<PAGE>
Filed Pursuant to Rule 497(c)
Registration No. 333-51033
[MEMBERS RETIREMENT PROGRAM LOGO]
-------------------------------------
MEMBERS
RETIREMENT PROGRAM
-------------------------------------
PROGRAM PROSPECTUS
DATED MAY 1, 1998
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-------------------------------------
THE HUDSON RIVER TRUST PROSPECTUS
DATED MAY 1, 1998
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EQ ADVISORS TRUST PROSPECTUS
DATED MAY 1, 1998
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<PAGE>
- ------------------------------------------------------------------------------
PROSPECTUS
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MAY 1, 1998
MEMBERS RETIREMENT PROGRAM
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Separate Account Units of interest under a group annuity contract with THE
EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, 1290 Avenue of The
Americas, New York, New York 10104, which funds the Members Retirement
Program.
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The contract currently provides for thirteen Investment Options:
SEPARATE ACCOUNT FUNDS
o Alliance Growth Equity Fund o MFS Research Fund
o Alliance Aggressive Equity Fund o Warburg Pincus Small Company
o Alliance Balanced Fund Value Fund
o Alliance Global Fund o T. Rowe Price Equity Income Fund
o Alliance Conservative Investors Fund o Merrill Lynch World Strategy Fund
o Alliance Growth Investors Fund
GUARANTEED OPTIONS
o 3 year Guaranteed Rate Account
o 5 year Guaranteed Rate Account
o Money Market Guarantee Account
EFFECTIVE ON OR ABOUT JULY 1, 1998, THE FOLLOWING ADDITIONAL INVESTMENT
OPTION WILL BECOME AVAILABLE:
o BT Equity 500 Index Fund
The Alliance Growth Equity, Alliance Aggressive Equity and Alliance Balanced
Funds are pooled separate accounts of Equitable (Nos. 4, 3 and 10,
respectively). See "Investment Options--The Funds" in this prospectus for a
description of the investment objectives, policies and risks of those
accounts.
The Alliance Global Fund, Alliance Conservative Investors Fund, and the
Alliance Growth Investors Fund invest in shares of a corresponding portfolio
(Portfolio) of The Hudson River Trust, a mutual fund that invests the assets
of separate accounts of insurance companies. The prospectus for The Hudson
River Trust, which is attached to this prospectus, describes the investment
objectives, policies and risks of those Portfolios and should be read
carefully and retained for future reference. This prospectus is not valid
unless it is attached to a current prospectus for The Hudson River Trust.
The MFS Research Fund, Warburg Pincus Small Company Value Fund, T. Rowe Price
Equity Income Fund and Merrill Lynch World Strategy Fund each invests and the
BT Equity 500 Index Fund will invest, effective on or about July 1, 1998, in
shares of a corresponding portfolio (Portfolio) of the EQ Advisors Trust, a
mutual fund that invests the assets of separate accounts of insurance
companies. The prospectus for the EQ Advisors Trust, which is attached to
this prospectus, describes the investment objectives, policies and risks of
those Portfolios and should be read carefully and retained for future
reference. This prospectus is not valid unless it is attached to a current
prospectus of the EQ Advisors Trust.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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THIS PROSPECTUS CONTAINS INFORMATION YOU SHOULD KNOW BEFORE INVESTING.
IT SHOULD BE READ CAREFULLY AND RETAINED FOR FUTURE REFERENCE.
A Statement of Additional Information (the "SAI") dated May 1, 1998 has been
filed with the Securities and Exchange Commission. The SAI is available free
of charge and may be obtained by mailing the SAI request form located at the
back of this prospectus or by calling, for current participants,
1-800-526-2701; for all others, 1-800-523-1125. Parts of the SAI have been
incorporated by reference into this prospectus. A table of contents for the
SAI appears on page 40 of this prospectus. Additional copies of the
prospectus may be obtained by calling the above-listed number.
Copyright 1998 by The Equitable Life Assurance Society of the United States.
All rights reserved.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
I. Summary ............................................... 2
The Members Retirement Program ....................... 2
The Investment Options................................ 3
Contributions ........................................ 3
Transfers Among Investment Options ................... 3
Corresponding with the Program ....................... 4
Summary of Annual Fund Expenses ...................... 5
II. Condensed Financial Information ....................... 8
III. Investment Options .................................... 11
The Funds ............................................ 11
The Alliance Growth Equity Fund ..................... 12
The Alliance Aggressive Equity Fund ................. 12
The Alliance Balanced Fund .......................... 13
The Hudson River Trust............................... 14
The EQ Advisors Trust ............................... 14
Risks and Investment Techniques ..................... 15
The General Account Options .......................... 19
Guaranteed Rate Accounts ............................ 19
Premature Withdrawals and Transfers ................. 19
Money Market Guarantee Account ...................... 20
IV. Fund Performance ...................................... 20
Unmanaged Market Indices ............................. 20
How Performance Data are Presented ................... 21
Percent Changes in Fund Unit Values .................. 22
Average Annual Rates of Return ....................... 22
Growth of $10,000 Initial Investment ................. 23
Investment of Contributions in the Funds ............. 25
Purchase of Fund Units .............................. 25
Business Day ........................................ 25
How We Determine the Unit Value ..................... 25
V. Equitable Life and the Investment Managers ............ 26
Equitable Life ....................................... 26
The Separate Accounts ................................ 26
Investment Management of the Funds ................... 27
Voting Rights ........................................ 28
VI. Provisions of the Contract and Services We Provide .... 29
Adoption of the Program by Employers ................. 29
Employer Responsibilities ........................... 29
Contributions ........................................ 29
Employer Responsibilities ........................... 29
Allocation of Contributions by Participants ........ 30
Transfers Among Investment Options ................... 30
General Rules ....................................... 30
Payments or Withdrawals from the Funds ............... 31
Distributions and Benefit Payment Options ............ 31
Participant Benefits: Retirement, Disability
and Termination of Employment ...................... 31
Participant Withdrawals Prior to Retirement ........ 31
Participant Death Benefits .......................... 32
Benefit Payment Options ............................. 33
Loans to Participants ................................ 34
Year 2000 Progress.................................... 34
VII. Deductions and Charges ................................ 34
Members Retirement Plan (Pension and Profit
Sharing), Prototype Self-Directed Plan and
Investment Only Fees .............................. 35
VIII. Federal Income Tax Considerations ..................... 36
Distributions: Tax Consequences ...................... 37
IX. Miscellaneous ......................................... 38
X. Table of Contents of Statement of Additional
Information .......................................... 40
</TABLE>
MEMBERSHIP RETIREMENT FUND
[LOGO]
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS.
