdrawals are not subject to a withdrawal charge.
MINIMUM DISTRIBUTION WITHDRAWALS
(Traditional IRA 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 attain 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..
[Sidebar: For Traditional IRA 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).]
HOW WITHDRAWALS ARE TAKEN FROM YOUR ACCOUNT VALUE
Lump sum withdrawal
You must specify the variable investment options from which you want to
take the withdrawal. If we receive only partial information, our Processing
Office will contact you for complete instructions before processing your
request.
27
<PAGE>
Systematic withdrawals, substantially equal withdrawals, and minimum
distribution withdrawals
Unless you specify otherwise, we will subtract your withdrawals on a
pro rata basis from each variable investment option in which you have value.
HOW WITHDRAWALS AFFECT YOUR GUARANTEED MINIMUM DEATH BENEFIT
Withdrawals will reduce your guaranteed minimum death benefit on either
a dollar-for-dollar basis or on a pro rata basis as explained below:
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 Age 80 - If 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 death
benefit.
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.
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."
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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 option.
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 on a tax-free exchange) by U.S. mail, unless you request that we use an
express delivery service at your expense.
CHOOSING YOUR ANNUITY PAYOUT OPTIONS
The Accumulator Plus 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 four different annuity payout options
listed below. Restrictions apply, depending on the type of contract you own.
- --------------------------------------------------------------------------------
TRADITIONAL ANNUITY PAYOUT OPTIONS Life annuity
Life annuity -- period certain
Life annuity -- refund certain
Period certain annuity
- --------------------------------------------------------------------------------
TRADITIONAL ANNUITY PAYOUT OPTIONS
You can choose from among the following traditional 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 continuing
benefit following the annuitant's death with this payout option,
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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.
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 traditional annuity payout options are available as
variable annuities:
o Life annuity.
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 The Hudson River Trust. The amount
of each variable annuity payment will fluctuate, depending upon the performance
of the variable investment options, and whether the actual rate of investment
return is higher or lower than an assumed base rate. Please see "Annuity Unit
Values" in the SAI.
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We may offer other payout options not outlined here. Your registered
representative can provide details.
SELECTING A TRADITIONAL 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 Traditional IRA, Roth IRA, and NQ contracts, unless you choose a
different payout option, we will pay fixed annuity payments under a life annuity
with a certain period of 10 years. The only payout options available under QP
contracts are the life annuity 10 year period certain and the joint and survivor
life annuity 10 year period certain.
You can choose the date annuity payments begin but it may not be
earlier than five years 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.
If you elect to start receiving annuity payments within three years of
making an additional contribution, we will recover the amount of any credit that
applies to that contribution.
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 the amount applied to
purchase the annuity, the type of annuity chosen and, in the case of a life
annuity, the annuitant's age (or the annuitant's and joint annuitant's ages) and
in certain instances, the sex of the annuitant(s).
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.
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.
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CHARGES AND EXPENSES
CHARGES THAT EQUITABLE OF COLORADO DEDUCTS
We deduct the following charges each day from the net assets of each
variable investment option:
o A mortality and expense risks charge.
o An administration charge.
o A distribution charge.
We deduct the following charges from your account value:
o At the time you make certain withdrawals or surrender your
contract -- a withdrawal charge.
o At the time annuity payments are to begin -- charges for state
premium and other taxes.
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.
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.
ADMINISTRATION CHARGE
We deduct a daily charge from the net assets in each variable
investment option to compensate us for administration 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%.
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DISTRIBUTION CHARGE
We deduct a daily charge from the net assets in each variable
investment option to compensate us for a portion of our sales 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. This charge will never exceed
applicable regulatory limitations.
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:
<TABLE>
<CAPTION>
CONTRACT YEAR
1 2 3 4 5 6 7 8 9 10+
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage of
contribution 8% 8% 7% 6% 5% 4% 3% 2% 1% 0%
</TABLE>
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. The amount deducted to pay each withdrawal charge is also
subject to a withdrawal charge. We deduct the charge in proportion to the amount
withdrawn from each variable 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.
MINIMUM DISTRIBUTIONS. The withdrawal charge does not apply to
withdrawals taken under our minimum distribution withdrawal option.
However, those withdrawals are
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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, U.S. Virgin Islands, or Guam) 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;
- 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.
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. 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).
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CHARGES THAT THE TRUSTS DEDUCT
The Hudson River Trust and EQ Advisors Trust each deducts charges for
the following types of fees and expenses:
o Investment advisory 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 each 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 prospectuses of the Trusts 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 death benefit or offer variable investment options that invest in shares
of The Hudson River Trust or 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 Traditional IRA and Roth 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 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 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 in the withdrawal charge 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, the Employee Retirement Income Securities Act of 1974 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.
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OTHER DISTRIBUTION ARRANGEMENTS
We may reduce or eliminate charges when sales are made in a manner that
result in savings of sales and administration 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.
PAYMENT OF DEATH BENEFIT
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 signed. Under jointly owned
contracts, the surviving owner is considered the beneficiary and will take the
place of any other beneficiary. 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. 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.
WHEN THE ANNUITANT DIES BEFORE ANNUITY PAYMENTS BEGIN
If the annuitant dies before the annuity payments begin, we will pay
the death benefit to your beneficiary.
CHANGE OF OWNER ON DEATH
Under certain conditions the owner can change after the original
owner's death. Under NQ contracts when the owner dies the person designated as
successor owner becomes the new owner. Under Traditional IRA and Roth IRA
contracts only, a beneficiary who is the surviving spouse can choose to be
treated as the successor owner/annuitant. Only a spouse can be a successor
owner/annuitant.
For Traditional IRA contracts, a beneficiary who is not a surviving
spouse may be able to have limited ownership.
WHEN AN NQ CONTRACT OWNER DIES BEFORE THE ANNUITANT
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 contract owner. You may name
a different person that will become the new owner at any time by sending
satisfactory notice to our Processing Office. If the
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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 "beneficiary" 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 designated beneficiary 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 new 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 designated beneficiary 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.
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" 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
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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 TRADITIONAL IRA CONTRACTS
Upon your death under a Traditional IRA contract, a non-spouse
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), the beneficiary
may begin taking 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. These withdrawals will begin by December 31st of the calendar year
following your death and will be based on the beneficiary's life expectancy. If
there is more than one beneficiary, the shortest life expectancy is used.
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 the annuitant's death. This option may
not currently be available in all states. Your registered representative can
provide information about state availability, or you may contact our Processing
Office.
While the contract continues in your name, the beneficiary may make
transfers among the variable investment options. However, additional
contributions will not be permitted and the death benefit (including the
guaranteed minimum death benefit) provision 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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TAX INFORMATION
OVERVIEW
In this part of the prospectus, we discuss the current federal income
tax rules that generally apply to Accumulator Plus contracts owned by United
States taxpayers. The tax rules can differ, depending on the type of contract,
whether NQ, Traditional IRA, Roth IRA or QP contracts. Therefore, we discuss the
tax aspects of each type of contract separately.
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.
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.
TRANSFERS AMONG VARIABLE INVESTMENT OPTIONS
You can make transfers among variable investment options inside the
contract without triggering taxable income.
TAXATION OF NONQUALIFIED ANNUITIES
CONTRIBUTIONS
You may not deduct the amount of your contributions for 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);
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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 we issue to you during the
same calendar year are linked together and treated as one contract for figuring
out 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 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 which 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).
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o The owner and the annuitant are the same under the source contract
and the Accumulator Plus 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 Accumulator
Plus 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" and "When an NQ contract owner dies before the annuitant" 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
computation 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 several types of IRAs, as follows:
o "Traditional IRAs," typically funded on a pre-tax basis;
o Roth IRAs, first available in 1998, funded on an after-tax basis;
and
o SEP-IRAs and SIMPLE-IRAs, issued and funded in connection with
employer-sponsored retirement plans.
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 website (http://www.irs.ustreas.gov).
The Accumulator Plus IRA contract is designed to qualify as an
"individual retirement annuity" under Section 408(b) of the Internal Revenue
Code. 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 Accumulator Plus IRA contract has been approved by the IRS as to
form for use as a Traditional IRA. We expect to submit the Roth IRA version for
formal IRS approval in 1999. 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 Accumulator Plus IRA contract.
CANCELLATION
You can cancel an Accumulator Plus IRA contract by following the
directions under "Your right to cancel within a certain number of days" earlier
in the prospectus. You can cancel
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an Accumulator Plus Roth IRA contract issued as a result of a full conversion of
an Equitable Accumulator Plus Traditional 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 a
Traditional IRA or Roth 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 tax-free "rollover" contributions; or
o direct custodian-to-custodian transfers from other Traditional IRAs
("direct transfers"); or
o "regular" contributions out of earned income or compensation.
We require that your initial contribution to the Accumulator Plus
Traditional IRA contract must be either a rollover or a direct
custodian-to-custodian transfer. See "Rollovers and transfers" below. Any
additional contributions you make may be rollovers or direct transfers. Since we
only permit rollover and direct transfer contributions under the Accumulator
Plus Traditional IRA contract, we do not discuss regular after-tax contributions
here.
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;
o "regular" contributions of more than earned income for the year,
if that amount is under $2,000;
o "regular" contributions to a Traditional IRA made after you reach
age 70 1/2; and
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
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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
(3) you took no tax deduction for the excess 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.
You may also switch Roth IRA funds to Traditional IRA funds, in
accordance with special federal income tax rules, if you use the forms we
prescribe. This is referred to as having "recharacterized" your contribution.
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.
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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;
o "required minimum distributions" after age 70 1/2 or separation
from service;
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;
o a hardship withdrawal;
o substantially equal periodic payments made for a specified period
of 10 years or more;
o corrective distributions which fit specified technical tax rules;
o loans that are treated as distributions;
o a death benefit payment to a beneficiary who is not your surviving
spouse; and
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.
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
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also taxable. Except as discussed below, the 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;
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.
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.
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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 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 figuring out 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 figuring out 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
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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 figure out 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.
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.
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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
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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); 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 the substantially equal
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 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 begin, the distributions
should not be stopped or changed until the later of your attaining 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 this 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 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 Accumulator Plus 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 taxable "rollover" contributions from Traditional IRAs
("conversion" contributions);
o tax-free rollover contributions from other Roth IRAs;
o tax-free direct custodian-to-custodian transfers from other Roth
IRAs ("direct transfers"); or
o "regular" after-tax contributions out of earnings.
Since we only permit direct transfer and rollover contributions under
the Accumulator Plus Roth IRA contract, we do not discuss regular after-tax
contributions here. If you use the
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forms we require, we will also accept Traditional IRA funds which are
subsequently recharacterized as Roth IRA funds following special federal income
tax rules.
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 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 of Colorado, 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 exempt. Instead, the distribution from the Traditional IRA is
generally
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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 exempt.)
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 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 Rollovers from a Roth IRA to another Roth IRA;
o Direct transfers from a Roth IRA to another Roth IRA;
o "Qualified Distributions" from Roth IRAs; 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
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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).
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.
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.
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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.
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.
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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 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 which 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; and
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 OF COLORADO
The contracts provide that we may charge Separate Account VA for taxes.
We do not now, but may in the future set up reserves for such taxes.
MORE INFORMATION
ABOUT OUR SEPARATE ACCOUNT VA
Each variable investment option is a ("subaccount") of our Separate
Account VA. We established Separate Account VA in 1996 under Colorado 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, including these contracts. The results of Separate Account VA
operations are accounted for without regard to Equitable of Colorado's other
operations. We are the legal owner of all of the assets in Separate Account VA
and may withdraw any amounts that exceed our reserves and other liabilities with
respect to variable investment options under our contracts.
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Separate Account VA 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 of Colorado or Separate Account
VA.
Each subaccount (variable investment option) within Separate Account VA
invests solely in class IB shares issued by the corresponding Portfolio of The
Hudson River Trust and 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 VA, 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 VA 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 VA or a variable investment
option directly);
(5) to deregister Separate Account VA under the Investment Company Act
of 1940;
(6) to restrict or eliminate any voting rights as to Separate Account
VA; 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 THE HUDSON RIVER TRUST AND EQ ADVISORS TRUST
Both of the Trusts are registered under the Investment Company Act of
1940. They are classified as "open-end management investment companies," more
commonly called mutual funds. Each Trust issues different shares relating to
each Portfolio.
The Trusts do not impose sales charges or "loads" for buying and
selling their shares. All dividends and other distributions on a Trust's shares
are reinvested in full. The Board of Trustees of each Trust may establish
additional Portfolios or eliminate existing Portfolios at any time. More
detailed information about the Trusts, their investment objectives, policies,
restrictions, risks, expenses, their Rule 12b-1 Plans relating to their Class IB
shares, and other aspects of their operations, appears in their prospectuses, or
in their SAIs, which are available upon request.
ABOUT THE GENERAL ACCOUNT
Our general account supports all of our policy and contract guarantees
as well as our general obligations. Credits allocated to your account value are
funded from our general account.
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The general account is subject to regulation and supervision by the
Insurance Department of the State of Colorado 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.
We have been advised that the staff of the SEC has not reviewed the
portions of this prospectus that relate to the general account. 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."
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 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 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 contract on a monthly or quarterly basis. AIP is not
available for Roth IRA or QP contracts.
The minimum amounts we will deduct are $100 monthly and $300 quarterly.
AIP additional contributions may be allocated to any of the variable investment
options. You choose the day of the month you wish to have your account debited
as long as it is not later than the 28th day of the month.
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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 generally any day that the New York Stock Exchange
is open for trading. Our business day ends at 4:00 p.m., Eastern Time for
purposes of determining the date when contributions are applied and any other
transaction requests are processed. 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 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 either the 28th day
of the month or the 1st day of the next month, whichever is the
closest business day.
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, CREDITS, AND TRANSFERS
o Contributions and credits allocated to the variable investment
options are invested at the value determined after the close of
the business day.
o Transfers to or from variable investment options will be made at
the value determined after the close of the business day.
ABOUT YOUR VOTING RIGHTS
As the owner of the shares of The Hudson River Trust and 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 each
Trust.
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o Any other matters described in the prospectuses for the Trusts 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, Equitable Life controls each Trust. Like Equitable Life,
however, Equitable of Colorado contract owners who have an interest in the trust
are given the opportunity to provide voting instructions in the manner described
above. EQ Advisors Trust shares are sold only to separate accounts of Equitable
Life, including Equitable of Colorado, and an affiliated qualified plan trust.
The Hudson River Trust shares are held by other separate accounts of Equitable
Life, including Equitable of Colorado, and by separate accounts of insurance
companies 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 Hudson River
Trust Board of Trustees 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 VA VOTING RIGHTS
If actions relating to Separate Account VA 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 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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<PAGE>
ABOUT OUR YEAR 2000 PROGRESS
Equitable of Colorado relies upon various Equitable Life computer
systems in order to administer your contract and operate the variable investment
options. Equitable of Colorado also relies upon systems of service providers who
are not affiliated with Equitable Life. These systems are the same systems that
Equitable Life relies upon in order to administer its contracts.
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. By year end 1998, the
work of modifying or replacing non-compliant systems was substantially
completed. Equitable Life has begun comprehensive testing of its Year 2000
compliance and expects that the testing will be substantially completed by June
30, 1999. Equitable Life has contacted third-party services providers to seek
assurances 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 variable investment options. Most third-party service
providers have provided Equitable Life assurances of their Year 2000 compliance.
Equitable Life believes it is on schedule for substantially all such systems and
services, including those considered to be mission-critical, to be confirmed as
Year 2000 compliant, renovated, replaced or the subject of contingency plans, by
June 30, 1999, except for one investment accounting system which is scheduled to
be replaced by August 31, 1999 and confirmed as Year 2000 compliant by September
30, 1999. Additionally, Equitable Life will be supplementing 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. Year
2000 specific contingency plans are anticipated to be in place by June 30, 1999.
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
variable 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, 15 U.S.C. Sec. 1 (1998).
ABOUT LEGAL PROCEEDINGS
Equitable of Colorado 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 VA, our ability to meet our obligations
under the contracts, or the distribution of the contracts.
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ABOUT OUR FINANCIAL STATEMENTS
The financial statements of Equitable of Colorado are contained in the
SAI.
TRANSFERS OF OWNERSHIP, COLLATERAL ASSIGNMENTS, LOANS, AND BORROWING
NQ contracts can be assigned at any time before annuity payments begin.
You cannot, however, assign your NQ contract as collateral or security for a
loan. Loans are also not available under your NQ contract. We will not be bound
by an assignment unless it is in writing and we have received it at our
Processing Office. In some cases, an assignment may have adverse tax
consequences. See "Tax Information."
You cannot assign or transfer ownership of a Traditional IRA, Roth IRA
or QP contract except by surrender to us. Loans are not available and you cannot
assign Traditional IRA, Roth IRA, and QP contracts as security for a loan or
other obligation.
For limited transfers of ownership after the owner's death see "Payment
of Death Benefit" and "Beneficiary continuation option for Traditional IRA
contracts." You may direct the transfer of the values under your Traditional
IRA, Roth IRA or QP 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. EDI serves as the principal
underwriter of Separate Account VA. 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 of
Colorado, and certain of Equitable of Colorado's separate accounts, including
Separate Account VA, Equitable of Colorado will pay EDI distribution fees as the
distributor of these contracts, and as the principal underwriter of Separate
Account VA.
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 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 of Colorado. 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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SERVICES PROVIDED BY EQUITABLE LIFE
In carrying out certain of our operations, we use Equitable Life's
personnel, property, and facilities. We reimburse Equitable Life for these
intercompany services on the basis of the cost of the services provided.
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 option for the period shown.
Table 2 shows the growth of a hypothetical $1,000 investment plus a $30
credit in the variable investment options over the periods shown. Both Tables 1
and 2 take into account all fees and charges under the contract but do not take
the charges for any applicable taxes such as premium taxes into account.
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 or the charges for any applicable taxes such as premium taxes.
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 Portfolio in which the variable investment option
invests. The results shown relate to periods when the variable investment
options and the contracts were not available. As the contracts are being offered
for the first time, as of the date of this prospectus, we adjusted the results
of the Portfolios to reflect the charges under the contracts that would have
applied had the variable investment options and contracts been available.
In addition, we have adjusted the results prior to October 1996, when
The Hudson River Trust Class IB shares 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
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.
All rates of return presented are time-weighted and include
reinvestment of investment income, including interest and dividends.
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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, administration charge, distribution charge or any withdrawal 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:
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 Small Stock Index and 50% Standard &
Poor's Mid-Cap Total Return Index.
ALLIANCE SMALL CAP GROWTH: Russell 2000 Growth 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.
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 200 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. The Lipper Variable Insurance Products Performance Analysis
Survey records the performance of a large group of variable annuity products,
including managed separate
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accounts of insurance companies. According to Lipper Analytical Services, Inc.,
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 Accumulator Plus
performance relative to other variable annuity products.
COMMUNICATING PERFORMANCE DATA
We may advertise the investment performance of the variable investment
options using the measurements shown in the tables below. We also may advertise
the current yield and effective yield of the Alliance Money Market and Alliance
High Yield options, described below.
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 and monthly
for the Alliance High Yield option. The yields and effective yields assume the
deduction of all contract charges and expenses other than the withdrawal charge
and any charge for taxes such as premium tax. For more information, see
"Alliance Money Market Option and Alliance High Yield Option Yield Information"
in the SAI.
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<TABLE>
<CAPTION>
TABLE 1
AVERAGE ANNUAL TOTAL RETURN UNDER A CONTRACT SURRENDERED ON
DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------
LENGTH OF INVESTMENT PERIOD
-----------------------------------------------------------------
VARIABLE SINCE PORTFOLIO
INVESTMENT ONE THREE FIVE TEN PORTFOLIO INCEPTION
OPTIONS YEAR YEARS YEARS YEARS INCEPTION DATE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Money Market (1.50)% 2.26% 2.97% 3.94% 5.13% 7/13/81
Alliance High Yield (12.11)% 8.43% 7.78% 9.43% 8.72% 1/2/87
Alliance Common Stock 22.81% 25.01% 19.89% 16.79% 14.36% 1/13/76
Alliance Aggressive Stock (6.60)% 7.80% 9.35% 17.03% 15.76% 1/27/86
Alliance Small Cap Growth (11.15)% -- -- -- 6.40% 5/1/97
BT Equity 500 Index 18.82% -- -- -- 18.82% 12/31/97
BT Small Company Index (8.99)% -- -- -- (8.99)% 12/31/97
BT International Equity Index 13.72% -- -- -- 13.72% 12/31/97
JPM Core Bond 2.50% -- -- -- 2.50% 12/31/97
Lazard Large Cap Value 13.68% -- -- -- 13.68% 12/31/97
Lazard Small Cap Value (13.82)% -- -- -- (13.82)% 12/31/97
MFS Research 17.78% -- -- -- 16.79% 5/1/97
MFS Emerging Growth Companies 28.34% -- -- -- 25.35% 5/1/97
Merrill Lynch Basic Value
Equity 5.09% -- -- -- 10.87% 5/1/97
Merrill Lynch World Strategy 0.26% -- -- -- 2.05% 5/1/97
Morgan Stanley Emerging
Markets Equity (34.04)% -- -- -- (28.81)% 8/20/97
EQ/Putnam Growth & Income
Value 6.35 -- -- -- 11.11% 5/1/97
EQ/Putnam Investors Growth 30.13% -- -- -- 27.42% 5/1/97
EQ/Putnam International Equity 13.09% -- -- -- 11.02% 5/1/97
</TABLE>
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<TABLE>
<CAPTION>
TABLE 2
GROWTH OF $1,000 UNDER A CONTRACT SURRENDERED ON DECEMBER 31, 1998
- -------------------------------------------- ----------------------------------------------------------------------------------
LENGTH OF INVESTMENT PERIOD
----------------------------------------------------------------------------------
VARIABLE SINCE
INVESTMENT ONE THREE FIVE TEN PORTFOLIO
OPTIONS YEAR YEARS YEARS YEARS INCEPTION*
- -------------------------------------------- --------------- ----------------- ----------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Alliance Money Market $985.02 $1,069.22 $1,157.35 $1,471.88 $2,459.38
Alliance High Yield $878.93 $1,274.74 $1,460.40 $2,462.56 $2,725.89
Alliance Common Stock $1,228.10 $1,953.72 $2,477.37 $4,720.17 $21,903.11
Alliance Aggressive Stock $934.04 $1,252.79 $1,563.63 $4,820.83 $6,701.50
Alliance Small Cap Growth $888.51 -- -- -- $1,132.19
BT Equity 500 Index $1,188.24 -- -- -- $1,188.24
BT Small Company Index $910.14 -- -- -- $910.14
BT International Equity Index $1,137.15 -- -- -- $1,137.15
JPM Core Bond $1,024.98 -- -- -- $1,024.98
Lazard Large Cap Value $1,136.84 -- -- -- $1,136.84
Lazard Small Cap Value $861.83 -- -- -- $861.83
MFS Research $1,177.84 -- -- -- $1,364.00
MFS Emerging Growth Companies $1,283.41 -- -- -- $1,571.23
Merrill Lynch Basic Value Equity $1,050.94 -- -- -- $1,229.29
Merrill Lynch World Strategy $1,002.63 -- -- -- $1,041.39
Morgan Stanley Emerging Markets Equity $659.64 -- -- -- $506.83
EQ/Putnam Growth & Income Value $1,063.51 -- -- -- $1,234.57
EQ/Putnam Investors Growth $1,301.33 -- -- -- $1,623.46
EQ/Putnam International Equity $1,130.87 -- -- -- $1,232.58
</TABLE>
- --------------------
*Portfolio inception dates are shown in Table 1.
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<TABLE>
<CAPTION>
TABLE 3
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- -------------------------------------------------------------------------------------------------------------------------------
SINCE
1 YEAR 3 YEARS 5 YEARS 10 YEARS 15 YEARS 20 YEARS INCEPTION*
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE MONEY MARKET 3.40% 3.42% 3.23% 3.63% 4.41% -- 5.11%
Lipper Money Market 4.84% 4.87% 4.77% 5.20% 5.94% -- 6.77%
Benchmark 5.05% 5.18% 5.11% 5.44% 6.07% -- 6.76%
ALLIANCE HIGH YIELD (6.90)% 9.30% 7.96% 9.11% -- -- 8.45%
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 27.00% 25.24% 19.66% 16.44% 15.27% 16.42% 14.24%
Lipper Growth 22.86% 22.23% 18.63% 16.72% 14.65% 16.30% 16.01%
Benchmark 28.58% 28.23% 24.06% 19.21% 17.90% 17.76% 15.98%
ALLIANCE AGGRESSIVE STOCK (1.55)% 8.69% 9.39% 16.69% -- -- 15.59%
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 (5.97)% -- -- -- -- -- 10.25%
Lipper Small Company Growth (0.33)% -- -- -- -- -- 16.72%
Benchmark 1.23% -- -- -- -- -- 16.58%
BT EQUITY 500 INDEX 23.13% -- -- -- -- -- 23.13%
Lipper S&P 500 Index 26.78% -- -- -- -- -- 26.78%
Benchmark 28.58% -- -- -- -- -- 28.58%
BT SMALL COMPANY INDEX (3.87)% -- -- -- -- -- (3.87)%
Lipper Small Cap 1.53% -- -- -- -- -- 1.53%
Benchmark (2.54)% -- -- -- -- -- (2.54)%
BT INTERNATIONAL EQUITY INDEX 18.17% -- -- -- -- -- 18.17%
Lipper International 12.17% -- -- -- -- -- 12.17%
Benchmark 20.00% -- -- -- -- -- 20.00%
JPM CORE BOND 7.28% -- -- -- -- -- 7.28%
Lipper Intermediate Investment
Grade Debt 7.23% -- -- -- -- -- 7.23%
Benchmark 8.72% -- -- -- -- -- 8.72%
LAZARD LARGE CAP VALUE 18.14% -- -- -- -- -- 18.14%
Lipper Capital Appreciation 24.16% -- -- -- -- -- 24.16%
Benchmark 28.58% -- -- -- -- -- 28.58%
LAZARD SMALL CAP VALUE (8.56)% -- -- -- -- -- (8.56)%
Lipper Small Cap 1.53% -- -- -- -- -- 1.53%
Benchmark (2.54)% -- -- -- -- -- (2.54)%
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
TABLE 3 (CONTINUED)
ANNUALIZED RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- -------------------------------------------------------------------------------------------------------------------------------
SINCE
1 YEAR 3 YEARS 5 YEARS 10 YEARS 15 YEARS 20 YEARS INCEPTION*
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MFS RESEARCH 22.12% -- -- -- -- -- 22.44%
Lipper Growth 25.82% -- -- -- -- -- 28.73%
Benchmark 28.58% -- -- -- -- -- 31.63%
MFS EMERGING GROWTH
COMPANIES 32.37% -- -- -- -- -- 32.69%
Lipper Mid-Cap 15.97% -- -- -- -- -- 22.72%
Benchmark (2.54)% -- -- -- -- -- 14.53%
MERRILL LYNCH BASIC VALUE EQUITY 9.80% -- -- -- -- -- 15.46%
Lipper Growth & Income 15.54% -- -- -- -- -- 21.32%
Benchmark 28.58% -- -- -- -- -- 31.63%
MERRILL LYNCH WORLD STRATEGY 5.11% -- -- -- -- -- 5.23%
Lipper Global Flexible Portfolio 9.34% -- -- -- -- -- 11.15%
Benchmark 19.55% -- -- -- -- -- 20.00%
MORGAN STANLEY EMERGING
MARKETS EQUITY (28.19)% -- -- -- -- -- (33.79)%
Lipper Emerging Markets (30.50)% -- -- -- -- -- (36.28)%
Benchmark (25.34)% -- -- -- -- -- (28.92)%
EQ/PUTNAM GROWTH &
INCOME VALUE 11.02% -- -- -- -- -- 15.74%
Lipper Growth & Income 15.54% -- -- -- -- -- 21.32%
Benchmark 28.58% -- -- -- -- -- 31.63%
EQ/PUTNAM INVESTORS
GROWTH 34.11% -- -- -- -- -- 35.19%
Lipper Growth 25.82% -- -- -- -- -- 28.73%
Benchmark 28.58% -- -- -- -- -- 31.63%
EQ/PUTNAM INTERNATIONAL
EQUITY 17.56% -- -- -- -- -- 15.64%
Lipper International 12.17% -- -- -- -- -- 9.06%
Benchmark 20.00% -- -- -- -- -- 13.43%
</TABLE>
- ----------------------------
*Portfolio inception dates are shown in Table 1.
69
<PAGE>
<TABLE>
<CAPTION>
TABLE 4
CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- -------------------------------------------------------------------------------------------------------------------------------
SINCE
1 YEAR 3 YEARS 5 YEARS 10 YEARS 15 YEARS 20 YEARS INCEPTION*
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE MONEY MARKET 3.40% 10.60% 17.22% 42.89% 91.01% -- 138.78%
Lipper Money Market 4.84% 15.34% 26.25% 66.09% 137.69% -- 214.68%
Benchmark 5.05% 16.35% 28.27% 69.88% 142.02% -- 214.45%
ALLIANCE HIGH YIELD (6.90)% 30.56% 46.65% 139.11% -- -- 164.68%
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 27.00% 96.46% 145.35% 358.29% 743.32% 1,991.24% 2,026.84%
Lipper Growth 22.86% 84.52% 138.97% 388.00% 727.63% 2,185.68% 3,490.04%
Benchmark 28.58% 110.85% 193.91% 479.62% 1,081.76% 2,530.43% 2,919.92%
ALLIANCE AGGRESSIVE STOCK (1.55)% 28.42% 56.67% 368.05% -- -- 550.62%
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 (5.97)% -- -- -- -- -- 17.69%
Lipper Small Company Growth (0.33)% -- -- -- -- -- 28.98%
Benchmark 1.23% -- -- -- -- -- 29.23%
BT EQUITY 500 INDEX 23.13% -- -- -- -- -- 23.13%
Lipper S&P 500 Index 26.78% -- -- -- -- -- 26.78%
Benchmark 28.58% -- -- -- -- -- 28.58%
BT SMALL COMPANY INDEX (3.87)% -- -- -- -- -- (3.87)%
Lipper Small Cap 1.53% -- -- -- -- -- 1.49%
Benchmark (2.54)% -- -- -- -- -- (2.54)%
BT INTERNATIONAL EQUITY INDEX 18.17% -- -- -- -- -- 18.17%
Lipper International 12.17% -- -- -- -- -- 12.23%
Benchmark 20.00% -- -- -- -- -- 20.00%
JPM CORE BOND 7.28% -- -- -- -- -- 7.28%
Lipper Intermediate Investment
Grade Debt 7.23% -- -- -- -- -- 7.23%
Benchmark 8.72% -- -- -- -- -- 8.72%
LAZARD LARGE CAP VALUE 18.14% -- -- -- -- -- 18.14%
Lipper Capital Appreciation 24.16% -- -- -- -- -- 24.09%
Benchmark 28.58% -- -- -- -- -- 28.58%
LAZARD SMALL CAP VALUE (8.56)% -- -- -- -- -- (8.56)%
Lipper Small Cap 1.53% -- -- -- -- -- 1.53%
Benchmark (2.54)% -- -- -- -- -- (2.54)%
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
TABLE 4 (CONTINUED)
CUMULATIVE RATES OF RETURN FOR PERIODS ENDED DECEMBER 31, 1998:
- --------------------------------------------------------------------------------------------------------------------------------
SINCE
1 YEAR 3 YEARS 5 YEARS 10 YEARS 15 YEARS 20 YEARS INCEPTION*
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MFS RESEARCH 22.12% -- -- -- -- -- 40.19%
Lipper Growth 25.82% -- -- -- -- -- 52.86%
Benchmark 28.58% -- -- -- -- -- 57.60%
MFS EMERGING GROWTH
COMPANIES 32.37% -- -- -- -- -- 60.31%
Lipper Mid-Cap 15.97% -- -- -- -- -- 42.16%
Benchmark (2.54)% -- -- -- -- -- 25.40%
MERRILL LYNCH BASIC VALUE EQUITY 9.80% -- -- -- -- -- 27.11%
Lipper Growth & Income 15.54% -- -- -- -- -- 15.59%
Benchmark 28.58% -- -- -- -- -- 57.60%
MERRILL LYNCH WORLD STRATEGY 5.11% -- -- -- -- -- 8.88%
Lipper Global Flexible Portfolio 9.34% -- -- -- -- -- 19.41%
Benchmark 19.55% -- -- -- -- -- 33.33%
MORGAN STANLEY EMERGING
MARKETS EQUITY (28.19)% -- -- -- -- -- (43.02)%
Lipper Emerging Markets (30.50)% -- -- -- -- -- (45.67)%
Benchmark (25.34)% -- -- -- -- -- (36.71)%
EQ/PUTNAM GROWTH &
INCOME VALUE 11.02% -- -- -- -- -- 27.62%
Lipper Growth & Income 15.54% -- -- -- -- -- 38.49%
Benchmark 28.58% -- -- -- -- -- 57.60%
EQ/PUTNAM INVESTORS
GROWTH 34.11% -- -- -- -- -- 65.38%
Lipper Growth 25.82% -- -- -- -- -- 52.86%
Benchmark 28.58% -- -- -- -- -- 57.60%
EQ/PUTNAM INTERNATIONAL
EQUITY 17.56% -- -- -- -- -- 27.44%
Lipper International 12.17% -- -- -- -- -- 15.88%
Benchmark 20.00% -- -- -- -- -- 23.42%
</TABLE>
- ----------------------------
*Portfolio inception dates are shown in Table 1.
71
<PAGE>
TABLE 5
YEAR-BY-YEAR RATES OF RETURN
- --------------------------------------------------------------------------------
1988 1989 1990 1991
------------------------------
ALLIANCE MONEY
MARKET 5.34% 7.18% 6.23% 4.23%
ALLIANCE HIGH
YIELD 7.71% 3.20% (2.95)% 22.17%
ALLIANCE
COMMON
STOCK 20.18% 23.28% (9.82)% 35.34%
ALLIANCE
AGGRESSIVE
STOCK (0.73)% 40.86% 6.16% 83.43%
ALLIANCE SMALL
CAP GROWTH -- -- -- --
BT EQUITY 500
INDEX -- -- -- --
BT SMALL
COMPANY INDEX -- -- -- --
BT INTER-
NATIONAL
EQUITY INDEX -- -- -- --
JPM CORE BOND -- -- -- --
LAZARD LARGE
CAP VALUE -- -- -- --
LAZARD SMALL
CAP VALUE -- -- -- --
MFS RESEARCH -- -- -- --
MFS EMERGING
GROWTH
COMPANIES -- -- -- --
MERRILL LYNCH
BASIC VALUE
EQUITY -- -- -- --
MERRILL LYNCH
WORLD STRATEGY -- -- -- --
MORGAN STANLEY
EMERGING
MARKETS EQUITY -- -- -- --
TABLE 5
YEAR-BY-YEAR RATES OF RETURN
- --------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998
-----------------------------------------------------------------
ALLIANCE MONEY
MARKET 1.65% 1.06% 2.10% 3.80% 3.37% 3.48% 3.40%
ALLIANCE HIGH
YIELD 10.23% 20.88% (4.58)% 17.71% 20.60% 16.28% (6.90)%
ALLIANCE
COMMON
STOCK 1.31% 22.52% (3.94)% 30.01% 21.97% 26.84% 27.00%
ALLIANCE
AGGRESSIVE
STOCK (4.95)% 14.59% (5.59)% 29.21% 19.93% 8.77% (1.55)%
ALLIANCE SMALL
CAP GROWTH -- -- -- -- -- 25.16%+ (5.97)%
BT EQUITY 500
INDEX -- -- -- -- -- -- 23.13%
BT SMALL
COMPANY INDEX -- -- -- -- -- -- (3.87)%
BT INTER-
NATIONAL
EQUITY INDEX -- -- -- -- -- -- 18.17%
JPM CORE BOND -- -- -- -- -- -- 7.28%
LAZARD LARGE
CAP VALUE -- -- -- -- -- -- 18.14%
LAZARD SMALL
CAP VALUE -- -- -- -- -- -- (8.56)%
MFS RESEARCH -- -- -- -- -- 14.80%+ 22.12%
MFS EMERGING
GROWTH
COMPANIES -- -- -- -- -- 21.11%+ 32.37%
MERRILL LYNCH
BASIC VALUE
EQUITY -- -- -- -- -- 15.77%+ 9.80%
MERRILL LYNCH
WORLD STRATEGY -- -- -- -- -- 3.58%+ 5.11%
MORGAN STANLEY
EMERGING
MARKETS EQUITY -- -- -- -- -- (20.66)%+ (28.19)%
72
<PAGE>
TABLE 5 (CONTINUED)
YEAR-BY-YEAR RATES OF RETURN
- --------------------------------------------------------------------------------
1988 1989 1990 1991
------------------------------
EQ/PUTNAM
GROWTH &
INCOME VALUE -- -- -- --
EQ/PUTNAM
INVESTORS
GROWTH -- -- -- --
EQ/PUTNAM
INTERNATIONAL
EQUITY -- -- -- --
TABLE 5 (CONTINUED)
YEAR-BY-YEAR RATES OF RETURN
- --------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998
-----------------------------------------------------------------
EQ/PUTNAM
GROWTH &
INCOME VALUE -- -- -- -- -- 14.96%+ 11.02%
EQ/PUTNAM
INVESTORS
GROWTH -- -- -- -- -- 23.32%+ 34.11%
EQ/PUTNAM
INTERNATIONAL
EQUITY -- -- -- -- -- 8.40%+ 17.56%
- --------------------
+Returns for these options represent less than 12 months of performance. The
returns are as of each Portfolio inception date as shown in Table 1.