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<PAGE>
PART I: SUMMARY
The Members Retirement Program of The Equitable Life Assurance Society of the
United States ("Equitable Life") consists of retirement plans and trusts
through which members of certain groups and other eligible persons can
accumulate retirement savings for themselves and their employees. The Program
is sponsored by Equitable Life. The Trustee under the trusts is Chase
Manhattan Bank ("Chase"). At December 31, 1997, the combined value of the
assets in the Investment Options under the Program was approximately $200
million, and there were 10,752 participants. The Program is funded through a
group annuity contract issued by Equitable Life.
Equitable Life provides this prospectus which describes the Separate Accounts
and their Units of Interest registered under the Securities Act of 1933
("1933 Act") and the General Account Options and other elements of the
Program which are not so registered. Whenever words like "we" and "our" are
used in the prospectus, they refer to Equitable Life. The terms "you" and
"your" refer to the participant or to the employer, as appropriate.
THE MEMBERS RETIREMENT PROGRAM
As an employer, you can use the Program to adopt the Members Retirement Plan,
or the Pooled Trust for individually designed plans or the Self-Directed
Prototype Plan.
o THE MEMBERS RETIREMENT PLAN--Under the Members Retirement Plan, a master
plan, you will automatically receive a full range of services from Equitable
Life, including a variety of Investment Options, plan-level and
participant-level recordkeeping, benefit payments and tax withholding and
reporting.
o The Members Retirement Plan is a defined contribution master plan which
can be adopted as a profit sharing plan (including optional 401(k) and
SIMPLE 401(k) features and beginning with plan years after December 31,
1998, safe harbor 401(k)), a defined contribution pension plan or both.
The Plan is designed to comply with the requirements of Section 404(c)
of the Employee Retirement Income Security Act of 1974 ("ERISA").
o THE POOLED TRUST FOR MEMBERS RETIREMENT PLANS--a funding vehicle to be
used by those who have an individually designed qualified retirement plan.
The Pooled Trust is for investment only and can be used for both defined
benefit and defined contribution plans. We provide participant-level or
plan-level recordkeeping services for plan assets held in the Pooled Trust.
o THE SELF-DIRECTED PROTOTYPE PLAN--a defined contribution prototype plan
which can be used to combine the Program Investment Options with individual
investments such as stocks and bonds. Employers must also adopt the Pooled
Trust and maintain a minimum of $25,000 in the Trust at all times. We provide
recordkeeping services for plan assets held in the Pooled Trust.
2
<PAGE>
THE INVESTMENT OPTIONS
SEPARATE ACCOUNT FUNDS GUARANTEED OPTIONS
o Alliance Aggressive Equity Fund o 3-Year Guaranteed Rate Account
(Separate Account No. 3 (Pooled)) o 5-Year Guaranteed Rate Account
o Alliance Growth Equity Fund o Money Market Guarantee Account
(Separate Account No. 4 (Pooled))
o Alliance Balanced Fund (Separate Account No. 10 (Pooled))
o Alliance Global Fund (Separate Account No. 51 (Pooled))
o Alliance Conservative Investors Fund (an Asset Allocation Option)
(Separate Account No. 51 (Pooled))
o Alliance Growth Investors Fund (an Asset Allocation Option)
(Separate Account No. 51 (Pooled))
o MFS Research Fund
(Separate Account No. 66 (Pooledd))
o Warburg Pinncus Small Company Value Fund
(Separate Account No. 66 (Pooledd))
o T. Rowe Price Equity Income Fund
(Separate Account No. 66 (Pooledd))
o Merrill Lynch World Strategy Fund
(Separate Account No. 66 (Pooledd))
AVAILABLE ON OR ABOUT JULY 1, 1998
o BT Equity 500 Index Fund
(Separate Account No. 66 (Pooled))
The Separate Accounts operate like mutual funds or unit investment
trusts in many ways. However, because of exclusionary provisions, they are not
subject to regulation under the Investment Company Act of 1940 ("1940 Act").
The Hudson River Trust and EQ Advisors Trust whose shares are purchased by
Separate Account Nos. 51 and 66, respectively, are registered investment
companies under the 1940 Act.
CONTRIBUTIONS
o Contributions can be allocated to any one Option or divided among them
o Contributions may be made by check or money order payable to Equitable Life
o Contributions must be sent along with a Contribution Remittance Form to
the address shown in Corresponding With the Program
o Contributions are credited on the day of receipt if they are accompanied
by properly completed forms; otherwise delays may occur
TRANSFERS AMONG INVESTMENT OPTIONS
o Generally, amounts may be transferred among the Investment Options at any
time
o Transfers may be made by telephone (on our Account Investment Management
(AIM) System)
o There is no charge for transfers and no tax liability
o Transfers from the Guaranteed Rate Accounts may not be made prior to
maturity. See Transfers Among Investment Options in Part VI
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PLAN OR WHO SELECTS ARE LOANS WHEN ARE YOU
TRUST INVESTMENTS? AVAILABLE? ELIGIBLE FOR
DISTRIBUTIONS?
- -------------------- ------------------- --------------------- ---------------------
Members Participant Yes, if permitted Upon retirement,
Retirement Plan under your Plan death, disability or
termination of
employment.
- -------------------- ------------------- --------------------- ---------------------
Pooled Trust for Participant or Yes, if permitted Benefits depend upon
Individually Trustee, as under your Plan the terms of your
Designed Plans specified under Plan.
your Plan.
- -------------------- ------------------- --------------------- ---------------------
Self-Directed Participant or Yes, if permitted Upon retirement,
Prototype Plan Trustee, as under your Plan death, disability or
specified under termination of
your Plan. employment.