73
<PAGE>
APPENDIX I: PURCHASE CONSIDERATIONS FOR QP CONTRACTS
- --------------------------------------------------------------------------------
Trustees who are considering the purchase of an Accumulator Plus 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 and the payment of death benefits in accordance
with the requirements of the Internal Revenue Code. The QP contract and this
prospectus should be reviewed in full, and the following factors, among others,
should be noted. Qualified plan assets will accumulate value on a tax-deferred
basis even if the plan is not funded by the Equitable Accumulator QP contract.
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" which 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 of Colorado 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 may apply. Further, Equitable of Colorado 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.
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.
74
<PAGE>
APPENDIX II: 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), no additional contributions, no
transfers and no withdrawals, the guaranteed minimum death benefit for an
annuitant age 45 would be calculated as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
5% ROLL UP TO
END OF AGE 80 ANNUAL RATCHET TO AGE 80
CONTRACT GUARANTEED MINIMUM GUARANTEED MINIMUM
YEAR ACCOUNT VALUE DEATH BENEFIT(1) DEATH BENEFIT
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
75
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
- --------------------------------------------------------------------------------
Unit Values 2
- --------------------------------------------------------------------------------
Annuity Unit Values 2
- --------------------------------------------------------------------------------
Custodian and Independent Accountants 3
- --------------------------------------------------------------------------------
Alliance Money Market Option and Alliance
High Yield Option Yield Information 3
- --------------------------------------------------------------------------------
Long-Term Market Trends 4
- --------------------------------------------------------------------------------
Key Factors in Retirement Planning 6
- --------------------------------------------------------------------------------
Financial Statements 10
- --------------------------------------------------------------------------------
HOW TO OBTAIN AN EQUITABLE OF COLORADO ACCUMULATOR PLUS STATEMENT OF ADDITIONAL
INFORMATION FOR SEPARATE ACCOUNT VA
Send this request form to:
Equitable of Colorado Accumulator Plus
P.O. Box 1547
Secaucus, NJ 07096-1547
Please send me an Equitable of Colorado Accumulator Plus SAI dated ______,
1999:
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip
76
<PAGE>
EQUITABLE OF COLORADO ACCUMULATOR PLUS(SM)
STATEMENT OF ADDITIONAL INFORMATION
April ___, 1999
---------------------
VARIABLE DEFERRED ANNUITY CONTRACTS
THE EQUITABLE OF COLORADO, INC. ("EQUITABLE OF COLORADO")
370 17TH STREET, DENVER, COLORADO 80202
- --------------------------------------------------------------------------------
This statement of additional information ("SAI") is not a prospectus. It should
be read in conjunction with the related Equitable of Colorado Accumulator
Plus(SM) prospectus, dated April __, 1999 issued by Equitable of Colorado. That
prospectus provides detailed information concerning the contracts and the
variable investment options that fund the contracts. Each variable investment
option is a subaccount of Equitable of Colorado's Separate Account VA.
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
- --------------------------------------------------------------------------------
PAGE
Unit Values 2
- --------------------------------------------------------------------------------
Annuity Unit Values 2
- --------------------------------------------------------------------------------
Custodian and Independent Accountants 3
- --------------------------------------------------------------------------------
Alliance Money Market Option and Alliance
High Yield Option Yield Information 3
- --------------------------------------------------------------------------------
Long-Term Market Trends 4
- --------------------------------------------------------------------------------
Key Factors in Retirement Planning 6
- --------------------------------------------------------------------------------
Financial Statements 9
- --------------------------------------------------------------------------------
Copyright 1999 The Equitable of Colorado, Inc.
All rights reserved. The Equitable of Colorado is an authorized licensee of
Accumulator Plus, a service mark of The Equitable Life Assurance
Society of the United States.
(MLPLUSSAI 5/99)
<PAGE>
- --------------------------------------------------------------------------------
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 of
Colorado Accumulator Plus ("Accumulator Plus").
The unit value for a variable investment option for any valuation period is
equal to: (1) 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 The Hudson River Trust or 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, administration charge, and
distribution 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 1.60%.
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 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).
2
<PAGE>
- --------------------------------------------------------------------------------
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 of Colorado is the custodian for the shares of The Hudson River Trust
and EQ Advisors Trust owned by Separate Account VA.
The consolidated financial statements of Equitable of Colorado 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
such firm as experts in accounting and auditing.
ALLIANCE MONEY MARKET OPTION
AND ALLIANCE HIGH YIELD OPTION YIELD INFORMATION
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.
Unit values reflect all other accrued expenses of the Alliance Money Market
option but do not reflect any withdrawal charges 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 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 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.
Unit values reflect all other accrued expenses of the Alliance High Yield option
but do not reflect any withdrawal charges 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 effective yield is obtained by modifying the current yield to give effect to
the compounding nature of the Alliance High Yield 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 30, and subtracting one from the result, i.e., effective yield =
(base period return + 1) [superscript 365/30] - 1. Alliance High Yield 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 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 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 interest
options. Nor should the yields be compared to the yields of money market options
made available to the general public.
Because the Accumulator Plus Contracts described in the prospectus are being
offered for the first time in 1999, no yield information is presented.
3
<PAGE>
- --------------------------------------------------------------------------------
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.
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.
4
<PAGE>
- --------------------------------------------------------------------------------
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.
For a comparative illustration of performance results of the variable investment
options (which reflect the trusts and variable investment options charges), see
"Investment Performance" in the prospectus.
<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.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
KEY FACTORS IN RETIREMENT PLANNING
INTRODUCTION
The Accumulator Plus 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.
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.
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]
6
<PAGE>
- --------------------------------------------------------------------------------
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
- -------------------------------------------------------------
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 (pretax)
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 pretax contribution of $93 (equivalent to
$129 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 pretax contribution of $552
(equivalent to $767 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]
7
<PAGE>
- --------------------------------------------------------------------------------
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
$164,527 after thirty years (assuming a 7.5% rate of return, no withdrawals and
assuming the deduction of the 1.60% Separate Account VA daily asset charge --
but no withdrawal charge 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 $118,460 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
$118,460 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 $97,387 with
charges deducted and $127,341 without charges as described above.
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.
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.
8
<PAGE>
- --------------------------------------------------------------------------------
CHART 5
MONTHLY INCOME
($100,000 CONTRIBUTION)
-------------------------------------------------------------------
PRINCIPAL
AND
JOINT AND SURVIVOR*
-----------------------------
INTEREST INTEREST 50% 66.67% 100%
ANNUITANT ONLY FOR SINGLE TO TO TO
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.
FINANCIAL STATEMENTS
The consolidated financial statements of Equitable of Colorado included herein
should be considered only as bearing upon the ability of Equitable of Colorado
to meet its obligations under the Contracts.
There are no financial statements for Separate Account VA as the Contracts
offered under the prospectus and SAI are being offered for the first time in
1999.
9
<PAGE>
THE EQUITABLE OF COLORADO, INC.
1998 FINANCIAL STATEMENTS
AND
REPORT OF INDEPENDENT ACCOUNTANTS
F-1
<PAGE>
February 8, 1999
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The Equitable of Colorado, Inc.
In our opinion, the accompanying balance sheets and the related 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 of Colorado, Inc. ("EOC") at December 31, 1998 and 1997, and the
results of its operations and its 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 EOC'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.
/s/ PricewaterhouseCoopers LLP
F-2
<PAGE>
THE EQUITABLE OF COLORADO, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Policy loans......................................................... $ 701,986.1 $ 1,158,866.7
Fixed maturities available for sale, at estimated fair value......... 232,819.8 226,077.5
------------------- -------------------
Total investments................................................ 934,805.9 1,384,944.2
Cash and cash equivalents.............................................. 7,034.4 421.4
Deferred policy acquisition costs...................................... 51,613.6 59,000.0
Amounts due from reinsurers............................................ 621,627.6 589,021.8
Accrued investment income.............................................. 14,624.5 58,990.2
Other assets........................................................... 7,168.4 7,299.7
------------------- -------------------
TOTAL ASSETS........................................................... $ 1,636,874.4 $ 2,099,677.3
=================== ===================
LIABILITIES
Policyholders' account balances........................................ $ 972,029.9 $ 1,457,678.0
Amounts due to reinsurers.............................................. 522,072.9 488,149.4
Future policy benefits and other policyholder's liabilities............ 27,803.7 23,724.9
Amounts due to Equitable Life.......................................... 6,249.1 15,465.6
Other liabilities...................................................... 18,357.4 21,361.5
------------------- -------------------
Total liabilities................................................ 1,546,513.0 2,006,379.4
------------------- -------------------
Commitments and contingencies (Notes 7, 8 and 9)
SHAREHOLDER'S EQUITY
Common stock, $2.00 par value 1.0 million shares authorized, issued
and outstanding...................................................... 2,000.0 2,000.0
Capital in excess of par value......................................... 37,000.0 37,000.0
Retained earnings...................................................... 48,793.3 52,308.1
Accumulated other comprehensive income................................. 2,568.1 1,989.8
------------------- -------------------
Total shareholder's equity....................................... 90,361.4 93,297.9
------------------- -------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............................. $ 1,636,874.4 $ 2,099,677.3
=================== ===================
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
THE EQUITABLE OF COLORADO, INC.
STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES
Universal life policy fee income..................... $ 6,876.3 $ 14,358.6 $ 13,891.7
Premiums............................................. 11,045.9 8,211.6 7,316.6
Net investment income................................ 39,113.6 79,205.2 70,132.8
Investment gains, net................................ 1,066.5 428.9 909.3
Other income......................................... 6,321.5 5,098.1 5,201.5
------------------ ------------------- -------------------
Total revenues................................. 64,423.8 107,302.4 97,451.9
------------------ ------------------- -------------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders'
account balances................................... 30,361.2 70,251.4 63,592.4
Policyholders' benefits.............................. 10,313.5 13,317.0 10,325.5
Other operating costs and expenses................... 29,155.9 18,787.4 16,694.8
------------------ ------------------- -------------------
Total benefits and other deductions............ 69,830.6 102,355.8 90,612.7
------------------ ------------------- -------------------
(Loss) earnings before Federal income taxes.......... (5,406.8) 4,946.6 6,839.2
Federal income benefit (tax)......................... 1,892.0 (1,731.3) (2,393.7)
------------------ ------------------- -------------------
Net (Loss) Earnings.................................. $ (3,514.8) $ 3,215.3 $ 4,445.5
================== =================== ===================
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
THE EQUITABLE OF COLORADO, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Common stock, at par value, beginning and
end of year........................................ $ 2,000.0 $ 2,000.0 $ 2,000.0
------------------ ------------------- -------------------
Capital in excess of par value, beginning
of year............................................ 37,000.0 37,000.0 22,000.0
Capital contribution from Equitable Life............. - - 15,000.0
------------------ ------------------- -------------------
Capital in excess of par value, end of year.......... 37,000.0 37,000.0 37,000.0
------------------ ------------------- -------------------
Retained earnings, beginning of year................. 52,308.1 49,092.8 44,647.3
Net (loss) earnings.................................. (3,514.8) 3,215.3 4,445.5
------------------ ------------------- -------------------
Retained earnings, end of year....................... 48,793.3 52,308.1 49,092.8
------------------ ------------------- -------------------
Accumulated other comprehensive income,
beginning of year.................................. 1,989.8 467.8 1,802.4
Other comprehensive income........................... 578.3 1,522.0 (1,334.6)
------------------ ------------------- -------------------
Accumulated other comprehensive income............... 2,568.1 1,989.8 467.8
------------------ ------------------- -------------------
TOTAL SHAREHOLDER'S EQUITY, END OF YEAR.............. $ 90,361.4 $ 93,297.9 $ 88,560.6
================== =================== ===================
COMPREHENSIVE INCOME
Net (loss) earnings.................................. $ (3,514.8) $ 3,215.3 $ 4,445.5
------------------ ------------------- -------------------
Change in unrealized gains (losses), net of
reclassification adjustment........................ 732.0 1,577.4 (1,659.5)
Minimum pension liability adjustment................. (153.7) (55.4) 324.9
------------------ ------------------- -------------------
Other comprehensive income........................... 578.3 1,522.0 (1,334.6)
------------------ ------------------- -------------------
COMPREHENSIVE INCOME................................. $ (2,936.5) $ 4,737.3 $ 3,110.9
================== =================== ===================
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
THE EQUITABLE OF COLORADO, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net (loss) earnings.................................. $ (3,514.8) $ 3,215.3 $ 4,445.5
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Interest credited to policyholders'
account balances................................. 30,361.2 70,251.4 63,592.4
Universal life policy fee income................... (6,876.3) (14,358.6) (13,891.7)
Investment gains................................... (1,066.5) (428.9) (909.3)
Change in amounts due to (from) reinsurers, net.... 1,317.7 (8,160.4) 23,717.1
Change in accrued investment income................ 44,365.7 (7,494.7) (6,271.4)
Other, net......................................... 13,137.8 8,586.2 5,592.7
------------------ ------------------- -------------------
Net cash provided by operating activities............ 77,724.8 51,610.3 76,275.3
------------------ ------------------- -------------------
Cash flows from investing activities:
Maturities and repayments.......................... 24,602.3 19,380.4 34,164.7
Sales.............................................. 109,882.4 16,820.3 27,813.2
Purchases.......................................... (139,177.6) (62,699.2) (95,629.5)
Increase in policy loans........................... (104,873.7) (123,720.3) (152,900.2)
Other, net......................................... (1.6) 4.6 15.8
------------------ ------------------- -------------------
Net cash used by investing activities................ (109,568.2) (150,214.2) (186,536.0)
------------------ ------------------- -------------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits......................................... 54,456.9 88,806.6 93,253.2
Withdrawals...................................... (3,453.7) (6,732.9) -
(Decrease) increase in loan due to Equitable Life.. (12,546.8) 12,546.8 -
Capital contribution from Equitable Life........... - - 15,000.0
------------------ ------------------- -------------------
Net cash provided by financing activities............ 38,456.4 94,620.5 108,253.2
------------------ ------------------- -------------------
Change in cash and cash equivalents.................. 6,613.0 (3,983.4) (2,007.5)
Cash and cash equivalents, beginning of year......... 421.4 4,404.8 6,412.3
------------------ ------------------- -------------------
Cash and Cash Equivalents, End of Year............... $ 7,034.4 $ 421.4 $ 4,404.8
================== =================== ===================
Supplemental cash flow information
Income Taxes Refunded (Paid)....................... $ 1,241.2 $ (4,349.4) $ (874.9)
================== =================== ===================
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
THE EQUITABLE OF COLORADO, INC.
NOTES TO FINANCIAL STATEMENTS
1) ORGANIZATION
The Equitable of Colorado, Inc. ("EOC") was incorporated on January 18,
1984, as a wholly owned subsidiary of The Equitable Life Assurance Society
of the United States ("Equitable Life") which is a wholly owned subsidiary
of The Equitable Companies Incorporated (the "Holding Company"). EOC's
operations consist principally of the sale of whole life fixed premium,
interest-sensitive policies and ten year term life insurance policies.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
-----------------------------------------------------
The accompanying 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 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.
New Accounting Pronouncements
-----------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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. EOC 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. SFAS No. 133 is not expected to have a
material impact on EOC's financial statements.
F-7
<PAGE>
In late 1998, the Americal Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("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 EOC's 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 and 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 EOC's financial
statements.
Valuation of Investments
------------------------
Fixed maturities identified as available for sale are reported at estimated
fair value. The amortized cost of fixed maturities is adjusted for
impairments in value deemed to be other than temporary.
Policy loans are stated at unpaid principal balances.
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 financial statements on a trade date
basis.
Investment Gains, Net and Unrealized Investment Gains (Losses)
--------------------------------------------------------------
Realized investment gains (losses) are determined by specific
identification and are presented as a component of revenue.
Unrealized investment gains and losses on fixed maturities available for
sale are accounted for as a separate component of accumulated comprehensive
income, net of related deferred Federal income taxes and deferred policy
acquisition costs ("DAC") related to universal life and investment-type
products.
Recognition of Insurance Income and Related Expenses
----------------------------------------------------
Premiums from universal life 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 non-participating traditional life 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.
F-8
<PAGE>
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, DAC is amortized over the expected total life
of the contract group (periods ranging from 25 to 35 years) 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 comprehensive income in shareholders' equity as of
the balance sheet date.
For non-participating traditional life 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.
DAC totaling $12,300.0 thousand ($8,000.0 thousand net of Federal income
taxes), related to a single large company-owned life insurance ("COLI")
policy surrendered in the first quarter of 1998, was written off and
included in other operating costs and expense. Concurrently, an initial fee
liability of $1,400.0 thousand ($900.0 thousand, net of Federal income
taxes) was amortized and included in universal life and investment-type
product fee income.
Policyholders' Account Balances and Future Policy Benefits
----------------------------------------------------------
Policyholders' account balances for universal life 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 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 EOC's experience which, together
with interest and expense assumptions, include 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. Interest rates used in
establishing such liabilities range from 4.00% to 8.25% for life insurance
liabilities.
Federal Income Taxes
--------------------
EOC is included in a consolidated Federal income tax return filed by the
Holding Company with Equitable Life and its other eligible subsidiaries. In
accordance with tax sharing arrangements between EOC and Equitable Life,
the amount of current income taxes as determined on a separate return basis
will be paid to or received from Equitable Life. Benefits for losses, which
are paid to EOC to the extent they are utilized by Equitable Life, may not
have been received in the absence of such an arrangement. 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.