- -------------------- ------------------- --------------------- ---------------------
</TABLE>
CORRESPONDING WITH THE PROGRAM
EXISTING PARTICIPANTS FUTURE PARTICIPANTS
o For regular mail (except contributions): o To reach a Retirement Program
The Members Retirement Program Specialist (9 a.m. to 5 p.m.
Box 2468 G.P.O. Eastern Time, Monday through
New York, New York 10116 Friday): 1-800-523-1125,
o For registered, certified or overnight mail ext. 5009
(except contributions): (From Alaska, call
The Members Retirement Program 0-201-583-2395, collect)
c/o Equitable Life o For regular mail:
200 Plaza Drive, Second Floor The Members Retirement Program
Secaucus, New Jersey 07094 c/o Equitable Life
o For contribution checks ONLY: Box 2011
The Members Retirement Program Secaucus, New Jersey 07094
P.O. Box 1599 o F or registered, certified or
Newark, New Jersey 07101-9764 overnight mail:
o To reach the AIM System (24 hours a day) The Members Retirement Program
or an Equitable Life Account Executive c/o Equitable Life
(9 a.m. to 5 p.m. Eastern Time, 200 Plaza Drive, 2-B55
Monday through Friday): 1-800-526-2701 Secaucus, New Jersey 07094
4
<PAGE>
SUMMARY OF ANNUAL FUND EXPENSES
PARTICIPANT TRANSACTION EXPENSES
Transaction expenses are charges you pay when you buy or sell units of the
Funds.
Sales Load None
Deferred Sales Charge None
Surrender Fees None
Transfer or Exchange Fee None
If you annuitize your account, a charge for premium taxes and other fees may
apply.
ANNUAL FUND OPERATING EXPENSES
The Program is subject to deductions and charges, including record
maintenance and report, enrollment, program expense, and investment
management and financial accounting fees. Certain expenses are also borne
directly by the Funds, by The Hudson River Trust, in which Separate Account
No. 51 (Pooled) invests, and by the EQ Advisors Trust, in which Separate
Account No. 66 (Pooled) invests. For more information, see Part VII:
Deductions and Charges, The Hudson River Trust and the EQ Advisors Trust
prospectuses, which both accompany this prospectus.
The purpose of the tables below is to assist employers and participants in
understanding the various costs and expenses they bear directly or
indirectly. The expenses shown are based on the actual experience of the
Funds during the year ended December 31, 1997. Future expenses may be greater
or less than those shown below. Similarly, the annual rate of return assumed
in the example is not an estimate or guarantee of future performance. The
tables give effect to generally applicable charges. Other charges may also be
applicable, including enrollment, record maintenance and report fees. See
Part VII: Deductions and Charges.
ALLIANCE GROWTH EQUITY, AGGRESSIVE EQUITY AND BALANCED FUNDS
INVESTMENT PROGRAM
MANAGEMENT FEE EXPENSE CHARGE OTHER TOTAL
-------------- -------------- --------- ------
Alliance Growth Equity Fund 0.50% 1.00% 0.15%(1) 1.65%
Alliance Aggressive Equity Fund 0.65% 1.00% 0.17%(1) 1.82%
Alliance Balanced Fund 0.50% 1.00% 0.18%(1) 1.68%
ALLIANCE GLOBAL, CONSERVATIVE INVESTORS AND GROWTH INVESTORS FUNDS
INVESTMENT PROGRAM
MANAGEMENT FEE EXPENSE CHARGE OTHER TOTAL
-------------- -------------- ---------- ----------
Alliance Global Fund 0.20%(2) 1.00% 0.16%(1) 1.36%
Hudson River Trust 0.65%(3) -- 0.08% 0.73%(3)
TOTAL 0.85% 1.00% 0.24% 2.09%
5
<PAGE>
ALLIANCE GLOBAL, CONSERVATIVE INVESTORS AND GROWTH INVESTORS FUNDS
<TABLE>
<CAPTION>
INVESTMENT PROGRAM
MANAGEMENT FEE EXPENSE CHARGE OTHER TOTAL
-------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Alliance Conservative Investors Fund 0.20%(2) 1.00% 0.18%(1) 1.38%
Hudson River Trust 0.48%(3) -- 0.07% 0.55%(3)
TOTAL 0.68% 1.00% 0.25% 1.93%
Alliance Growth Investors Fund 0.20%(2) 1.00% 0.14%(1) 1.34%
Hudson River Trust 0.52%(3) -- 0.05% 0.57%(3)
TOTAL 0.72% 1.00% 0.19% 1.91%
</TABLE>
MFS RESEARCH, WARBURG PINCUS SMALL COMPANY VALUE, T. ROWE PRICE EQUITY INCOME,
MERRILL LYNCH WORLD STRATEGY AND BT EQUITY 500 INDEX FUNDS
<TABLE>
<CAPTION>
TRUST RELATED EXPENSES PROGRAM RELATED EXPENSES TOTAL
----------------------------------------- --------------------------------- TRUST &
INVESTMENT PROGRAM PROGRAM
MGMT. 12B-1 EXPENSE RELATED
& ADVISORY FEE OTHER FEE(4) TOTAL(5) CHARGE OTHER(1) TOTAL EXPENSES
-------------- ------- ------- -------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MFS Research Fund 0.55% 0.05% 0.25% 0.85% 1.00% 0.02%(6) 1.02% 1.87%
Warburg Pincus Small
Company Value Fund 0.65% 0.10% 0.25% 1.00% 1.00% 0.03%(6) 1.03% 2.03%
T. Rowe Price Equity
Income Fund 0.55% 0.05% 0.25% 0.85% 1.00% 0.02%(6) 1.02% 1.87%
Merrill Lynch World
Strategy Fund 0.70% 0.25% 0.25% 1.20% 1.00% 0.02%(6) 1.02% 2.22%
BT Equity 500 Index
Fund 0.25% 0.05% 0.25% 0.55% 1.00% 0.20%(7) 1.20%(7) 1.75%(7)
</TABLE>
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(1) Reflects the amount deducted for the daily accrual of direct expenses.
See How We Determine the Unit Value in Part IV.