F-9
<PAGE>
3) INVESTMENTS
The following tables provide additional information relating to fixed
maturities:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------------- ----------------- ---------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
-----------------
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 200,395.2 $ 6,231.9 $ 365.5 $ 206,261.6
Mortgage-backed.................... 6,862.6 119.7 - 6,982.3
U.S. Treasury securities and
U.S. government and
agency securities................ 13,629.4 164.4 18.1 13,775.7
States and political subdivisions.. 3,203.8 - 13.9 3,189.9
Foreign governments................ 1,987.5 37.1 - 2,024.6
Redeemable preferred stock......... 592.6 - 6.9 585.7
----------------- ----------------- ---------------- -----------------
Total Available for Sale............... $ 226,671.1 $ 6,553.1 $ 404.4 $ 232,819.8
================= ================= ================ =================
December 31, 1997
-----------------
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 197,388.2 $ 4,821.3 $ 568.8 $ 201,640.7
Mortgage-backed.................... 9,410.0 95.8 - 9,505.8
U.S. Treasury securities and
U.S. government and
agency securities................ 14,778.3 152.7 - 14,931.0
----------------- ----------------- ---------------- -----------------
Total Available for Sale............... $ 221,576.5 $ 5,069.8 $ 568.8 $ 226,077.5
================= ================= ================ =================
</TABLE>
For publicly traded fixed maturities, estimated fair value is determined
using quoted market prices. For fixed maturities without a readily
ascertainable market value, EOC has determined 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. 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
$97,253.5 thousand and $111,147.1 thousand, respectively, had estimated
fair values of $101,073.7 thousand and $114,176.4 thousand, respectively.
The contractual maturity of bonds at December 31, 1998 is shown below:
AVAILABLE FOR SALE
------------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
---------------- -----------------
(IN THOUSANDS)
Due in one year or less............. $ 19,088.7 $ 19,221.6
Due in years two through five....... 87,625.6 89,141.6
Due in years six through ten........ 94,565.9 98,594.6
Due after ten years................. 17,935.7 18,294.0
Mortgage-backed securities.......... 6,862.6 6,982.3
---------------- -----------------
Total............................... $ 226,078.5 $ 232,234.1
================ =================
F-10
<PAGE>
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.
EOC's fixed maturity investment portfolio includes corporate high yield
securities consisting of public high yield bonds and directly negotiated
debt in leveraged buyout transactions. EOC seeks to minimize the higher
than normal credit risks associated with such securities by monitoring the
total investments in any single issuer or total investment in 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 1.8% of the
$226,078.5 thousand aggregate amortized cost of bonds held by EOC were
considered to be other than investment grade.
4) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities................................... $ 16,178.2 $ 14,877.4 $ 13,164.5
Policy loans....................................... 23,624.9 64,707.6 57,398.9
Other investment income............................ 53.2 131.4 450.0
----------------- ---------------- -----------------
Gross investment income.......................... 39,856.3 79,716.4 71,013.4
Investment expenses.............................. (742.7) (511.2) (880.6)
----------------- ---------------- -----------------
Net Investment Income.............................. $ 39,113.6 $ 79,205.2 $ 70,132.8
================= ================ =================
</TABLE>
For 1998, 1997 and 1996, respectively, proceeds received on sales of fixed
maturities classified as available for sale amounted to $109,882.4
thousand, $16,820.3 thousand and $27,813.2 thousand. Gross gains of
$1,200.3 thousand, $608.3 thousand and $1,316.0 thousand and gross losses
of $120.1 thousand, $180.3 thousand and $1,050.8 thousand, respectively,
were realized on these sales.
F-11
<PAGE>
Net unrealized investment gains (losses), included in the 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 THOUSANDS)
<S> <C> <C> <C>
Balance, beginning of year......................... $ 2,135.5 $ 558.1 $ 2,217.6
Changes in gross unrealized investment
gains (losses)................................... 1,647.7 3,237.9 (4,068.0)
Changes in unrealized investment losses
(gains) attributable to:
DAC............................................ (521.6) (811.1) 1,515.0
Deferred Federal income taxes.................. (394.1) (849.4) 893.5
----------------- ---------------- -----------------
Balance, End of Year............................... $ 2,867.5 $ 2,135.5 $ 558.1
================= ================ =================
Balance, end of year comprises:
Unrealized investment gains on:
Fixed maturities............................... $ 6,148.7 $ 4,501.0 $ 1,263.1
Amounts of unrealized investment gains
attributable to:
DAC.......................................... (1,736.9) (1,215.3) (404.2)
Deferred Federal income taxes................ (1,544.3) (1,150.2) (300.8)
----------------- ---------------- -----------------
Total.............................................. $ 2,867.5 $ 2,135.5 $ 558.1
================= ================ =================
</TABLE>
5) ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income represents cumulative gains and
losses on items that are not reflected in the statements of earnings. The
balances for the years 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Unrealized gains on investments.................... $ 2,867.5 $ 2,135.5 $ 558.1
Minimum pension liability.......................... (299.4) (145.7) (90.3)
----------------- ---------------- -----------------
Total Accumulated Other
Comprehensive Income............................. $ 2,568.1 $ 1,989.8 $ 467.8
================= ================ =================
</TABLE>
F-12
<PAGE>
The components of other comprehensive income for the years 1998, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net unrealized gains (losses) on investment
securities:
Net unrealized gains (losses) arising during
the period..................................... $ 2,260.3 $ 3,840.1 $ (4,085.3)
Reclassification adjustment for (gains) losses
included in net earnings....................... (612.6) (602.2) 17.3
----------------- ---------------- -----------------
Net unrealized gains (losses) on investment
securities....................................... 1,647.7 3,237.9 (4,068.0)
Adjustments for:
DAC and deferred Federal income taxes.............. (915.7) (1,660.5) 2,408.5
----------------- ---------------- -----------------
Change in unrealized gains (losses), net of
reclassification of adjustment................... 732.0 1,577.4 (1,659.5)
Change in minimum pension liability................ (153.7) (55.4) 324.9
----------------- ---------------- -----------------
Total Other Comprehensive Income................... $ 578.3 $ 1,522.0 $ (1,334.6)
================= ================ =================
</TABLE>
6) FEDERAL INCOME TAXES
A summary of the Federal income taxes in the statements of earnings is
shown below:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal income tax (benefit) expense:
Current.......................................... $ (507.9) $ 2,676.7 $ 2,633.6
Deferred......................................... (1,384.1) (945.4) (239.9)
----------------- ---------------- -----------------
Total.............................................. $ (1,892.0) $ 1,731.3 $ 2,393.7
================= ================ =================
</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 THOUSANDS)
<S> <C> <C> <C> <C>
Compensation and related benefits...... $ - $ 330.8 $ - $ 13.5
Other.................................. 1,076.1 - 1,432.0
DAC, reserves and reinsurance.......... - 4,937.0 - 7,115.4
Investments............................ - 1,092.9 - 660.4
--------------- ---------------- --------------- ---------------
Total.................................. $ 1,076.1 $ 6,360.7 $ 1,432.0 $ 7,789.3
=============== ================ =============== ===============
</TABLE>
F-13
<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 THOUSANDS)
<S> <C> <C> <C>
DAC, reserves and reinsurance...................... $ (2,140.0) $ (1,185.0) $ (510.0)
Investments........................................ - - 300.0
Compensation and related benefits.................. 400.0 200.0 400.0
Other.............................................. 355.9 39.6 (429.9)
----------------- ---------------- -----------------
Deferred Federal Income Tax
Benefit.......................................... $ (1,384.1) $ (945.4) $ (239.9)
================= ================ =================
</TABLE>
7) REINSURANCE AGREEMENTS
EOC cedes reinsurance to Equitable Life and unaffiliated insurance
companies. EOC 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 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Direct premiums.................................... $ 53,896.3 $ 50,014.0 $ 49,459.8
Reinsurance ceded.................................. (42,850.4) (41,802.4) (42,143.2)
----------------- ---------------- -----------------
Premiums........................................... $ 11,045.9 $ 8,211.6 $ 7,316.6
================= ================ =================
Universal Life and Investment-type Product
Policy Fee Income Ceded.......................... $ 31,862.9 $ 25,216.1 $ 17,152.4
================= ================ =================
Policyholders' Benefits Ceded...................... $ 72,624.0 $ 70,187.7 $ 61,931.5
================= ================ =================
Interest Credited to Policyholders' Account
Balances Ceded................................... $ 39,521.6 $ 36,371.0 $ 32,267.4
================= ================ =================
</TABLE>
To limit its exposure to losses, effective February 1998, EOC reinsured 90%
of the mortality risk on new term policies. EOC also reinsures mortality
risks in excess of $150.0 thousand on any single life. EOC also reinsures
the entire risk on certain substandard underwriting risks as well as in
certain other cases.
8) FAIR VALUE OF FINANCIAL INSTRUMENTS
EOC 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 EOC'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.
F-14
<PAGE>
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 carrying value and estimated
fair value for policy loans were both $701,986.1 thousand at December 31,
1998 as compared with $1,158,866.7 thousand at December 31, 1997.
9) LITIGATION
An action was instituted on April 6, 1995 against EOC and Equitable Life in
New York state court, entitled Sidney C. Cole, et al. v. The Equitable Life
Assurance Society of the United States and The Equitable of Colorado, Inc.
The action is brought by the holders of a joint survivorship whole life
policy issued by EOC. The action purports to be on behalf of a class
consisting of all persons who from January 1, 1984 purchased life insurance
policies sold by Equitable Life and EOC based upon allegedly uniform sales
presentations and policy illustrations. The complaint puts in issue various
alleged sales practices that plaintiffs assert, among other things,
misrepresented the stated number of years that the annual premium would
need to be paid. Plaintiffs seek damages in an unspecified amount,
imposition of a constructive trust, and seek to enjoin Equitable Life and
EOC from engaging in the challenged sales practices. In June 1996, the
court issued a decision and order dismissing with prejudice plaintiffs'
causes of action for fraud, constructive fraud, breach of fiduciary duty,
negligence, and unjust enrichment, and dismissing without prejudice
plaintiffs' cause of action under the New York State consumer protection
statute. The only remaining causes of action are for breach of contract and
negligent misrepresentation. In 1997, plaintiffs noticed an appeal from the
court's June 1996 order and filed their memorandum of law and affidavits in
support of their motion for class certification. In August 1997, Equitable
Life and EOC moved for summary judgment dismissing plaintiffs' remaining
claims of breach of contract and negligent misrepresentation and in
February 1998, the court granted Equitable Life and EOC's motion for
summary judgment. The court therefore denied plaintiffs' motion to certify
the class. In April 1998, plaintiffs noticed their appeal from that
decision and from the June 1996 decision, the appeal from which had been
dismissed. Plaintiffs perfected their appeal in January 1999. Oral argument
is scheduled for September 1999.
Although the outcome of litigation cannot be predicted with certainty,
EOC's management believes that the ultimate resolution of this case should
not have a material adverse effect on the financial position of EOC. EOC'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 EOC's
results of operations in any particular period.
In addition, EOC is involved in various legal actions and proceedings in
connection with its business. 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
EOC's financial position or results of operations.
10) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION
EOC is restricted as to the amounts of dividends it may pay to Equitable
Life. Under Colorado Insurance Law, the Division of Insurance of the State
of Colorado has broad discretion to determine whether the financial
condition of a stock life insurance company would support the payment of
dividends to its shareholders. Statutory surplus, capital stock and Asset
Valuation Reserve ("AVR") totaled $51,662.9 thousand and $47,907.1 thousand
at December 31, 1998 and 1997, respectively. For 1998, 1997 and 1996,
statutory net income totaled $3,401.3 thousand, $615.6 thousand and $784.0
thousand, respectively.
At December 31, 1998, EOC, in accordance with various government and state
regulations, had $3,770.4 thousand of securities deposited with such
government or state agencies.
F-15
<PAGE>
The differences between statutory surplus and capital stock determined in
accordance with Statutory Accounting Principles ("SAP") and total
shareholder's 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 revenues and
expenses; (d) Federal income taxes are generally accrued under SAP based
upon revenues and expensed 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.
11) RELATED PARTY TRANSACTIONS
EOC reimburses Equitable Life for its use of Equitable Life's personnel,
property and facilities in carrying out certain of its operations.
Reimbursements for intercompany services is made on the basis of the cost
of services provided. The amounts of these intercompany transactions are as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Personnel and facilities........................... $ 6,897.9 $ 9,835.4 $ 5,523.1
Agent commissions and fees......................... $ 5,784.8 $ 4,835.1 $ 4,679.0
</TABLE>
Equitable Life sponsors qualified and non-qualified defined benefit plans
covering substantially all employees (including certain qualified part-time
employees), managers and agents. The pension plans are non-contributory and
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. Under its cost sharing agreement, Equitable Life allocated a portion
of the costs of these benefit plans to EOC; these costs were included in
personnel and facilities above.
EOC incurred investment advisory and asset management fees of $375.8
thousand, $362.7 thousand and $315.6 thousand for services provided by
affiliates during 1998, 1997 and 1996, respectively.
F-16
<PAGE>
PART C
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits.
(a) Financial Statements included in Part B.
1. The Equitable of Colorado, Inc.
o Report of Independent Accountants - PricewaterhouseCoopers
LLP;
- Consolidated Balance Sheets as of December 31, 1998 and 1997;
o Consolidated Statements of Earnings for Years Ended
December 31, 1998, 1997 and 1996;
- Consolidated Statements of Equity for Years Ended
December 31, 1998, 1997 and 1996;
o Consolidated Statements of Cash Flows for Years Ended
December 31, 1998, 1997 and 1996
- Notes to Consolidated Financial Statements.
The following exhibits are filed herewith:
1. Certified Resolutions of the Board of Directors of The Equitable
of Colorado, Inc. ("EOC") authorizing the establishment of
separate accounts, dated December 16, 1996, previously filed with
this Registration Statement File No. 333-72381 on Februry 12,
1999.
2. Not applicable.
3. (a) Form of Distribution Agreement among EOC and Equitable
Distributors, Inc., ("EDI"), authorizing EDI to distribute
all EOC Products in the retail channel, previously filed with
this Registration Statement File No. 333-72381 on Februry 12,
1999.
(b) Form of Distribution and Servicing Agreement among EOC and EQ
Financial Consultants ("EQFC") authorizing EQFC to distribute
all EOC Products in the agency channel, previously filed with
this Registration Statement File No. 333-72381 on Februry 12,
1999.
(c) Form of Sales Agreement between EQFC and EOC committing EQFC
to provide shares of the Hudson River Trust ("HRT") for all
EOC Separate Account Products sold in the agency channel,
previously filed with this Registration Statement File No.
333-72381 on Februry 12, 1999.
(d) Form of Sales Agreement between EOC and EDI committing EDI to
provide HRT shares for all EOC Separate Account Products sold
in the retail channel, previously filed with this
Registration Statement File No. 333-72381 on Februry 12,
1999.
(e) Form of Participation Agreement by and among EQ Advisors
Trust ("EQAT"), EDI, EOC and EQFC, committing EQAT and its
distributors, EQFC and EDI, to provide EQAT shares for all
EOC Separate Account Products sold in the agency channel and
the retail channel, previously filed with this Registration
Statement File No. 333-72381 on Februry 12, 1999.
(f) Agreement for Cooperative and Joint Use of Personnel,
Property and Services between Equitable Life Assurance
Society of the United States and EOC dated April 16,
1984, previously filed with this Registration Statement File
No. 333-72381 on Februry 12, 1999.
C-1
<PAGE>
4. (a) Form of annuity contract no. EOC99APICB-INDV (as revised).
(b) Form of Data Pages for Accumulator Plus NQ, previously filed
with this Registration Statement File No. 333-72381 on
Februry 12, 1999.
(c) Form of Data Pages for Accumulator Plus Traditional IRA and
Roth IRA, previously filed with this Registration Statement
File No. 333-72381 on Februry 12, 1999.
(d) Form of Data Pages for Accumulator Plus QP - Defined Benefit
and Defined Contribution, previously filed with this
Registration Statement File No. 333-72381 on Februry 12,
1999.
(e) Form of Endorsement Applicable to IRA Contracts No.
98EOCENIRAIA-AP, previously filed with this Registration
Statement File No. 333-72381 on Februry 12, 1999.
C-2
<PAGE>
(f) Form of Custodial owned Roth IRA Endorsement No. 98COROTHI,
previously filed with this Registration Statement File No.
333-72381 on February 12, 1999.
(g) Form of Defined Benefit Endorsement no. 98EOCENDBQPII,
previously filed with this Registration Statement File No.
333-72381 on February 12, 1999.
(h) Form of Endorsement Applicable to Defined Contribution
Qualified Plan, previously filed with this Registration
Statement File No. 333-72381 on February 12, 1999.
(i) Form of Endorsement for Extra Credit Annuity No. 98EOCECEND
IIA/B, previously filed with this Registration Statement File
No. 333-72381 on February 12, 1999.
5. (a) Form of Application for Accumulator Plus (IRA, NQ, and QP),
previously filed with this Registration Statement File No.
333-72381 on February 12, 1999.
6. (a) Restated Charter of EOC, as amended, previously filed with
this Registration Statement File No. 333-72381 on February
12, 1999.
(b) By-Laws of EOC, as amended, previously filed with this
Registration Statement File No. 333-72381 on February 12,
1999.
7. Not applicable.
8. Not applicable.
9. Opinion and Consent of Edwards & Angell, LLP.
10. (a) Consent of PricewaterhouseCoopers LLP.
(b) Powers of Attorney, previously filed with this Registration
Statement File No. 333-72381 on February 12, 1999.
11. Not applicable.
12. Not applicable.
13. (a) Formulae for Determining Money Market Fund Yield for a
Seven-Day Period, previously filed with this Registration
Statement File No. 333-72381 on February 12, 1999.
C-3
<PAGE>
(b) Formulae for Determining Cumulative and Annualized Rates of
Return, previously filed with this Registration Statement
File No. 333-72381 on February 12, 1999.
(c) Formulae for Determining Standardized Performance Value and
Annualized Average Performance Ratio, previously filed with
this Registration Statement File No. 333-72381 on February
12, 1999.
C-4
<PAGE>
Item 25: Directors and Officers of EOC.
Set forth below is information regarding the directors and principal
officers of EOC. EOC's address is 370 17th Street, Suite 4950, Denver,
Colorado 80202. The business address of the persons whose names are
preceded by an asterisk is that of Equitable Life Assurance Society of
the United States, 1290 Avenue of the Americas, New York, NY 10104.
DIRECTORS AND OFFICERS
*Samuel B. Shlesinger Chairman of the Board, President,
Chief Executive Officer and Director
*Michael S. Martin Executive Vice President and
Director
*Michel Beaulieu Director
*Harvey E. Blitz Director
*Kevin R. Byrne Senior Vice President and Treasurer
*Alvin Fenichel Senior Vice President and Chief
Financial Officer
*Linda J. Galasso Vice President and Secretary
*Mark A. Hug Senior Vice President
*Charles Marino Vice President and Actuary
*John P. Natoli Vice President and Chief
Administrative Officer
Michael J. Remur Vice President and Chief
Administrative Officer
3001 Westown Parkway
West Des Moines, IA 50266
Allen Zabusky Vice President and Controller
135 West 50th Street
New York, NY 10020
*Barbara Fraser Vice President and Actuary
*Mildred M. Oliver Vice President
*Naomi J. Weinstein Vice President
C-5
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Insurance
Company or Registrant:
Separate Account VA of The Equitable of Colorado, Inc. ("EOC"), (the
"Separate Account") is a separate account of EOC. EOC is a wholly owned
subsidiary of The Equitable Life Assurance Society of the United States
("Equitable"). Equitable, a New York stock life insurance company, is a wholly
owned subsidiary of The Equitable Companies Incorporated (the "Holding
Company"), a publicly traded company.
The largest stockholder of the Holding Company is AXA, which as of
March 31, 1999 beneficially owned 58.3% of the Holding Company's outstanding
common stock. AXA is able to exercise significant influence over the operations
and capital structure of the Holding Company and its subsidiaries, including
Equitable. AXA, a French company, is the holding company for an international
group of insurance and related financial services companies.
C-6
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
The Equitable Companies Incorporated (l991) (Delaware)
Donaldson, Lufkin & Jenrette, Inc. (1993) (Delaware) (41.8%) (See
Addendum B(1) for subsidiaries)
The Equitable Life Assurance Society of the United States (1859)
(New York) (a)(b)
The Equitable of Colorado, Inc. (l983) (Colorado)
EVLICO, INC. (1995) (Delaware)
EVLICO East Ridge, Inc. (1995) (California)
GP/EQ Southwest, Inc. (1995) (Texas)
Franconom, Inc. (1985) (Pennsylvania)
Frontier Trust Company (1987) (North Dakota)
Gateway Center Buildings, Garage, and Apartment Hotel, Inc.
(inactive) (pre-l970) (Pennsylvania)
Equitable Deal Flow Fund, L.P.
Equitable Managed Assets (Delaware)
EREIM LP Associates (99%)
EML Associates, L.P. (19.8%)
Alliance Capital Management L.P. (2.7% limited partnership
interest)
ACMC, Inc. (1991) (Delaware)(s)
Alliance Capital Management L.P. (1988) (Delaware)
(39.3% limited partnership interest)
EVCO, Inc. (1991) (New Jersey)
EVSA, Inc. (1992) (Pennsylvania)
Prime Property Funding, Inc. (1993) (Delaware)
Wil Gro, Inc. (1992) (Pennsylvania)
Equitable Underwriting and Sales Agency (Bahamas) Limited (1993)
(Bahamas)
(a) Registered Broker/Dealer (b) Registered Investment Advisor
C-7
<PAGE>
The Equitable Companies Incorporated (cont.)
Donaldson Lufkin & Jenrette, Inc.
The Equitable Life Assurance Society of the United States (cont.)
Fox Run, Inc. (1994) (Massachusetts)
STCS, Inc. (1992) (Delaware)
CCMI Corporation (1994) (Maryland)
FTM Corporation (1994) (Maryland)
Equitable BJVS, Inc. (1992) (California)
Equitable Rowes Wharf, Inc. (1995) (Massachusetts)
Camelback JVS, Inc. (1995) (Arizona)
ELAS Realty, Inc. (1996) (Delaware)
100 Federal Street Realty Corporation (Massachusetts)
Equitable Structured Settlement Corporation (1996) (Delaware)
Prime Property Funding II, Inc. (1997) (Delaware)
Sarasota Prime Hotels, Inc. (1997) (Florida)
ECLL, Inc. (1997) (Michigan)
Equitable Holdings LLC (1997) (New York) (into which Equitable Holding
Corporation was merged in 1997)
EQ Financial Consultants, Inc. (l97l) (Delaware) (a) (b)
ELAS Securities Acquisition Corp. (l980) (Delaware)
100 Federal Street Funding Corporation (Massachusetts)
EquiSource of New York, Inc. (1986) (New York) (See
Addendum A for subsidiaries)
Equitable Casualty Insurance Company (l986) (Vermont)
EREIM LP Corp. (1986) (Delaware)
EREIM LP Associates (1%)
EML Associates (.02%)
Six-Pac G.P., Inc. (1990) (Georgia)
Equitable Distributors, Inc. (1988) (Delaware) (a)
(a) Registered Broker/Dealer (b) Registered Investment Advisor
C-8
<PAGE>
The Equitable Companies Incorporated (cont.)
Donaldson Lufkin & Jenrette, Inc.
The Equitable Life Assurance Society of the United States (cont.)
Equitable Holdings, LLC (cont.)
Equitable JVS, Inc. (1988) (Delaware)
Astor/Broadway Acquisition Corp. (1990) (New York)
Astor Times Square Corp. (1990) (New York)
PC Landmark, Inc. (1990) (Texas)
Equitable JVS II, Inc. (1994) (Maryland)
EJSVS, Inc. (1995) (New Jersey)
Donaldson, Lufkin & Jenrette, Inc. (1985 by EIC; 1993 by EQ and
EHC) (Delaware) (34.4%) (See Addendum B(1) for
subsidiaries)
JMR Realty Services, Inc. (1994) (Delaware)
Equitable Investment Corporation (l97l) (New York)
Stelas North Carolina Limited Partnership (50% limited
partnership interest) (l984)
Equitable JV Holding Corporation (1989) (Delaware)
Alliance Capital Management Corporation (l991) (Delaware) (b)
(See Addendum B(2) for subsidiaries)
Equitable Capital Management Corporation (l985)
(Delaware) (b)
Alliance Capital Management L.P. (1988)
(Delaware) (14.8% limited partnership interest)
EQ Services, Inc. (1992) (Delaware)
EREIM Managers Corp. (1986) (Delaware)
ML/EQ Real Estate Portfolio, L.P.
EML Associates, L.P.
(a) Registered Broker/Dealer (b) Registered Investment
Advisor
C-9
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
ADDENDUM A - SUBSIDIARY
OF EQUITABLE HOLDINGS, LLC
HAVING MORE THAN FIVE SUBSIDIARIES
-------------------------------------------------------
EquiSource of New York, Inc. (formerly Traditional Equinet Business Corporation
of New York) has the following subsidiaries that are brokerage companies to
make available to Equitable Agents within each state traditional (non-equity)
products and services not manufactured by Equitable:
EquiSource of Alabama, Inc. (1986) (Alabama)
EquiSource of Arizona, Inc. (1986) (Arizona)
EquiSource of Arkansas, Inc. (1987) (Arkansas)
EquiSource Insurance Agency of California, Inc. (1987) (California)
EquiSource of Colorado, Inc. (1986) (Colorado)
EquiSource of Delaware, Inc. (1986) (Delaware)
EquiSource of Hawaii, Inc. (1987) (Hawaii)
EquiSource of Maine, Inc. (1987) (Maine)
EquiSource Insurance Agency of Massachusetts, Inc. (1988)
(Massachusetts)
EquiSource of Montana, Inc. (1986) (Montana)
EquiSource of Nevada, Inc. (1986) (Nevada)
EquiSource of New Mexico, Inc. (1987) (New Mexico)
EquiSource of Pennsylvania, Inc. (1986) (Pennsylvania)
EquiSource of Puerto Rico, Inc. (1997) (Puerto Rico)
EquiSource Insurance Agency of Utah, Inc. (1986) (Utah)
EquiSource of Washington, Inc. (1987) (Washington)
EquiSource of Wyoming, Inc. (1986) (Wyoming)
C-10
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
ADDENDUM B - INVESTMENT SUBSIDIARIES
HAVING MORE THAN FIVE SUBSIDIARIES
------------------------------------
Donaldson, Lufkin & Jenrette, Inc. has the following subsidiaries, and
approximately 150 other subsidiaries, most of which are special purpose
subsidiaries (the number fluctuates according to business needs):
Donaldson, Lufkin & Jenrette, Securities Corporation (1985)
(Delaware) (a) (b)
Wood, Struthers & Winthrop Management Corp. (1985)
(Delaware) (b)
Autranet, Inc. (1985) (Delaware) (a)
DLJ Real Estate, Inc.
DLJ Capital Corporation (b)
DLJ Mortgage Capital, Inc. (1988) (Delaware)
Column Financial, Inc. (1993) (Delaware) (50%)
Alliance Capital Management Corporation (as general partner) (b) has the
following subsidiaries:
Alliance Capital Management L.P. (1988) (Delaware) (b)
Alliance Capital Management Corporation of Delaware, Inc.
(Delaware)
Alliance Fund Services, Inc. (Delaware) (a)
Alliance Fund Distributors, Inc. (Delaware) (a)
Alliance Capital Oceanic Corp. (Delaware)
Alliance Capital Management Australia Pty. Ltd.
(Australia)
Meiji - Alliance Capital Corp. (Delaware) (50%)
Alliance Capital (Luxembourg) S.A. (99.98%)
Alliance Eastern Europe Inc. (Delaware)
Alliance Barra Research Institute, Inc. (Delaware)
(50%)
Alliance Capital Management Canada, Inc. (Canada)
(99.99%)
Alliance Capital Management (Brazil) Llda
Alliance Capital Global Derivatives Corp. (Delaware)
Alliance International Fund Services S.A.
(Luxembourg)
Alliance Capital Management (India) Ltd. (Delaware)
Alliance Capital Mauritius Ltd.
Alliance Corporate Finance Group, Incorporated
(Delaware)
Equitable Capital Diversified Holdings, L.P. I
Equitable Capital Diversified Holdings, L.P. II
Curisitor Alliance L.L.C. (Delaware)
Curisitor Holdings Limited (UK)
Alliance Capital Management (Japan), Inc.
Alliance Capital Management (Asia) Ltd.
Alliance Capital Management (Turkey), Ltd.
Cursitor Alliance Management Limited (UK)
(a) Registered Broker/Dealer (b) Registered Investment Advisor
C-11
<PAGE>
AXA GROUP CHART
The information listed below is dated as of December 31, 1997; percentages
shown represent voting power. The name of the owner is noted when AXA
indirectly controls the company.
AXA INSURANCE AND REINSURANCE BUSINESS HOLDING
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
AXA Assurances Iard France 100% by AXA France Assurance
AXA Assurances Vie France 100% by AXA France Assurance
AXA Courtage Iard France 97.4% by AXA France Assurance
and UAP Iard
AXA Courtage Vie France 100% by AXA France Assurance
Alpha Assurances Vie France 100% by AXA France Assurance
AXA Direct France 100%
Direct Assurances Iard France 100% by AXA Direct
Direct Assurance Vie France 100% by AXA Direct
AXA Tellit Versicherung Germany 50% owned by AXA Direct and
50% by CKAG
Axiva France 100% by AXA France Assurance
Juridica France 88.4% by UAP Iard, 10.9% by
AXA France Assurance
AXA Assistance France France 100% by AXA Assistance SA
Monvoisin Assurances France 99.9% by different companies
and Mutuals
Societe Beaujon France 100%
Lor Finance France 100%
Jour Finance France 100% by AXA Conseil Iard and
by AXA Assurances Iard
Financiere 45 France 99.8%
Mofipar France 100%
Compagnie Auxiliaire pour le France 99.8% by Societe Beaujon
Commerce and l'Industrie
C.F.G.A. France 99.96% owned by Mutuals and
Finaxa
AXA Global Risks France 100% owned by AXA France
Assurance, UAP Iard and
Mutuals
Argovie France 100% by Axiva and SCA Argos
C-12
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
Astral Finance France 99.33% by AXA Courtage Vie
Argos France N.S.
AXA France Assurance France 100%
UAP Incendie Accidents France 100% by AXA France
Assurance
UAP Vie France 100% by AXA France
Assurance
UAP Collectives France 50% by AXA Assurances
Iard, 3.3% by AXA Conseil
Iard and 46.6% UAP Vie
Thema Vie France 30% by Axiva, 11.9% by
UAP Collectives, 10.9% by
UAP Iard and 46.8% by UAP Vie.
La Reunion Francaise France 49% by UAP Iard and 51% by
AXA Global Risks
UAP Assistance France 52% by UAP Incendie-Accidents
and 48% by UAP Vie
UAP International France 50.1% by AXA and 49.9% by
AXA Global Risks
Sofinad France 100%
AXA-Colonia Konzern AG (AXA-
CKAG) Germany 39.7% by Vinci BV, 25.6% by
Kolnische Verwaltungs and
5.5% by AXA-UAP
Finaxa Belgium Belgium 100%
AXA Belgium Belgium 27.1% by AXA and 72.6%
by Finaxa Belgium
De Kortrijske Verzekering Belgium 99.8% by AXA Belgium
Juris Belgium 100% owned by Finaxa Belgium
Royale Vendome Belgium 49% by AXA and 20.2% by
AXA Global Risks
Royale Belge Belgium 51.2% by Royale Vendome and
9.5% by different companies
of the Group
Royale Belge 1994 Belgium 97.9% by Royale Belge and 2%
by UAB
UAB Belgium 99.9% by Royale Belge
Ardenne Prevoyante Belgium 99.4% by Royale Belge
GB Lex Belgium 55% by Royale Belge, 25% by
Royale Belge 1994, 10% by
Juridica and 10% by AXA
Conseil Assurance
Royale Belge Re Belgium 99.9% by Royale Belge
Parcolvi Belgium 100% by Vinci Belgium
Vinci Belgium Belgium 99.5% by Vinci BV
Finaxa Luxembourg Luxembourg 100%
AXA Assurance IARD Luxembourg Luxembourg 99.9%
AXA Assurance Vie Luxembourg Luxembourg 99.9%
Royale UAP Luxembourg 100% by Royale Belge
Paneurolife Luxembourg 90% by different companies of
the AXA Group
Paneurore Luxembourg 90% by different companies of
the AXA Group
Crealux Luxembourg 100% by Royale Belge
Futur Re Luxembourg 100% by AXA Global Risks
General Re-CKAG Luxembourg 37.8% by AXA-CKAG and 12.1%
by Colonia Nordstern
Versicherung
Royale Belge Investissements Luxembourg 100% by Royale Belge
AXA Aurora Spain 30% owned by AXA and 40%
by UAP International
Aurora Polar SA de Seguros y Spain 99.4% owned by AXA Aurora
Reaseguros
Aurora Vida SA de Seguros y Spain 90% owned by Aurora Polar and
Reaseguros 5% by AXA
AXA Gestion de Seguros y Spain 99.1% owned by AXA Aurora
Reaseguros
Hilo Direct Seguros Spain 71.4% by AXA Aurora
Ayuda Legal Spain 59% owned by Aurora Polar,
29% by AXA Gestion and 12%
by Aurora Vida
UAP Iberica Spain 100% by UAP International
General Europea (GESA) Spain 100% by Societe Generale
d'Assistance
AXA Assicurazioni Italy 100%
Eurovita Italy 30% owned by AXA Assicurazioni
Gruppo UAP Italia (GUI) Italy 97% by UAP International and
3% by UAP Vie
UAP Italiana Italy 96% by AXA and 4% by GUI
UAP Vita Italy 62.2% by GUI and 37.8% by UAP
Vie
Allsecures Assicurazioni Italy 90% by GUI and 10% by UAP
Italiana
Allsecures Vita Italy 92.9% by GUI and 7% by AXA
Centurion Assicurazioni Italy 100% by GUI
AXA Equity & Law plc U.K. 100%
AXA Equity & Law Life U.K. 100% by SLPH
Assurance Society
AXA Insurance U.K. 100% owned by SLPH
AXA Global Risks U.K. 51% owned by AXA Global
Risks (France) and 49% by
AXA Courtage IARD
Sun Life and Provincial U.K. 71.6% by AXA and AXA
Holdings (SLPH) Equity & Law Plc
Sun Life Corporation Plc U.K. 100% by AXA Sun Life Holding
Sun Life Assurance U.K. 100% by AXA Sun Life Holding
UAP Provincial Insurance U.K. 100% by SLPH
English & Scottish U.K. 100% by AXA UK
Servco U.K. 100% by AXA Sun Life Holding
AXA Sun Life U.K. 100% by AXA Sun Life Holding
AXA Leven The Nether- 100% by AXA Equity & Law Life
lands Assurance Society
UAP Nieuw Rotterdam The Nether- 51% by Royale Belge, 38.9% by
Holding BV lands Gelderland BV and 4.1% by
AXA
UNIROBE Groep BV The Nether- 100% by UAP Nieuw Rotterdam
lands Holding BV
UAP Nieuw Rotterdam Verzkerigen The Nether- 100% by UAP Nieuw Rotterdam
lands Holding BV
UAP Nieuw Rotterdam Schade The Nether- 100% by UAP Nieuw Rotterdam
lands Verzekerigen
UAP Nieuw Rotterdam Leven The Nether- 100% by UAP Nieuw Rotterdam
lands Verzekerigen
UAP Nieuw Rotterdam Zorg The Nether- 100% by UAP Nieuw Rotterdam
lands Schade
Societe Generale d'Assistance The Nether- 51% by UAP Incendie-Accidents,
lands 29% by UAP Vie and 20% by
AXA-UAP
Gelderland BV The Nether- 100% by UAP Vie
lands
Royale Belge International The Nether- 100% by Royale Belge
lands Investissements
Vinci BV The Nether- 94.8% by AXA and 5.2% by
lands Parcolvi
AXA Portugal Companhia de Portugal 43.1% by different companies
Serguros SA of the AXA Group
AXA Portugal Companhia de Portugal 95.1% by UAP Vie and 7.5% UAP
Serguros de Vida SA International
Union UAP Switzerland 99.9% by UAP International
Union UAP Vie Switzerland 95% by UAP International
AXA Oyak Hayat Sigorta Turkey 60% owned by AXA
Oyak Sigorta Turkey 11% owned by AXA
Al Amane Assurances Morocco 52% by UAP International
AXA Canada Inc. Canada 100%
AXA Boreal Insurance Inc. Canada 100% owned by Gestion Fracapar
Inc
AXA Assurances Inc Canada 100% owned by AXA Canada Inc
C-13
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
AXA Insurance Inc Canada 100% owned by AXA Canada Inc.
and AXA Assurance Inc
Anglo Canada General Insurance Canada 100% owned by AXA Canada Inc.