(2) The Alliance Global, Alliance Conservative Investors and Alliance
Growth Investors Funds invest through Equitable's Separate Account No.
51 in corresponding Portfolios of The Hudson River Trust. This charge
represents only financial accounting expenses for Separate Account No.
51.
(3) Effective May 1, 1997, a new Investment Advisory Agreement was entered
into between The Hudson River Trust and Alliance Capital Management
L.P., The Hudson River Trust's Investment Advisor, which effected
changes in The Hudson River Trust's management fee and expense
structure.
The tables above reflecting The Hudson River Trust's expenses are
based on Portfolio average daily net assets for the year ended
December 31, 1997 and have been restated to reflect (i) the fees that
would have been paid to Alliance if the current advisory agreement
had been in effect as of January 1, 1997 and (ii) accounting expenses
for the year ended December 31, 1997.
(4) The Class IB shares of EQ Trust are subject to fees imposed under
distribution plans (herein, the "Rule 12b-1 Plans") adopted by EQ Trust
pursuant to Rule 12b-1 under the investment Company Act of 1940, as
amended. The Rule 12b-1 Plan provides that EQ Trust, on behalf of each
Portfolio, may pay annually up to 0.25% of the average daily net assets
of a Portfolio attributable to its Class IB shares in respect of
activities primarily intended to result in the sale of the Class IB
shares.
(5) All EQAT Portfolios commenced operations on May 1, 1997 except the BT
Equity 500 Index Portfolio, which had initial seed capital invested on
December 31, 1997.
The maximum investment management and advisory fees for each EQAT
Portfolio cannot be increased without a vote of that Portfolio's
shareholders. The amounts shown as "Other Expenses" will fluctuate from
year to year depending on actual expenses, however, EQ Financial
Consultants, Inc. ("EQ Financial"), EQAT's manager, has entered into an
expense limitation agreement with respect to each Portfolio, ("Expense
Limitation Agreement") pursuant to which EQ Financial 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 respective average daily net assets of each Portfolio as follows:
0.30% for BT Equity 500 Index; 0.60% for MFS Research and T. Rowe Price
Equity Income; 0.75% for Warburg Pincus Small Company Value; and 0.95%
for Merrill Lynch World Strategy.
Absent the expense limitation, "Other Expenses" for 1997 on an
annualized basis for each of the Portfolios that commenced operations
in 1997 would have been as follows: 0.80% for Warburg Pincus Small
Company Value; 0.94% for T. Rowe Price Equity Income; 0.98% for MFS
Research; and
6
<PAGE>
2.10% for Merrill Lynch World Strategy. Absent the expense limitation,
"Other Expenses" for the BT Equity 500 Index Portfolio, which had
initial seed capital invested on December 31, 1997, are estimated for
1998 to be 0.29%.
Each Portfolio may at a later date make a reimbursement to EQ Financial
for any of the management fees waived or limited and other expenses
assumed and paid by EQ Financial 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. See the EQAT
prospectus for more information.
(6) The amounts shown also reflect expenses of $19,329 which were initially
paid by us in connection with the organization of the MFS Research,
Warburg Pincus Small Company Value, T. Rowe Price Equity Income and
Merrill Lynch World Strategy Funds. These expenses are being reimbursed
by these Funds (equally amortized over the four EQAT Funds) over a five
year period that ends December 31, 2002.
(7) The BT Equity 500 Index Fund was not available in 1997, therefore,
these numbers reflect anticipated annualized expenses for 1998.
EXAMPLE
A $1,000 investment in each Fund listed below would be subject to the
expenses indicated, assuming a 5% annual return. Applicable expenses are the
same whether or not you withdraw all or part of your Account Balance at the
end of each time period shown (1).
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
Alliance Growth Equity ............. $17.67 $54.71 $ 94.15 $204.30
Alliance Aggressive Equity ......... 19.38 59.92 102.94 222.34
Alliance Balanced .................. 17.97 55.63 95.71 207.51
Alliance Global .................... 22.10 68.14 116.73 250.32
Alliance Conservative Investors ... 20.49 63.28 108.58 233.84
Alliance Growth Investors .......... 21.82 67.55 115.84 248.67
MFS Research ....................... 13.22 41.13 -- --
Warburg Pincus Small Company Value 21.50 66.32 -- --
T. Rowe Price Equity Income ....... 19.89 61.45 -- --
Merrill Lynch World Strategy ...... 23.41 72.08 -- --
BT Equity 500 Index ................ 18.68 57.78 -- --
</TABLE>
- ------------
(1) These calculations include all asset based charges plus a component for
record maintenance and report fees and enrollment fees. The component
is computed by aggregating such fees and dividing by the average assets
for the same period. See Members Retirement Plan (Pension and Profit
Sharing), Prototype Self Directed Plan and Investment Only Fees in Part
VII of this prospectus.
7
<PAGE>
PART II: CONDENSED FINANCIAL INFORMATION
Your interest in the Funds under the Program is represented by Units. See How
We Determine the Unit Value in Part IV. The following tables give information
about income, expenses and capital changes in the Alliance Growth Equity Fund
(Separate Account No. 4 (Pooled)), the Alliance Aggressive Equity Fund
(Separate Account No. 3 (Pooled)), and the Alliance Balanced Fund (Separate
Account No. 10 (Pooled)) attributable to a Unit outstanding under the Program
for the periods indicated, along with other supplementary data. For 1997,
1996, 1995, 1994 and 1993 the tables have been audited by Price Waterhouse
LLP, independent accountants, as stated in their reports under Financial
Statements in the SAI. For years prior to 1993, such condensed financial
information was audited by other independent accountants. These tables should
be read in conjunction with the full Financial Statements.
Condensed Financial Information for the Alliance Global, Alliance
Conservative Investors, and Alliance Growth Investors Portfolios is contained
in The Hudson River Trust prospectus accompanying this prospectus. Additional
copies of The Hudson River Trust Prospectus and its Statement of Additional
Information (SAI) may be obtained by calling an Account Executive. Those
financial statements, however, do not reflect the Program Expense Charge and
the daily accrual of direct expenses deducted from amounts held in Separate
Account No. 51 (Pooled). Unit Values for the Alliance Global, Alliance
Conservative Investors, and Alliance Growth Investors Funds of Separate
Account No. 51 (Pooled) are shown below and do reflect the Program Expense
Charge and daily accrual of direct expenses so deducted.
Condensed Financial Information for the MFS Research, Warburg Pincus Small
Company Value, T. Rowe Price Equity Income, Merrill Lynch World Strategy and
BT Equity 500 Index Funds is contained in The EQ Advisors Trust prospectus
accompanying this prospectus. Additional copies of The EQ Advisors Trust
Prospectus and Statement of Additional Information (SAI) may be obtained by
calling an Account Executive. Those financial statements, however, do not
reflect the Program Expense Charge and the daily accrual of direct expenses
deducted from amounts held in Separate Account No. 66 (Pooled). Unit values
for the MFS Research, Warburg Pincus Small Company Value, T. Rowe Price
Equity Income and Merrill Lynch World Strategy Funds of Separate Account No.
66 (Pooled) are shown below and do reflect the Program Expense Charge and
daily accrual of direct expenses so deducted. No unit value for the BT Equity
500 Index Fund is shown because it will not become available until on or
about July 1, 1998.
FULL FINANCIAL STATEMENTS. The Financial Statements of the Alliance Growth
Equity, Alliance Aggressive Equity and Alliance Balanced Funds and the
Consolidated Financial Statements of Equitable Life are contained in the SAI.
The Financial Statements of the Alliance Global, Alliance Conservative
Investors and Alliance Growth Investors Portfolios are contained in the SAI
for the Hudson River Trust.
8
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
of The Equitable Life Assurance Society of the United States
ALLIANCE GROWTH EQUITY FUND--INCOME, EXPENSES AND CAPITAL CHANGES PER UNIT
OUTSTANDING THROUGHOUT THE YEARS INDICATED AND OTHER SUPPLEMENTARY DATA
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Income..................................... $ 1.53 $ 1.37 $ 1.84
Expenses (Note A).......................... (4.55) (3.82) (3.25)
- ------------------------------------------ --------- --------- ---------
Net income (loss).......................... (3.02) (2.45) (1.41)
Net realized and unrealized gain
(loss) on investments (Note B)............ 65.28 36.80 50.16
- ------------------------------------------ --------- --------- ---------
Net increase (decrease) in Alliance Growth
Equity Fund Unit Value.................... 62.26 34.35 48.75
Alliance Growth Equity Fund Unit Value
(Note C):
Beginning of year........................ 244.25 209.90 161.15
- ------------------------------------------ --------- --------- ---------
End of year.............................. $306.51 $244.25 $209.90
========================================== ========= ========= =========
Ratio of expenses to average net
assets attributable to the Program ....... 1.65% 1.68% 1.74%
Ratio of net income (loss) to average
net assets attributable to the Program ... (1.10)% (1.08)% (0.76)%
Number of Alliance Growth Equity Fund
Units outstanding at end of year
(000's)................................... 241 228 214
Portfolio turnover rate (Note D)........... 62% 105% 108%
========================================== ========= ========= =========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1994 1993* 1992 1991 1990 1989 1988
--------- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income..................................... $ 1.79 $ 1.75 $ 1.51 $ 1.37 $ 1.92 $ 1.70 $ 1.29
Expenses (Note A).......................... (2.76) (2.54) (2.22) (2.00) (1.56) (1.59) (1.21)
- ------------------------------------------ --------- --------- --------- --------- --------- --------- --------
Net income (loss).......................... (.97) (.79) (.71) (.63) .36 .11 .08
Net realized and unrealized gain
(loss) on investments (Note B)............ (3.76) 26.16 .77 47.67 (13.52) 31.92 9.94
- ------------------------------------------ --------- --------- --------- --------- --------- --------- --------
Net increase (decrease) in Alliance Growth
Equity Fund Unit Value.................... (4.73) 25.37 .06 47.04 (13.16) 32.03 10.02
Alliance Growth Equity Fund Unit Value
(Note C):
Beginning of year........................ 165.88 140.51 140.45 93.41 106.57 74.54 64.52
- ------------------------------------------ --------- --------- --------- --------- --------- --------- --------
End of year.............................. $161.15 $165.88 $140.51 $140.45 $ 93.41 $106.57 $74.54
========================================== ========= ========= ========= ========= ========= ========= ========
Ratio of expenses to average net
assets attributable to the Program ....... 1.72% 1.69% 1.65% 1.68% 1.64% 1.74% 1.73%
Ratio of net income (loss) to average
net assets attributable to the Program ... (0.60)% (0.52)% (0.53)% (0.54)% 0.38% 0.11% 0.12%
Number of Alliance Growth Equity Fund
Units outstanding at end of year
(000's)................................... 219 208 212 189 47 48 63
Portfolio turnover rate (Note D)........... 91% 82% 68% 66% 93% 113% 101%
========================================== ========= ========= ========= ========= ========= ========= ========
</TABLE>
SEPARATE ACCOUNT NO. 3 (POOLED)
of The Equitable Life Assurance Society of the United States
ALLIANCE AGGRESSIVE EQUITY FUND--INCOME, EXPENSES AND CAPITAL CHANGES PER
UNIT OUTSTANDING THROUGHOUT THE YEARS INDICATED AND OTHER SUPPLEMENTARY DATA
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Income..................................... $ .26 $ .33 $ .24
Expenses (Note A).......................... (.97) (.86) (.69)
- ------------------------------------------ --------- --------- ---------
Net investment income (loss)............... (.71) (.53) (.45)
Net realized and unrealized gain
(loss) on investments (Note B)............ 6.08 9.25 9.98
- ------------------------------------------ --------- --------- ---------
Net increase (decrease) in Alliance
Aggressive Equity Fund Unit Value......... 5.37 8.72 9.53
Alliance Aggressive Equity Fund Unit Value
(Note C):
Beginning of year........................ 50.46 41.74 32.21
- ------------------------------------------ --------- --------- ---------
End of year.............................. $55.83 $50.46 $41.74
========================================== ========= ========= =========
Ratio of expenses to average net assets
attributable to the Program............... 1.82% 1.80% 1.86%
Ratio of net investment income (loss) to
average net assets attributable to
the Program............................... (1.33)% (1.12)% (1.21)%