Cy
AXA Pacific Insurance Cy Canada 100% by AXA Boreal Insurance
Inc
AXA Boreal Assurances Canada 100% by AXA Boreal Insurance
Agricoles Inc Inc
AXA Life Insurance Japan 100%
Dongbu AXA Life Korea 50%
Insurance Co. Ltd.
Sime AXA Berhad Malaysia 30% owned by AXA and
AXA Reassurance
AXA Investment Holdings Pte Ltd Singapore 100%
AXA Insurance Singapore 100% owned by AXA Investment
Holdings Pte Ltd
AXA Insurance Hong Kong 100% owned by AXA Investment
Holdings Pte Ltd
AXA Life Insurance Hong Kong 100%
PT Asuransi AXA Indonesia Indonesia 80%
The Equitable Companies U.S.A. 58.7% of which AXA owns
Incorporated 42.0%, Financiere 45, 3.2%,
Lorfinance 6.4%, AXA Equity
& Law Life Association Society
4.1% and AXA Reassurance 3.0%
The Equitable Life Assurance U.S.A. 100% owned by The Equitable
Society of the United States Companies Incorporated
(ELAS)
National Mutual Holdings Ltd Australia 51% between AXA, 42.1%
and AXA Equity & Law Life
Assurance Society 8.9%
The National Mutual Life Australia 100% owned by National Mutual
Association of Australasia Ltd Holdings Ltd
National Mutual International Australia 100% owned by National Mutual
Pty Ltd Holdings Ltd
National Mutual (Bermuda) Ltd Australia 100% owned by National Mutual
International Pty Ltd
National Mutual Asia Ltd Australia 41% owned by National Mutual
Holdings Ltd, 20% by Datura
Ltd and 13% by National Mutual
Life Association of
Australasia
Australian Casualty & Life Ltd Australia 100% owned by National Mutual
Holdings Ltd
National Mutual Health Australia 100% owned by National Mutual
Insurance Pty Ltd Holdings Ltd
C-14
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
AXA Reassurance France 100% owned by AXA, AXA
Assurances Iard and AXA Global
Risks
AXA Re Finance France 79% owned by AXA Reassurance
AXA Cessions France 100%
AXA Re Asia Singapore 100% owned by AXA Reassurance
AXA Re U.K. Plc U.K. 100% owned by AXA Re U.K.
Holding
AXA Re U.K. Holding U.K. 100% owned by AXA Reassurance
AXA Re U.S.A. U.S.A. 100% owned by AXA America
AXA America U.S.A. 100% owned by AXA Reassurance
AXA Space U.S.A. 80% owned by AXA America
AXA Re Life U.S.A. 100% owned by AXA America
C.G.R.M. Monaco 100% owned by AXA Reassurance
C-15
<PAGE>
AXA FINANCIAL BUSINESS
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
Compagnie Financiere de Paris France 97.2% (100% with Mutuals)
(C.F.P.)
AXA Banque France 98.7% owned by C.F.P.
AXA Credit France 65% owned by C.F.P.
AXA Gestion Interessement France 100% owned by AXA Investment
Managers
Sofapi France 100% owned by C.F.P.
Soffim France 100% owned by C.F.P.
Societe de Placements France 98.8% with Mutuals
Selectionnes S.P.S.
Presence et Initiative France 100% with Mutuals
Vamopar France 100% owned by Societe Beaujon
Financiere Mermoz France 100%
AXA Investment Managers France 100% by some AXA Group
companies
AXA Asset Management France 100% owned by AXA Investment
Partenaires Managers
AXA Investment Managers Paris France 100% owned by AXA Investment
Managers
AXA Asset Management France 99.6% owned by AXA Investment
Distribution Managers
UAP Gestione Financiere France 99.9 by AXA
Assurinvestissements France 50% by UAP Vie, 30% UAP
Collectives, 20% UAP
Incendie-Accidents
Banque Worms France 51% by CFP and 49% by
three UAP insurance companies
Colonia Bausbykasse Germany 97.8% by AXA-CKAG
Banque Ippa Belgium 99.9% by Royale Belge
Banque Bruxelles Lambert Belgium 9.3% by Royale Belge, 3.1%
Royale Belge 1994, 0.2% by
AXA Belgium
AXA Equity & Law Home Loans U.K. 100% owned by AXA Equity & Law
Plc
AXA Equity & Law Commercial U.K. 100% owned by AXA Equity & Law
Loans Plc Loans
Sun Life Asset Management U.K. 66.7% owned by SLPH and 33.4%
by AXA Asset Management Ltd.
C-16
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
Alliance Capital Management U.S.A. 57.9% held by ELAS
Donaldson Lufkin & Jenrette U.S.A. 76.2% owned by Equitable
Holdings LLC and ELAS
National Mutual Funds Australia 100% owned by National
Management (Global) Ltd Mutual Holdings Ltd
National Mutual Funds USA 100% by National Mutual Funds
Management North America Management (Global) Ltd.
Holding Inc.
Cogefin Luxembourg 100% owned by AXA Belgium
ORIA France 100% owned by AXA Millesimes
AXA Oeuvres d'Art France 100% by Mutuals
AXA Cantenac Brown France 100%
AXA Suduiraut France 99.6% owned by AXA and
Societe Beaujon
C-17
<PAGE>
AXA REAL ESTATE BUSINESS
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
Prebail France 100% owned by AXA Immobilier
Axamur France 100% by different companies
and Mutuals
Parimmo France 100% by different companies
and Mutuals
S.G.C.I. France 100% by different companies
and Mutuals
Transaxim France 100% owned by S.G.C.I. and
C.P.P.
Compagnie Parisienne de France 100% owned by S.G.C.I.
Participations (C.P.P.)
Monte Scopeto France 100% owned by C.P.P.
Matipierre France 100% by different companies
Securimo France 87.12% by different companies
and Mutuals
Paris Orleans France 100% by different companies
AXA Courtage Iard
Colisee Bureaux France 100% by different companies
and Mutuals
Colisee Premiere France 100% by different companies
and Mutuals
Colisee Laffitte France 100% by Colisee Bureaux
Fonciere Carnot Laforge France 100% by Colisee Premiere
Parc Camoin France 100% by Colisee Premiere
Delta Point du Jour France 100% owned by Matipierre
Paroi Nord de l'Arche France 100% owned by Matipierre
Falival France 100% owned by AXA Reassurance
Compagnie du Gaz d'Avignon France 100% owned by AXA Assurances
Iard
Ahorro Familiar France 44% owned by AXA Assurances
Iard, 1% by AXA Aurora Polar
and 1% by AXA Seguros
Fonciere du Val d'Oise France 100% owned by C.P.P.
Sodarec France 100% owned by C.P.P.
C-18
<PAGE>
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
Centrexpo France 99.3% owned by C.P.P.
Fonciere de la Ville du Bois France 99.6% owned by Centrexpo
Colisee Seine France 100% owned by different
companies
Translot France 100% owned by SGCI
Colisee Alpha France 100% owned by Colisee Bureaux
Colisee Silly France 100% owned by Colisee Bureaux
S.N.C. Dumont d'Urville France 100% owned by Colisee Premiere
Colisee Federation France 100% by SGCI
Colisee Saint Georges France 100% by SGCI
Drouot Industrie France 50% by SGCI and 50% by Axamur
Colisee Vauban France 99.6% by Matipierre
Fonciere Colisee France 100% by Matipierre and other
companies of the AXA Group
AXA Pierre S.C.I. France 97.6% owned by different
companies and Mutuals
AXA Millesimes France 85.4% owned by AXA and the
Mutuals
Chateau Suduirault France 100% owned by AXA Millesimes
Diznoko Hungary 95% owned by AXA Millesimes
Compagnie Fonciere Matignon France 100% by different companies
and Mutuals
Fidei France 20.7% owned by C.F.P. and
10.8% by Axamur
Fonciere Saint Sebastien France 99.9% by UAP Vie
Fonciere Vendome France 91% by different companies of
the Group
La Holding Vendome France 99.9% by AXA Global Risks
10, boulevard Haussmann France 69% by La Fonciere Vendome and
31% by AXA Conseil Iard
37-39 Le Peletier France 100% by AXA Courage Iard
Ugici France 100% by different companies of
the AXA Group of which
93.1% by UAP Vie
Ugicomi France 100% by different companies of
the AXA Group of which
63.8% by UAP Vie
Ugif France 100% by different companies of
the AXA Group of which
59.6% by UAP Vie and 32.6%
by UAP Collectives
Ugil France 93.9% by different companies
of the AXA Group of which
65.8% by UAP Vie
Ugipar France 100% by different companies
of the AXA Group of which
39.4% by UAP Vie, 35.4% by AXA
Courtage Iard and 20.8% by UAP
Collectives
AXA Immobiller France 100% by AXA
Quinta do Noval Vinhos S.A. Portugal 99.6% owned by AXA Millesimes
C-19
<PAGE>
OTHER AXA BUSINESS
COMPANY COUNTRY VOTING POWER
- ------- ------- ------------
A.N.F. France 95.4% owned by Finaxa
Lucia France 20.6% owned by AXA Assurances
Iard and 8.6% by Mutuals
Schneider S.A. France 10.4%
C-20
<PAGE>
ORGANIZATION CHART OF EQUITABLE'S AFFILIATES
NOTES
-----
1. The year of formation or acquisition and state or country of incorporation
of each affiliate is shown.
2. The chart omits certain relatively inactive special purpose real estate
subsidiaries, partnerships, and joint ventures formed to operate or
develop a single real estate property or a group of related properties,
and certain inactive name-holding corporations.
3. All ownership interests on the chart are 100% common stock ownership
except: (a) The Equitable Companies Incorporated's 41.8% interest in
Donaldson, Lufkin & Jenrette, Inc. and Equitable Holdings, LLC's
34.4% interest in same; (b) as noted for certain partnership interests; (c)
Equitable Life's ACMC, Inc.'s and Equitable Capital Management
Corporation's limited partnership interests in Alliance Capital Management
L.P.; and (d) as noted for certain subsidiaries of Alliance Capital
Management Corp. of Delaware, Inc.
4. The following entities are not included in this chart because, while they
have an affiliation with The Equitable, their relationship is not the
ongoing equity-based form of control and ownership that is characteristic
of the affiliations on the chart, and, in the case of the first two
entities, they are under the direction of at least a majority of "outside"
trustees:
The Hudson River Trust
EQ Advisors Trust
Separate Accounts
5. This chart was last revised on March 15, 1999.
C-21
<PAGE>
Item 27. Number of Contractowners
Currently, there are no holders of the contracts to be offered.
Item 28. Indemnification
Indemnification of Principal Underwriters
To the extent permitted by law of the State of Colorado and subject to
all applicable requirements thereof, Equitable Distributors, Inc. and EQ
Financial Consultants, Inc. have undertaken to indemnify each of their directors
and officers who is made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact the director or
officer, or his or her testator or intestate, is or was a director or officer of
Equitable Distributors, Inc. or EQ Financial Consultants, Inc.
Undertaking
Insofar as indemnification for liability arising under the Securities
Act of 1933 ("Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Item 29. Principal Underwriters
(a) Equitable Distributors, Inc., and EQ Financial Consultants, Inc.,
both indirect wholly owned subsidiaries of Equitable, are the proposed principal
underwriters for Separate Account VA. The principal business address of both
companies is 1290 Avenue of the Americas, New York, NY 10104. The proposed
principal underwriters, Equitable Distributors, Inc., and EQ Financial
Consultants, Inc. are not currently distributing securities of the Registrant.
(b) Set forth below is certain information regarding the directors and
principal officers of Equitable Distributors, Inc. and EQ Financial Consultants,
Inc. The business address of the persons whose names are preceded by an asterisk
is 1290 Avenue of the Americas, New York, NY 10104.
C-22
<PAGE>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH UNDERWRITER
BUSINESS ADDRESS (EQUITABLE DISTRIBUTORS, INC.)
- ---------------- ----------------------
*Jose S. Suquet Chairman of the Board and Director
James A. Shepherdson, III Co-Chief Executive Officer, Co-President,
660 Newport Center Drive Managing Director, and Director
Suite 1200
Newport Beach, CA 92660
Greg Brakovich Co-Chief Executive Officer, Co-President,
660 Newport Center Drive Managing Director, and Director
Suite 1200
Newport Beach, CA 92660
Edward J. Hayes Director
200 Plaza Drive
Secaucus, NJ 07096-1583
*Charles Wilder Director
Hunter Allen Senior Vice President
660 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
Michael Dougherty Senior Vice President
660 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
Elizabeth Forget Senior Vice President
660 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
Jennifer Hall Senior Vice President
660 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
Al Haworth Senior Vice President
660 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
David Hughes Senior Vice President
660 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
Stuart Hutchins Senior Vice President
660 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
Ken Jaffe Senior Vice President
660 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
Michael McDaniel Senior Vice President
660 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
*Mark A. Silberman Vice President and Chief
Financial Officer
*Norman J. Abrams Vice President and Counsel
Debora Buffington Vice President and Chief Compliance
660 Newport Center Drive Officer
Newport Beach, CA 92660
*Raymond T. Barry Vice President
Mark Brandengerber Vice President
660 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
Michelle O'Haren Vice President
660 Newport Center Drive
Suite 1200
Newport Beach, CA 92660
*Ronald R. Quist Treasurer
*Janet Hannon Secretary
*Linda Galasso Assistant Secretary
C-23
<PAGE>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH UNDERWRITER
BUSINESS ADDRESS (EQ FINANCIAL CONSULTANTS)
- ---------------- --------------------------
*Michael S. Martin Chairman of the Board and Director
*Richard J. Matteis Vice Chairman of the Board and Director
*Michael F. McNelis President, Chief Operating Officer
and Director
*Martin J. Telles Executive Vice President and Chief
Marketing Officer
*Derry E. Bishop Executive Vice President and Director
*Harvey E. Blitz Executive Vice President and Director
*Michael J. Laughlin Director
*Richard V. Silver Director
*Mark R. Wutt Director
*William J. Green Executive Vice President
Edward J. Hayes Executive Vice President
200 Plaza Drive
Secaucus, NJ 07096
*Craig A. Junkins Executive Vice President
*Peter D. Noris Executive Vice President
*Mark A. Silberman Senior Vice President and Chief
Financial Officer
Stephen T. Burnthall Senior Vice President
6435 Shiloh Road
Suite A
Alpharetta, GA 30005
Richard Magaldi Senior Vice President
6435 Shiloh Road
Suite A
Alpharetta, GA 30005
*Theresa A. Nurge-Alws Senior Vice President
*Donna M. Dazzo First Vice President
*Robin K. Murray First Vice President
*Mary P. Breen Vice President and Counsel
*Michael Brzozowski Vice President and Compliance Director
*Marie D. Godolsky Vice President and Controller
*Janet E. Hannon Secretary
*Linda J. Galasso Assistant Secretary
(c) Not Applicable
Item 30. Location of Accounts and Records
C-24
<PAGE>
The records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder will be
maintained by EOC at 200 Plaza Drive, Secaucus, NJ 07096. The contract files
will be kept at Vantage Computer System, Inc., 301 W. 11th Street, Kansas City,
MO 64105.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
The Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more
than 16 months old for so long as payments under the variable
annuity contracts may be accepted;
(b) to include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant can
check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included
in the prospectus that the applicant can remove to send for a
Statement of Additional Information;
(c) to deliver any Statement of Additional Information and any
financial statements required to be made available under this
Form promptly upon written or oral request.
EOC represents that the fees and charges deducted under the Contracts
described in this Registration Statement, in the aggregate, in each case, are
reasonable in relation to the services rendered, the expenses to be incurred,
and the risks assumed by EOC under the respective Contracts. EOC bases its
representation on its assessment of all of the facts and circumstances,
including such relevant factors as: the nature and extent of such services,
expenses and risks, the need for EOC to earn a profit, the degree to which the
Contracts include innovative features, and regulatory standards for the grant
of exemptive relief under the Investment Company Act of 1940 used prior to
October 1996, including the range of industry practice. This representation
applies to all Contracts sold pursuant to this Registration Statement,
including those sold on the terms specifically described in the prospectuses
contained herein, or any variations therein, based on supplements, endorsements,
data pages, or riders to any Contracts or prospectus, or otherwise.
C-25
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant has caused this Registration Statement or amendment
thereto to be signed on its behalf, in the City and State of New York, on this
9th day of April 1999.
SEPARATE ACCOUNT VA OF
THE EQUITABLE OF COLORADO, INC.
(Registrant)
By: The Equitable of Colorado, Inc.
(Depositor)
By: /s/ Naomi J. Weinstein
---------------------------------
Naomi J. Weinstein
Vice President,
The Equitable of Colorado, Inc.
C-26
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company
Act of 1940, the Depositor, has caused this Registration Statement or amendement
thereto be signed on its behalf, in the City and State of New York, on this
9th day of April 1999.
THE EQUITABLE OF COLORADO, INC.
(Depositor)
By: /s/ Naomi J. Weinstein
---------------------------------
Naomi J. Weinstein
Vice President,
The Equitable of Colorado, Inc.
As required by the Securities Act of 1933, this Registration Statement
or amendment thereto has been signed by the following persons in the capacities
and on the date indicated:
PRINCIPAL EXECUTIVE OFFICER:
Samuel B. Shlesinger President, Chief Operating Officer
and Director
PRINCIPAL FINANCIAL OFFICER:
/s/ Alvin H. Fenichel
- ---------------------
Alvin H. Fenichel Vice Chairman of the Board
April 9, 1999 Chief Financial Officer and Director
PRINCIPAL ACCOUNTING OFFICER:
Allen Zabusky Senior Vice President and Controller
DIRECTORS:
Michel Beaulieu Michael S. Martin
Harvey E. Blitz Samuel B. Schlesinger
By: /s/ Naomi J. Weinstein
------------------------
Naomi J. Weinstein
Attorney-in-Fact
April 9, 1999
C-27
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. TAG VALUE
- ----------- ---------
4(a) Form of Contract EX-99.4a
9 Opinion and Consent of Edwards & Angell, LLP EX-99.9
10(a) Consent of PricewaterhouseCoopers LLP EX-99.10a
C-28
OWNER: [John Doe]
ANNUITANT: [John Doe]
CONTRACT NUMBER: [00000]
CONTRACT DATE: [January 15, 1999]
CONTRACT
Processing Office: Income Management Group, P.O. Box 1547,
Secaucus, New Jersey 07096-1547
This is the Contract which is issued under the terms of the Contract defined in
Section 1.09. This Contract is issued in return for the application for coverage
under the Contract and the Contributions to be made to us under the Contract.