Number of Alliance Aggressive Equity
Fund Units outstanding at end
of year (000's)........................... 508 395 328
Portfolio turnover rate (Note D)........... 176% 118% 137%
========================================== ========= ========= =========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1994 1993* 1992 1991 1990 1989 1988
--------- --------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income..................................... $ .18 $ .26 $ .31 $ .29 $ .28 $ .29 $ .17
Expenses (Note A).......................... (.60) (.57) (.50) (.41) (.27) (.24) (.20)
- ------------------------------------------ --------- --------- --------- --------- -------- -------- ---------
Net investment income (loss)............... (.42) (.31) (.19) (.12) .01 .05 (.03)
Net realized and unrealized gain
(loss) on investments (Note B)............ (1.32) 4.25 (1.13) 14.52 1.17 4.85 .11
- ------------------------------------------ --------- --------- --------- --------- -------- -------- ---------
Net increase (decrease) in Alliance
Aggressive Equity Fund Unit Value......... (1.74) 3.94 (1.32) 14.40 1.18 4.90 .08
Alliance Aggressive Equity Fund Unit Value
(Note C):
Beginning of year........................ 33.95 30.01 31.33 16.93 15.75 10.85 10.77
- ------------------------------------------ --------- --------- --------- --------- -------- -------- ---------
1994 1993* 1992 1991 1990 1989 1988
--------- --------- --------- --------- -------- -------- ---------
End of year.............................. $32.21 $33.95 $30.01 $31.33 $16.93 $15.75 $10.85
========================================== ========= ========= ========= ========= ======== ======== =========
Ratio of expenses to average net assets
attributable to the Program............... 1.86% 1.84% 1.74% 1.59% 1.65% 1.74% 1.71%
Ratio of net investment income (loss) to
average net assets attributable to
the Program............................... (1.31)% (1.02)% (0.66)% (0.48)% 0.07% 0.35% (0.23)%
Number of Alliance Aggressive Equity
Fund Units outstanding at end
of year (000's)........................... 283 249 229 150 13 5 3
Portfolio turnover rate (Note D)........... 94% 83% 71% 63% 48% 92% 103%
========================================== ========= ========= ========= ========= ======== ======== =========
</TABLE>
See notes following these tables.
9
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
of The Equitable Life Assurance Society of the United States
ALLIANCE BALANCED FUND--INCOME, EXPENSES AND CAPITAL CHANGES PER UNIT
OUTSTANDING THROUGHOUT THE YEARS INDICATED AND OTHER SUPPLEMENTARY DATA
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
- --------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Income.................................. $ 1.21 $ 1.00 $ .89
Expenses (Note A)....................... (.52) (.48) (.43)
- --------------------------------------- -------- -------- --------
Net investment income .................. .69 .52 .46
Net realized and unrealized gain
(loss) on investments (Note B)......... 2.83 2.11 3.74
- --------------------------------------- -------- -------- --------
Net increase (decrease) in
Alliance Balanced Fund Unit Value ..... 3.52 2.63 4.20
Alliance Balanced Fund Unit Value (Note
C):
Beginning of year..................... 29.02 26.39 22.19
- --------------------------------------- -------- -------- --------
End of year........................... $32.54 $29.02 $26.39
======================================= ======== ======== ========
Ratio of expenses to average net assets
attributable to the Program............ 1.68% 1.73% 1.79%
Ratio of net investment income to
average net assets attributable to
the Program............................ 2.25% 1.91% 1.90%
Number of Alliance Balanced Fund Units
outstanding at end of year (000's) .... 454 476 458
Portfolio turnover rate (Note D) ....... 165% 177% 170%
======================================= ======== ======== ========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1994 1993* 1992 1991 1990 1989 1988
- --------------------------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income.................................. $ .74 $ .77 $ .79 $ .80 $ .94 $ .93 $ .72
Expenses (Note A)....................... (.40) (.39) (.35) (.32) (.27) (.25) (.21)
- --------------------------------------- -------- -------- -------- -------- -------- -------- --------
Net investment income .................. .34 .38 .44 .48 .67 .68 .51
Net realized and unrealized gain
(loss) on investments (Note B)......... (2.60) 2.00 (1.34) 6.04 (.98) 2.66 1.07
- --------------------------------------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in
Alliance Balanced Fund Unit Value ..... (2.26) 2.38 (.90) 6.52 (.31) 3.34 1.58
Alliance Balanced Fund Unit Value (Note
C):
Beginning of year..................... 24.45 22.07 22.97 16.45 16.76 13.42 11.84
- --------------------------------------- -------- -------- -------- -------- -------- -------- --------
End of year........................... $22.19 $24.45 $22.07 $22.97 $16.45 $16.76 $13.42
======================================= ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets
attributable to the Program............ 1.72% 1.70% 1.65% 1.67% 1.66% 1.73% 1.70%
Ratio of net investment income to
average net assets attributable to
the Program............................ 1.51% 1.61% 2.03% 2.47% 4.12% 4.38% 4.00%
Number of Alliance Balanced Fund Units
outstanding at end of year (000's) .... 446 419 364 284 27 16 12
Portfolio turnover rate (Note D) ....... 107% 102% 90% 114% 199% 175% 172%
======================================= ======== ======== ======== ======== ======== ======== ========
</TABLE>
See notes below.
NOTES:
* Prior to July 22, 1993, Equitable Capital Management Corporation
(Equitable Capital) served as the investment adviser to the Fund. On
July 22, 1993, Alliance Capital Management L.P. acquired the business
and substantially all of the assets of Equitable Capital and became the
investment adviser to the Fund.
A. Enrollment fees are not included above and did not affect the Alliance
Growth Equity, Alliance Aggressive Equity or Alliance Balanced Fund
Unit Values. Enrollment fees were generally deducted from contributions
to the Program.
B. See Note 2 to Financial Statements of Separate Account Nos. 3 (Pooled),
4 (Pooled) and 10 (Pooled), which may be found in the SAI.
C. The value for an Alliance Growth Equity Fund Unit was established at
$10.00 on January 1, 1968 under the National Association of Realtors
Members Retirement Program (NAR Program). The NAR Program was merged
into the Members Retirement Program on December 27, 1984. The values
for an Alliance Aggressive Equity and an Alliance Balanced Fund Unit
were established at $10.00 on May 1, 1985, the date on which the Funds
were first made available under the Program.
D. The portfolio turnover rate includes all long-term U.S. Government
securities, but excludes all short-term U.S. Government securities and
all other securities whose maturities at the time of acquisition were
one year or less. Represents the annual portfolio turnover rate for the
entire Separate Account.
Income, expenses, gains and losses shown above pertain only to
participants' accumulations attributable to the Program. Other plans
also participate in the Alliance Growth Equity, Alliance Aggressive
Equity and Alliance Balanced Funds and may have operating results and
other supplementary data different from those shown above.
10
<PAGE>
SEPARATE ACCOUNT NO. 51 (POOLED) UNIT VALUES
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE
ALLIANCE CONSERVATIVE GROWTH
GLOBAL INVESTORS INVESTORS
FUND FUND FUND
---------- -------------- -----------
<S> <C> <C> <C>
Unit Value as of:
December 31, 1993........... $11.05 $10.22 $10.49
December 31, 1994........... $11.45 $ 9.62 $ 9.98
December 31, 1995 .......... $13.38 $11.39 $12.40
December 31, 1996 .......... $15.11 $11.81 $13.76
December 31, 1997........... $16.63 $13.19 $15.85
Number of Units Outstanding
at December 31, 1997
(000's) .................... 617 738 333
</TABLE>
SEPARATE ACCOUNT NO. 66 (POOLED) UNIT VALUES
<TABLE>
<CAPTION>
WARBURG PINCUS T. ROWE PRICE MERRILL LYNCH
MFS RESEARCH SMALL COMPANY EQUITY INDEX WORLD STRATEGY
FUND VALUE FUND FUND FUND
-------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Unit Value as of:
December 31, 1997........... $10.34 $10.62 $11.02 $9.47
Number of Units Outstanding
at December 31, 1997
(000's)..................... 75 176 199 38
</TABLE>
PART III: INVESTMENT OPTIONS
Currently thirteen INVESTMENT OPTIONS are available under the Program. Ten
Options are Funds--the Alliance Growth Equity Fund, the Alliance Aggressive
Equity Fund, the Alliance Balanced Fund, the Alliance Global Fund, the MFS
Research Fund, the Warburg Pincus Small Company Value Fund, the T. Rowe Price
Equity Income Fund and the Merrill Lynch World Strategy Fund and two Asset
Allocation Options--the Alliance Conservative Investors Fund and the Alliance
Growth Investors Fund. The Alliance Growth Equity, Alliance Aggressive
Equity, Alliance Balanced, Alliance Global, Alliance Conservative Investors
and Alliance Growth Investors Funds were formerly known as the Growth Equity,
Aggressive Equity, Balanced, Global, Conservative Investors and Growth
Investors Funds, respectively. The Funds' objectives, policies and risks have
remained the same. Three Options are General Account Options--two Guaranteed
Rate Accounts and the Money Market Guarantee Account. ON OR ABOUT JULY 1,
1998, THE BT EQUITY 500 INDEX FUND WILL BE AVAILABLE.
THE FUNDS
Each of the Funds has a different investment objective that it seeks to
achieve by following specific investment policies. We do not anticipate that
the investment objective of any of the Funds will change. We do, however,
have the right to change the investment objectives of the Alliance Growth
Equity, Alliance Aggressive Equity and Alliance Balanced Funds, subject to
the approval of the New York State Insurance Department. The investment
objectives of the Alliance Global, Alliance Conservative Investors and
Alliance Growth Investors Funds can only be changed by a majority vote of the
shareholders of the corresponding Portfolios of The Hudson River Trust. See
Voting Rights under Part V: Equitable Life and the Investment Managers below.
None of the investment objectives and policies of the MFS Research, Warburg
Pincus Small Company Value, T. Rowe Price Equity Income, Merrill Lynch World
Strategy and BT Equity 500 Index Funds of the EQ Advisors Trust are
fundamental and may be changed by the Board
11
<PAGE>
of Trustees of the EQ Advisors Trust without the approval of shareholders.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVES OF ANY OF THE FUNDS WILL
BE MET OR THAT THE RISK TO PRINCIPAL OR VOLATILITY OF RETURN WILL BE AS
INDICATED. See Risks and Investment Techniques below.
THE ALLIANCE GROWTH EQUITY FUND
OBJECTIVE. The Alliance Growth Equity Fund seeks to achieve long-term growth
of capital by investing in the securities of carefully selected companies we
believe will share in the growth of our nation's economy--and those of other
leading industrialized countries--over a long period. The Alliance Growth
Equity Fund invests in securities of companies of any capitalization but is
generally invested primarily in securities of intermediate to large sized
companies.
INVESTMENT POLICIES. The Alliance Growth Equity Fund invests primarily in
common stocks. Smaller amounts may be invested in other equity-type
securities, such as convertible preferred stocks or convertible debt
instruments. The Alliance Growth Equity Fund may use its assets to make
non-equity investments. These could include non-participating and
non-convertible preferred stocks, bonds and debentures. Some non-equity
investments may carry certain equity features such as conversion or exchange
rights or warrants for the acquisition of stocks of the same or different
issuers or participation based on revenues, sales or profits. If, in light of
economic conditions and the general level of stock prices, it appears that
the Fund's investment objective will not be met by buying equities and equity
type securities, non-equity investment may be substantial. The Fund may
invest up to 10% of its total assets in restricted securities.
The Alliance Growth Equity Fund may make temporary investments in government
obligations, short-term commercial paper and other money market instruments,
either directly or through our Separate Account No. 2A. While equity
investments will be made primarily in securities of United States companies
or foreign companies doing substantial business in the United States, up to
15% of the value of the Fund's assets may be invested in the securities of
established foreign companies without substantial business in the United
States. See Risks and Investment Techniques below for more information on
restricted securities, Separate Account No. 2A, securities of medium and
smaller sized companies, foreign securities, investment concentration, money
market investments and convertible securities.