In this Contract, "we", "our" and "us" mean Equitable of Colorado, Inc. "You"
and "your" mean the Owner.
We will provide the benefits and other rights pursuant to the terms of this
Contract.
TEN DAYS TO CANCEL - Not later than ten days after you receive this Contract,
you may return it to us. We will cancel it and refund any Contribution made to
us, plus or minus any investment gain or loss which applies to the Investment
Funds of the Separate Account from the date such Contribution was allocated to
such Fund to the date of cancellation.
EQUITABLE OF COLORADO, INC.
Samuel B. Shlesinger, Linda Galasso,
President and Chief Executive Officer Secretary
THE PORTION OF ANNUITY ACCOUNT VALUE HELD IN THE SEPARATE ACCOUNT MAY INCREASE
OR DECREASE IN VALUE (SEE PART II OF THIS CONTRACT).
No. EOC99APICB-INDV Page 1
<PAGE>
TABLE OF CONTENTS
Page
Part I - DEFINITIONS 3
Part II - INVESTMENT OPTIONS 5
Part III - CONTRIBUTIONS AND ALLOCATIONS 7
Part IV - TRANSFERS AMONG INVESTMENT OPTIONS 8
Part V - WITHDRAWALS AND TERMINATION 8
Part VI - DEATH BENEFITS 9
Part VII - ANNUITY BENEFITS 10
Part VIII - CHARGES 12
Part IX - GENERAL PROVISIONS 13
TABLE OF GUARANTEED ANNUITY PAYMENTS 15
No. EOC99APICB-INDV Page 2
<PAGE>
PART I - DEFINITIONS
SECTION 1.01 ANNUITANT
"Annuitant" means the individual shown as such in the Data pages, or any
successor Annuitant.
SECTION 1.02 ANNUITY ACCOUNT VALUE
"Annuity Account Value" means the sum of the amounts held for you in the
Investment Options.
SECTION 1.03 ANNUITY BENEFIT
"Annuity Benefit" means a benefit payable by us as described in Part VII.
SECTION 1.04 ANNUITY COMMENCEMENT DATE
"Annuity Commencement Date" means the date on which annuity payments are to
commence as described in Section 7.03. Such date is the date shown in the Data
pages and is subject to change as described in Section 7.03.
SECTION 1.05 BUSINESS DAY
A "Business Day" is any day on which the New York Stock Exchange is open for
trading, or any other day which may be specified in the Data pages. Our Business
Day ends at 4:00 p.m., Eastern time, or such other time as we state in writing
to you.
SECTION 1.06 CASH VALUE
"Cash Value" means an amount equal to the Annuity Account Value, less any
charges that apply as described in Part VIII and any charges that may apply as
described in any applicable Endorsement(s).
SECTION 1.07 CODE
"Code" means the Internal Revenue Code of [1986], as amended at any time, or any
corresponding provisions of prior or subsequent United States revenue laws.
SECTION 1.08 CONTRACT
"Contract" means this Contract including the Data pages and any Endorsement(s).
SECTION 1.09 CONTRACT DATE
"Contract Date" means the earlier of (a) the effective date of the Contract and
(b) the effective date of a prior Contract. Such date is shown in the Data
pages.
SECTION 1.10 CONTRACT YEAR
"Contract Year" means the twelve month period starting on (i) the Contract Date
and (ii) each anniversary of the Contract Date, unless we agree to another
period.
SECTION 1.11 CONTRIBUTION
No. EOC99APICB-INDV Page 3
<PAGE>
"Contribution" means a payment made to us under the Contract. See Section 3.01.
SECTION 1.12 EMPLOYER
"Employer" means, if applicable, an employer as defined in an endorsement
hereto.
SECTION 1.13 INVESTMENT FUND
"Investment Fund" means a sub-fund of a Separate Account. An Investment Fund may
invest its assets in a separate class (or series) or shares of a specified trust
or investment company where each class (or series) represents a separate
portfolio in such trust or investment company.
SECTION 1.14 INVESTMENT OPTION
"Investment Option" means a Separate Account or an Investment Fund of a Separate
Account.
SECTION 1.15 OWNER
"Owner" means the person or entity shown as such in the Data pages, or any
successor owner.
SECTION 1.16 PLAN
"Plan" means, if applicable, the annuity program sponsored by the Employer and
as may be defined in an endorsement hereto.
SECTION 1.17 PRIOR CONTRACT
"Prior Contract" means another contract or Contract issued by us and from which
the Owner and we have agreed to transfer amounts to this Contract.
SECTION 1.18 PROCESSING DATE
"Processing Date" means the day(s) we deduct charges from the Annuity Account
Value. The Data pages show how often a Processing Date will occur.
SECTION 1.19 PROCESSING OFFICE
"Processing Office" means the Equitable of Colorado processing office shown on
the cover page of this Contract, or such other location we may state upon
written notice to you.
SECTION 1.20 SEPARATE ACCOUNT
"Separate Account" means any of the Separate Accounts (except our Separate
Account No. 46) described or referred to in Sections 2.01 and 2.04.
No. EOC99APICB-INDV Page 4
<PAGE>
SECTION 1.21 TRANSACTION DATE
The Transaction Date is the Business Day we receive at the Processing Office a
Contribution or a transaction request providing the information we need.
Transaction requests must be in a form acceptable to us.
PART II - INVESTMENT OPTIONS
SECTION 2.01 SEPARATE ACCOUNT
We have established the Separate Account(s) and maintain such Account(s) in
accordance with the laws of the State of Colorado. Income, realized and
unrealized gains and losses from the assets of the Separate Account(s) are
credited to or charged against it without regard to our other income, gains or
losses. Assets are placed in the Separate Account(s) to support this Contract
and other variable annuity contracts and Contracts. Assets may be placed in the
Separate Account(s) for other purposes, but not to support contracts or policies
other than variable annuities and variable life insurance.
The Data pages set forth the Separate Account(s). A Separate Account may be
subdivided into Investment Funds.
The assets of a Separate Account are our property. The portion of such assets
equal to the reserves and other contract liabilities will not be chargeable with
liabilities which arise out of any other business we conduct. We may transfer
assets of a Separate Account in excess of the reserves and other liabilities
with respect to such Account to another Separate Account or to our general
account.
We may, at our discretion, invest Separate Account assets in any investment
permitted by applicable law. We may rely conclusively on the opinion of counsel
(including counsel in our employ) as to what investments we may make as law
permits.
SECTION 2.02 SEPARATE ACCOUNT ACCUMULATION UNITS AND UNIT VALUES
The amount you have in an Investment Fund at any time is equal to the number of
Accumulation Units you have in that Fund multiplied by the Fund's Accumulation
Unit Value at that time. "Accumulation Unit" means a unit which is purchased in
a Separate Account. "Accumulation Unit Value" means the dollar value of each
Accumulation unit in a Separate Account on a given date. (If Investment Funds
apply as described in Section 2.01, then the terms of this Section 2.02 apply
separately to each Fund, unless otherwise stated).
Amounts allocated or transferred to a Separate Account are used to purchase
Accumulation Units of that Account. Units are redeemed when amounts are
deducted, transferred or withdrawn.
The number of Accumulation Units you have in a Separate Account at any time is
equal to the number of Accumulation Units purchased minus the number of Units
redeemed in that Account up to that time. The number of Accumulation Units
purchased or redeemed in a transaction is equal to the dollar amount of the
transaction divided by the Account's Accumulation Unit Value for that
Transaction Date.
We determine Accumulation Unit Values for each Separate Account for each
Valuation Period. A "Valuation Period" is each Business Day together with any
consecutive preceding non-business days. For example, for each Monday which is a
Business Day, the preceding Saturday and Sunday will be included to equal a
three-day Valuation Period.
Unless the following paragraph applies, the Accumulation Unit Value for a
Separate Account for any Valuation Period is equal to the Accumulation Unit
Value for the immediately preceding Valuation Period multiplied by the ratio of
values "(i)" and "(ii)". Value "(i)" is the value of the Separate Account at the
close of business at the
No. EOC99APICB-INDV Page 5
<PAGE>
end of the current Valuation Period, before any amounts are allocated to or
withdrawn from the Separate Account in that Period. Value "(ii)" is the value of
the Separate Account at the close of business at the end of the preceding
Valuation Period, after all allocations and withdrawals were made for that
Period. For this purpose, "value of the Separate Account" means the market value
or, where there is no readily available market, the fair value of the assets
allocated to the Separate Account, as determined in accordance with accepted
accounting practices, and applicable laws and regulations.
To the extent the Separate Account invests in Investment Funds, and the assets
of the Funds are invested in a class or series of shares of a specified trust or
investment company, the Accumulation Unit Value of an Investment Fund for any
Valuation Period is equal to the Accumulation Unit Value for that Fund on the
immediately preceding Valuation Period multiplied by the Net Investment Factor
for that Fund for the current Valuation Period. The Net Investment Factor for a
Valuation Period is (a) divided by (b) minus (c), where
(a) is the value of the Investment Fund's shares of the related
portfolio of the specified trust or investment company at the end
of the Valuation Period (before taking into account any amounts
allocated to or withdrawn from the Investment Fund for the
Valuation Period and after deduction of investment advisory fees
and direct operating expenses of the specified trust or investment
company; for this purpose, we use the share value reported to us
by the specified trust or investment company);
(b) is the value of the Investment Fund's shares of the related
portfolio of the specified trust or investment company at the end
of the preceding Valuation Period (taking into account any amounts
allocated or withdrawn for that Valuation Period);
(c) is the daily Separate Account charges (see Section 8.04) for the
expenses and risks of this Contract, times the number of calendar
days in the Valuation Period, plus any charge for taxes or amounts
set aside as a reserve for taxes.
SECTION 2.03 AVAILABILITY OF INVESTMENT OPTIONS
Section 3.01 describes how Contributions are allocated among Investment Options
based on your election.
The Data pages list which Options are available as of the Contract Date.
SECTION 2.04 CHANGES WITH RESPECT TO SEPARATE ACCOUNT
In addition to the right reserved pursuant to subsection (b) of Section 2.03, we
have the right, subject to compliance with applicable law, including approval of
Contract owners if required:
(a) to add Investment Funds (or sub-funds of Investment Funds) to, or
to remove Investment Funds (or sub-funds) from, the Separate
Account, or to add other separate accounts;
(b) to combine any two or more Investment Funds or sub-funds thereof;
(c) to transfer the assets we determine to be the share of the class
of contracts to which this Contract belongs from any Investment
Fund to another Investment Fund;
(d) to operate the Separate Account or any Investment Fund 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 the Separate Account;
(e) to operate the Separate Account or any Investment Fund as a unit
investment trust under the Investment Company Act of 1940;
No. EOC99APICB-INDV Page 6
<PAGE>
(f) to deregister the Separate Account under the Investment Company
Act of 1940, provided that such action conforms with the
requirements of applicable law;
(g) to restrict or eliminate any voting rights as to the Separate
Account;
(h) to cause one or more Investment Funds to invest some or all of
their assets in one or more other trusts or investment companies.
If the exercise of these rights results in a material change in the underlying
investment of a Separate Account, you will be notified of such exercise, as
required by law.
A Separate Account or Investment Fund which may be added by us as described
above may be one with respect to which (i) there may be periods during which
Contributions may be restricted pursuant to the maturity terms of such Account
or Fund, (ii) amounts therein may be automatically liquidated pursuant to the
investment policy of the Account, and (iii) investments therein may mature. We
will have the right to reallocate amounts arising from liquidation or maturity
according to your allocation instructions then in effect unless you specify
other instructions with respect to such amounts. If no such allocation
instructions have been made, the reallocation will be made to a designated
Investment Option, or to the next established Account or Fund of the same type
as described in this paragraph, if applicable, as specified in the Data pages.
PART III - CONTRIBUTIONS AND ALLOCATIONS
SECTION 3.01 CONTRIBUTIONS, ALLOCATIONS
You elect which Investment Option will be available under the Contract subject
to the terms of Section 2.03. Once this election is made, you may allocate
Contributions to, or transfer among, only these Options. You may add or subtract
Options by sending us a written request, but we have the right to decline your
request.
You also elect how to allocate Contributions among the Options chosen. If you
are not the Annuitant, you may delegate to the Annuitant authority to allocate
Contributions. You need not allocate Contributions to each Option available. You
may change the allocation election at any time by sending us the proper form.
Allocation percentages must be in whole numbers (no fractions) and must equal
100%.
Each Contribution is allocated (after deduction of any charges that may apply)
in accordance with the allocation election in effect on the Transaction Date.
Contributions made to a Separate Account purchase Accumulation Units in that
Account, using the Accumulation Unit Value for that Transaction Date.
SECTION 3.02 LIMITS ON CONTRIBUTIONS
We have the right not to accept any Contribution which is less than the amount
shown in the Data pages. The Data pages indicate other minimum and maximum
Contribution requirements which may apply. We also have the right, upon advance
notice to you, to:
(a) change such requirements to apply to Contributions made after the date of
such change, and
(b) discontinue acceptance of Contributions under this Contract with respect to
all Owners or with respect to all Owners to whom the same type of Contract
applies.
No. EOC99APICB-INDV Page 7
<PAGE>
PART IV - TRANSFERS AMONG INVESTMENT OPTIONS
SECTION 4.01 TRANSFER REQUESTS
You may request to transfer all or part of the amount held in an Investment
Option to one or more of the other Options. The request must be in a form we
accept. All transfers will be made on the Transaction Date. Transfers are
subject to the terms of Section 4.02 and to our rules in effect at the time of
transfer. With respect to a Separate Account, the transfers will be made at the
Accumulation Unit Value for that Transaction Date.
SECTION 4.02 TRANSFER RULES
The transfer rules which apply are described in the Data pages. A transfer
request will not be accepted if it involves less than the minimum amount, if
any, stated in the Data pages (unless the Annuity Account Value is less than
such amount). We have the right to change our transfer rules. Any change will be
made upon advance notice to you.
The Investment Funds may consist of funds which are classified as "Type A"
Investment Options or "Type B" Investment Options or any other type which may be
specified in the Data pages, as we designate in our discretion for purposes of
the transfer rules described in the Data pages. The Data pages specify whether
such Investment Options are designated Type A or Type B or another type as well
as the minimum or maximum limits on transfers which apply.
PART V - WITHDRAWALS AND TERMINATION
SECTION 5.01 WITHDRAWALS
Unless otherwise stated in the Data pages, you may request, pursuant to our
procedures then in effect, a withdrawal from the Investment Options before the
Annuity Commencement Date and while the Annuitant is alive. The request must be
in a form we accept.
On the Transaction Date, we will pay the amount of the withdrawal requested or,
if less, the Cash Value. The amount to be paid plus any Withdrawal Charge which
applies (see Section 8.01) will be withdrawn on a pro-rata basis from the
amounts held for you in the Investment Options, unless you elect otherwise and
unless otherwise stated in the Data pages.
We will not accept a withdrawal request if it involves less than the minimum
amount, if any, stated in the Data pages. Further conditions or restrictions may
apply if stated in the Data pages or in an Endorsement hereto.
SECTION 5.02 TERMINATION
This Contract will terminate if one or more of the following events occurs,
unless otherwise specified in the Data pages:
(a) If a withdrawal made under Section 5.01 would result in an Annuity Account
Value of an amount less than the minimum amount stated in the Data pages, we
will so advise you and have the right to pay you such Value. In that case this
Contract will be terminated.
(b) Before the Annuity Commencement Date, we have the right to pay the Cash
Value and terminate this Contract if no Contributions are made during the last
three Contract Years, and the Annuity Account Value is less than the amount
described in item (a) above.
No. EOC99APICB-INDV Page 8
<PAGE>
(C) We also have the right to terminate this Contract if no Contributions have
been made within 120 days of the Contract Date
PART VI - DEATH BENEFITS
SECTION 6.01 DEATH BENEFIT
Upon receipt of due proof that the Annuitant has died before the Annuity
Commencement Date, we will pay a death benefit to the beneficiary named under
Section 6.02. Payment may be subject to the terms of Section 6.02 and any
special rules which may apply as described in any Endorsement hereto.
The amount of the death benefit is described in the Data pages.
The death benefit will be paid as an Annuity Benefit or in a single sum, as
described in Section 6.02.
SECTION 6.02 BENEFICIARY
You give us the name of the beneficiary who is to receive any death benefit
payable on the Annuitant's death. You may change the beneficiary from time to
time during the Annuitant's lifetime and while coverage under the Contract is in
force. Any such change must be made in writing in a form we accept. A change
will, upon receipt at the Processing Office, take effect as of the date the
written form is executed, whether or not you are living on the date of receipt.
We will not be liable as to any payments we made before we receive any such
change.
You may name one or more persons to be primary beneficiary on the Annuitant's
death and one or more other persons to be successor beneficiary if the primary
beneficiary dies before the Annuitant. Unless you direct otherwise, if you have
named two or more persons as beneficiary, the beneficiary will be the named
person or persons who survive the Annuitant and payments will be made to such
persons in equal shares or to the survivor.
Any part of a death benefit payable as described in Section 6.01 for which there
is no named beneficiary living at the Annuitant's death will be payable in a
single sum to the Annuitant's surviving children. The payments will be made in
equal shares, or should none survive or should there be none, then to the
Annuitant's estate.
If you so elect in writing, any amount that would otherwise be payable to a
beneficiary in a single sum may be applied to provide an Annuity Benefit, on the
form of annuity elected by you, subject to our rules then in effect. If at the
Annuitant's death there is no election in effect, the beneficiary may make such
an election. In the absence of any election by either you or the beneficiary, we
will pay the death benefit in a single sum.
Any naming of a beneficiary is subject to the terms of the Plan, if one applies,
including any terms requiring spousal consent.
No. EOC99APICB-INDV Page 9
<PAGE>
PART VII - ANNUITY BENEFITS
SECTION 7.01 ANNUITY BENEFIT
Payments under an Annuity Benefit will be made monthly. You may elect instead to
have the Annuity Benefit paid at other intervals, such as every three months,
six months, or twelve months, instead of monthly, subject to our rules at the
time of your election or as otherwise stated in the Data pages or any
endorsement hereto. This election may be made at the time the Annuity Benefit
form as described in Section 7.02 is elected. In that event, all references in
this Contract to monthly payments will, with respect to the Annuity Benefit to
which the election applies, be deemed to mean payments at the frequency elected.
SECTION 7.02 ELECTION OF ANNUITY BENEFITS
As of the Annuity Commencement Date, provided the Annuitant is then living, the
Annuity Account Value will be applied to provide the Normal Form of Annuity
Benefit (described below). However, you may instead elect (i) to have the Cash
Value paid in a single sum, (ii) to apply the Annuity Account Value to provide
an Annuity Benefit of any form offered by us or one of our subsidiary life
insurance companies, or (iii) to apply the Cash Value to provide any other form
of benefit payment we offer, subject to our rules then in effect and applicable
laws and regulations. At the time an Annuity Benefit is purchased, we will issue
a supplementary contract which reflects the Annuity Benefit terms.
We will provide notice and election forms to you not more than six months before
the Annuity Commencement Date.
We will have the right to require you to furnish any information we need to
provide an Annuity Benefit. We will be fully protected in relying on such
information and need not inquire as to its accuracy or completeness.
SECTION 7.03 COMMENCEMENT OF ANNUITY BENEFITS
Before the Annuity Commencement Date, you may elect to change such Date to any
date after your election is filed (other than the 29th, 30th, or 31st of any
month). You must do this in writing. The change will not take effect until your
written election is received and accepted by us at our Processing Office.
However, no Annuity Commencement Date will be later than the first day of the
month which follows the date the Annuitant attains the "maximum maturity age"
or, if later, the tenth anniversary of the Contract Date. The current maximum
maturity age is shown in the Data pages, but may be changed by us in conformance
with applicable law.
SECTION 7.04 ANNUITY BENEFIT FORMS
The "Normal Form" of Annuity Benefit is an Annuity Benefit payable on the
Life-Period Certain Annuity Form described below, unless another Form is to
apply pursuant to the terms of the Plan, if applicable, the requirements of the
Employee Retirement Income Security Act of 1974 (ERISA), as amended, or any
other law that applies. The Data pages will state the Normal Form which applies.
We may offer other annuity forms as available from us or from one of our
affiliated or subsidiary life insurance companies. Such a form may, for example,
include the Joint and Survivor Life Annuity Form which provides monthly payments
while either of two persons upon whose lives such payments depend is living. The
monthly amount to be continued when only one of the persons is living will be
equal to a percentage, as elected, of the monthly amount that was paid while
both were living.
No. EOC99APICB-INDV Page 10
<PAGE>
The Life-Period Certain Annuity is an annuity payable during the lifetime of the
person upon whose life the payments depend, but with 10 years of payments
guaranteed (10 years certain period). That is, if the original payee dies before
the certain period has ended, payments will continue to the beneficiary named to
receive such payments for the balance of the certain period.
SECTION 7.05 AMOUNT OF ANNUITY BENEFITS
If you elect pursuant to Section 7.02 to have an Annuity Benefit paid in lieu of
the Cash Value, the amount applied to provide the Annuity Benefit will, unless
otherwise stated in the Data pages or required by applicable laws or
regulations,be the (i) Annuity Account Value if the Annuity form elected
provides payments for a person's remaining lifetime or (ii) the Cash Value if
the annuity form elected does not provide such lifetime payments.
The amount applied to provide an Annuity Benefit may be reduced by a charge for
any taxes which apply on annuity purchase payments. If we have previously
deducted charges for taxes from Contributions, we will not again deduct charges
for the same taxes before an Annuity Benefit is provided. The balance will be
used to purchase the Annuity Benefit on the basis of either (i) the Table of
Guaranteed Annuity Payments or (ii) our then current individual annuity rates,
whichever rates would provide a larger benefit with respect to the payee.
SECTION 7.06 CONDITIONS
We may require proof acceptable to us that the person on whose life a benefit
payment is based is alive when each payment is due. We will require proof of the
age of any such person on whose life an Annuity Benefit is based.
If a benefit was based on information that is later found not to be correct,
such benefit will be adjusted on the basis of the correct information. The
adjustment will be made in the number or amount of the benefit payments, or any
amount used to provide the benefit, or any combination. Overpayments by us will
be charged against future payments. Underpayments will be added to future
payments. Our liability is limited to the correct information and the actual
amounts used to provide the benefits.
If the age (or sex, if applicable as stated in the Data pages or Table of
Guaranteed Annuity Payments) of any person upon whose life an Annuity Benefit
depends has been misstated, any benefits will be those which would have been
purchased at the correct age (or sex). Any overpayments or underpayments made by
us will be charged or credited with interest at the rate shown in the Data
pages. Such interest will be deducted from or added to future payments.
If we receive acceptable proof that (i) a payee entitled to receive any payment
under the terms of this Contract is physically or mentally incompetent to
receive such payment or a minor, (ii) another person or an institution is then
maintaining or has custody of such payee, and (iii) no guardian, committee, or
other representative of the estate of such payee has been appointed, we may make
the payments to such other person or institution. In the case of a minor, the
payments will not exceed $200, or such other amount as may be shown in the Data
pages. We will have no further liability with respect to the payments so made.
If the amount to be applied hereunder is less than the minimum amount stated in
the Data pages, we may pay the amount to the payee in a single sum instead of
applying it under the annuity form elected.
No. EOC99APICB-INDV Page 11
<PAGE>
SECTION 7.07 CHANGES
We have the right, upon advance notice to you, to change at any time after the
fifth anniversary of the Contract Date and at intervals of not less than five
years, the actuarial basis used in the Tables of Guaranteed Annuity Payments.
However, no such change will apply to (a) any Annuity Benefit provided before
the change or (b) Contributions made before such change which are applied to
provide an Annuity Benefit.
PART VIII - CHARGES
SECTION 8.01 WITHDRAWAL CHARGES
The amount of the Withdrawal Charge is stated in the Data pages. We have the
right to change the Charge shown in the Data Pages with respect to future
Contributions, subject to any maximum stated in the Data pages. We will give you
notice of any change.
If specified in the Data pages, a "Free Corridor Amount" will apply as follows:
"Free Corridor Amount" means an amount equal to the percentage, stated in
the Data pages, of the Annuity Account Value, minus the total of all prior
withdrawals (and associated Withdrawal Charges) made as described in
Section 5.01 in the current Contract Year. We have the right to change the
Free Corridor Amount, but it will always be a percentage between 0% and
30% if so provided in the Data.
If the amount of a withdrawal made under Part V is more than the Free
Corridor Amount (defined above), we will (a) first withdraw from the
Investment Options, on the basis described in Section 5.01, an amount
equal to the Free Corridor Amount, and (b) then withdraw from the
Investment Options an amount equal to the excess of the amount requested
over the Free Corridor Amount, plus a Withdrawal Charge if one applies.
For purposes of this Section, amounts withdrawn up to the Free Corridor
Amount will not be deemed a withdrawal of any Contributions. We have the
right to carry forward the free Corridor Amount into a future Contract
Year, if not used in any Year, if so stated in the Data pages.
Any withdrawals in excess of the Free Corridor Amount will be deemed
withdrawals of Contributions in the reverse order in which they were made.
That is, contributions will be withdrawn on a last-in, first-out basis
unless the Data pages state that a first-in, first-out basis will apply.
In addition, the Annuitant's years of participation under the Prior Contract, if
applicable, will be included for purposes of determining the Withdrawal Charge,
if so specified in the Data pages in accordance with our rules then in effect.
If specified in the Data pages we have the right to reduce or waive the
Withdrawal Charge upon such events as stated in the Data pages. Moreover, the
Withdrawal Charge will be reduced if needed in order to comply with any
applicable state or federal law.
SECTION 8.02 ADMINISTRATIVE AND OTHER CHARGES DEDUCTED FROM ANNUITY ACCOUNT
VALUE
As of each Processing Date, we will deduct Charges related to the administration
and/or distribution of this Contract from the Annuity Account Value. Such
Charges are shown in the Data pages. If specified in the Data pages, the Charges
will be deducted in full or prorated for the Contract Year, or portion thereof,
in which the Contract Date occurs or in which the Annuity Account Value is
withdrawn or applied to provide an Annuity Benefit or death benefit. If so, the
Charges will be deducted when withdrawn or so applied.
No. EOC99APICB-INDV Page 12
<PAGE>
The amount of any such Charge will in no event exceed any maximum amount shown
in the Data pages, subject to any maximum amount permitted under any applicable
law.
We have the right to change the amount of the Charges with respect to future
Contributions. We will give you advance notice of any such change.
SECTION 8.03 TRANSFER CHARGES
We have the right to impose a charge with respect to any transfer among
Investment Options after the number of free transfers, shown in the Data pages,
made on behalf of an Annuitant. The amount of such charge will be set forth in a
notice from us to you and will in no event exceed any maximum amount stated in
the Data pages.
SECTION 8.04 DAILY SEPARATE ACCOUNT CHARGE
Assets of the Investment Funds will be subject to a daily asset charge. This
daily asset charge is for mortality risk, expenses and expense risk that we
assume, as well as for financial accounting and death benefits if specified in
the Data pages. The charge will be made pursuant to item (c) of "Net Investment
Factor" as defined in Section 2.02. Such charge will be applied after any
deductions to provide for taxes. It will be at a rate not to exceed the maximum
annual rate stated in the Data pages. We have the right to charge less on a
current basis; the actual charge to apply, for at least the first Contract Year,
is also stated in the Data pages.
SECTION 8.05 CHANGES
In addition to our right to reduce or waive charges as described in this Part
VIII, we have the right, upon advance notice to you, to increase the amount of
any charge stated in the Data pages, subject to (a) any maximum amount provided
in this Part VIII or the Data pages and (b) with respect to Withdrawal Charges
and Administrative or Other Charges deducted from the Annuity Account Value, the
application of any increase only to Contributions made after the date of the
changes.
PART IX - GENERAL PROVISIONS
SECTION 9.01 CONTRACT
This Contract is the entire contract between the parties. It will govern with
respect to our rights and obligations.
This Contract may not be changed, nor may any of our rights or rules be waived,
except in writing and by our authorized officer.
SECTION 9.02 STATUTORY COMPLIANCE
We have the right to change this Contract without the consent of any other
person in order to comply with any laws and regulations that apply. Such right
will include, but not be limited to, the right to conform this Contract to
reflect changes in the Code, in Treasury regulations or published rulings of the
Internal Revenue Service, ERISA, and in Department of Labor regulations.
The benefits and values available under this Contract will not be less than the
minimum benefits required by any state law that applies.
No. EOC99APICB-INDV Page 13
<PAGE>
SECTION 9.03 DEFERMENT
The use of proceeds to provide a payment of a death benefit and payment of any
portion of the Annuity Account Value (less any Withdrawal Charge that applies)
will be made within seven days after the Transaction Date. Payments or use of
proceeds from the Investment Funds can be deferred for any period during which
(1) the New York Stock Exchange is closed or trading is restricted, (2) sales of
securities or determination of the fair value of an Investment Fund's assets is
not reasonably practicable because of an emergency, or (3) the Securities and
Exchange Commission, by order, permits us to defer payment in order to protect
persons with interests in the Investment Funds.
SECTION 9.04 REPORTS AND NOTICES
At least once each year until the Annuity Commencement Date, we will send you a
report showing:
(a) the total number of Accumulation Units in each Separate Account or
Investment Fund;
(b) the Accumulation Unit Value;
(c) the dollar amount in each Separate Account or Investment Fund;
(d) the Cash Value; and
(e) the amount of the death benefit.
The terms which require us to send you a report as described above or any
written notice as described in any other Section will be satisfied by our
mailing any such report or notice to your last known address as shown in our
records.
All written notices sent to us will not be effective until received at the
Processing Office. Your Contract Number should be included in all
correspondence.
SECTION 9.05 ASSIGNMENTS, NONTRANSFERABILITY, NONFORFEITABILITY
No amounts payable under this Contract to a payee other than you may be assigned
by that payee unless permitted herein, nor will they be subject to the claims of
creditors or to legal process, except to the extent permitted by law. Other
restrictions may apply if stated in any endorsement hereto.
SECTION 9.06 MANNER OF PAYMENT
We will pay all amounts hereunder by check (in United States dollars) or, if so
agreed by you and us, by wire transfer. All amounts payable to you will be paid
by check payable to us (in United States dollars) or by any other method
acceptable to us.
No. EOC99APICB-INDV Page 14
<PAGE>
TABLE OF GUARANTEED ANNUITY PAYMENTS
[AMOUNT OF ANNUITY BENEFIT PAYABLE MONTHLY ON THE LIFE ANNUITY FORM WITH TEN
YEARS CERTAIN PROVIDED BY APPLICATION OF $1,000.
Monthly Income Monthly Income
Ages Males Females Age Males Females
- ---- ----- ------- --- ----- -------
60 4.12 3.70 73 5.52 4.87
61 4.20 3.76 74 5.66 4.99
62 4.29 3.83 75 5.80 5.12
63 4.38 3.90 76 5.95 5.26
64 4.48 3.98 77 6.10 5.40
65 4.58 4.06 78 6.25 5.55
66 4.68 4.14 79 6.40 5.70
67 4.79 4.23 80 6.56 5.85
68 4.90 4.32 81 6.72 6.01
69 5.02 4.42 82 6.88 6.18
70 5.14 4.52 83 7.04 6.34
71 5.26 4.63 84 7.20 6.51
72 5.39 4.75 85 7.36 6.67
The amount of income provided under an Annuity Benefit payable on the Life
Annuity form with Ten Years Certain is based on 2.5% interest and the 1983
Individual Annuity Mortality Table "a" projected with modified Scale G.
Amounts required for ages not shown in the above Table or for other annuity
forms will be calculated by us on the same actuarial basis.
If a variable annuity form is available from us and elected pursuant to Section
7.02, then the amounts required will be calculated by us based on the 1983
Individual Annuity Mortality Table "a" projected with modified Scale "G" and a
modified two year age setback and on an Assumed Base Rate of Net Investment
Return of 5.0%.]
No. EOC99APICB-INDV Page 15
EDWARDS & ANGELL, LLP
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COUNSELLORS AT LAW 90 STATE HOUSE SQUARE
HARTFORD, CT 06103-3702
since 1894 (860) 525-5065
FAX (860) 527-4198
April 9, 1999
The Equitable of Colorado, Inc.
370 17th Street, Suite 4950
Denver, Colorado 80202
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of a Registration
Statement under the Securities Act of 1933 and under the Investment Company Act
of 1940 on Form N-4, File No. 333-72381 ("Registration Statement") of Separate
Account VA of The Equitable of Colorado, Inc. ("EOC"). The Registration
Statement covers an indefinite number of units of interest in Separate Account
VA ("Units") under a variable deferred annuity contract issued by EOC
("Contract"). According to the Registration Statement, the Contracts are to be
offered in the manner described in the Prospectus included in the Registration
Statement. The Registration Statement also provides that the Contracts will be
sold only in jurisdictions authorizing such sales.
We have examined all such corporate records of EOC and such other documents
and laws as we consider appropriate as a basis for the opinions hereinafter
expressed including the Colorado Revised Statutes and Colorado Insurance
Regulations, certified copies of the Articles of Incorporation of EOC as
amended, certified copies of resolutions of the Board of Directors of EOC, a
Certificate of Good Standing for EOC from the Secretary of State of the State of
Colorado, a certified copy of EOC's duplicate original Certificate of Authority
from the Commissioner of Insurance of the State of Colorado (the "Colorado
Commissioner"), a copy of Form N-8A as filed by EOC with the U.S. Securities and
Exchange Commission ("SEC") on February 12, 1999 on behalf of Separate Account
VA File Number 811-09233, a copy of the SEC's Notice of Acceptance of the
Separate Account VA Form N-8A Submission dated February 12, 1999, a copy of the
Form N-4 Registration Statement, File No. 333-72381, as filed with the SEC on
February 12, 1999, and the form of variable deferred annuity contract no. EOC
99A PICB-INDV.
We assume for purposes of this opinion, without independent inquiry, the
accuracy of the facts and representations contained in the Registration
Statement, and we assume that the Contracts to be issued will correspond to the
form reviewed by us in all material respects. This opinion is based entirely on
our review of the statutes, regulations, certificates and documents listed above
and we have made no other documentary review or investigation of any kind
whatsoever. On the basis of such examination and subject to the limitations of
the penultimate paragraph of this letter, it is our opinion that:
1. EOC is a corporation duly organized under the laws of the State of
Colorado and is authorized to transact the business of life insurance
in the State of Colorado, including variable life and variable annuity
lines of business.
<PAGE>
The Equitable of Colorado, Inc.
April 9, 1999
Page 2
2. Separate Account VA was duly established and is maintained by EOC
pursuant to the laws of the State of Colorado, under which income,
gains and losses, whether or not realized, from assets allocated to
Separate Account VA are, in accordance with the Contracts, credited to
or charged against Separate Account VA without regard to other income,
gains or losses of EOC.
3. Assets allocated to Separate Account VA will be owned by EOC; EOC is
not a trustee with respect thereto. The Contracts provide that the
portion of the assets of Separate Account VA equal to the reserves,
and other Contract liabilities with respect to Separate Account VA,
will not be chargeable with liabilities arising out of any other
business EOC may conduct. Under the terms of the Contracts and in
accordance with applicable law, including the consent of the Colorado
Commissioner as provided by applicable Colorado law, EOC reserves the
right to transfer assets of Separate Account VA in excess of such
reserves and other Contract liabilities to the general account of EOC.
4. When issued and sold as described in the Registration Statement, the
Contracts (including any Units duly created thereunder) will be duly
authorized and will constitute validly issued and binding obligations
of EOC in accordance with their terms.
The opinions set forth herein are limited to the laws of the State of
Colorado and the federal laws of the United States of America, and no opinion is
expressed as to the laws of any other jurisdiction.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
EDWARDS & ANGELL, LLP
NSH/TPA/BCD/lrs
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 to the Registration
Statement No. 333-72381 on Form N-4 of our report dated February 8, 1999
relating to the financial statements of The Equitable of Colorado, Inc., which
reports appear in such Statement of Additional Information, and to the
incorporation by reference of our reports into the Prospectus which constitutes
part of this Registration Statement. We also consent to the reference to us
under the heading "Custodian and Independent Accountants" in the Statement of
Additional Information.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
New York, New York
April 8, 1999