THE ALLIANCE AGGRESSIVE EQUITY FUND
OBJECTIVE. The Alliance Aggressive Equity Fund seeks to achieve long-term
capital growth, consistent with investment quality. The Fund will attempt to
achieve this objective by investing primarily in securities of medium and
smaller sized companies (with capitalization generally between $100 million
and $3.0 billion) which we believe have greater growth potential than larger
companies.
INVESTMENT POLICIES. Most of the time, the Alliance Aggressive Equity Fund
will invest primarily in common stocks of medium and smaller sized companies.
The Fund may also invest in securities not generally defined as growth
stocks, but with unusual value or earnings potential. For example,
opportunities for capital growth exist from time to time in what are believed
to be cyclical industries, companies whose securities are temporarily
undervalued, special situations, younger but not widely known companies and
companies doing business in countries whose economies are expanding. The
Alliance Aggressive Equity Fund may invest in foreign companies without
substantial business in the United States. Industry diversification is not an
objective of the Alliance Aggressive Equity Fund and it may at times be less
diversified than a traditional equity portfolio. Some other equity-type
investments may also
12
<PAGE>
be made. The Fund may also invest in short-term debt securities such as
corporate notes, and temporary money market investments, including our
Separate Account No. 2A. Additionally, the Fund may invest up to 10% of its
total assets in restricted securities.
See Risks and Investment Techniques below for more information on foreign
securities, restricted securities, securities of medium and smaller sized
companies and money market investments. This Fund may hold investments with
greater growth potential and greater risks than those investments held by the
Alliance Growth Equity and Balanced Funds. Due to this Fund's aggressive
investment policies and less diversified investments, you should consider
limiting the amount allocated to this Fund, particularly as you near
retirement.
THE ALLIANCE BALANCED FUND
OBJECTIVE. The Alliance Balanced Fund's investment objective is to achieve
both appreciation of capital and current income by investments in a
diversified portfolio of common stocks, other equity-type securities and
longer-term fixed income securities and current income by investments in
publicly traded debt securities and short-term money market instruments. The
investment mix is determined by the portfolio manager.
INVESTMENT POLICIES. It is anticipated that we will vary the portion of the
Alliance Balanced Fund's assets invested in each type of security in
accordance with our evaluation of economic conditions, the general level of
common stock prices, anticipated interest rates and other relevant
considerations, including our assessment of the risks associated with each
investment medium. The Fund is subject to the risk that we may incorrectly
predict changes in the relative values of the stock and bond markets. In
general, equity securities will comprise the greatest portion of the Balanced
Fund's assets. At the years ended December 31, 1988 through 1997, the
percentage of the Alliance Balanced Fund's assets invested in equity
securities (including equity-type securities such as convertible preferred
stocks or convertible debt instruments) has ranged from 43% to 86%. The
Fund's non-money market debt securities will consist primarily of
publicly-traded securities issued or guaranteed by the United States
Government or its agencies or instrumentalities and corporate fixed income
securities, including, but not limited to, bank obligations, notes,
asset-backed securities, mortgage pass-through obligations, collateralized
mortgage obligations, zero coupon bonds, and preferred stock. The Alliance
Balanced Fund may also buy debt securities with equity features such as
conversion or exchange rights or warrants for the acquisition of stock or
participations based on revenues, sales or profits. All non-money market debt
securities will be investment grade, at the time of acquisition, i.e., rated
BBB or higher by Standard & Poor's Corporation (S&P) or Baa or higher by
Moody's Investors Services, Inc. (Moody's) or, if unrated, will be of
comparable investment quality. The average maturity of the debt securities
held by the Alliance Balanced Fund will vary according to market conditions
and the stage of interest rate cycles. The Alliance Balanced Fund may also
realize gains on debt securities when such actions are considered
advantageous in light of existing market conditions. The Fund may invest up
to 10% of its total assets in restricted securities and may invest in foreign
companies without substantial business in the United States. The Alliance
Balanced Fund may invest in money market securities through our Separate
Account No. 2A or directly. The Alliance Balanced Fund may invest in put and
call options and trade in stock index or interest rate futures for hedging
purposes only. In option transactions, the economic benefit will be offset by
the cost of the option, while any loss would be limited to such cost. The
Fund also enters into hedging transactions. These transactions are undertaken
only when any required regulatory procedures have been completed and when
economic and market conditions indicate that such transactions would serve
the best interests of the Fund.
See Risks and Investment Techniques below for more information on foreign
securities, restricted securities, securities of medium and smaller sized
companies, debt instruments issued by Schedule B Banks, hedging transactions,
money market investments and convertible securities.
13
<PAGE>
THE HUDSON RIVER TRUST
The Hudson River Trust is an open-end, diversified management investment
company, more commonly called a mutual fund. As a "series" type of mutual
fund, it includes various Portfolios, three of which are offered through this
Program. The Hudson River Trust commenced operations in January 1987. The
Hudson River Trust does not impose a sales charge or "load" for buying and
selling its shares. All dividend distributions from The Hudson River Trust
are reinvested in the Portfolio to which they relate. The Alliance Global,
Alliance Conservative Investors and Alliance Growth Investors Funds invest in
corresponding Portfolios of The Hudson River Trust.
The Hudson River Trust prospectus accompanying this prospectus contains
information about the objectives, investment policies and special risks of
the Alliance Global, Alliance Conservative Investors and Alliance Growth
Investors Portfolios. YOU SHOULD CAREFULLY READ THE HUDSON RIVER TRUST
PROSPECTUS BEFORE YOU ALLOCATE CONTRIBUTIONS OR TRANSFER AMOUNTS TO THE
ALLIANCE GLOBAL, ALLIANCE CONSERVATIVE INVESTORS OR ALLIANCE GROWTH INVESTORS
FUNDS.
ALLIANCE GLOBAL FUND OBJECTIVE. The Alliance Global Fund seeks to achieve
long-term growth of capital by investing primarily in equity securities of
non-United States as well as United States companies.
ALLIANCE CONSERVATIVE INVESTORS FUND OBJECTIVE. The Alliance Conservative
Investors Fund seeks to achieve high total return without, in the Fund
adviser's opinion, undue risk to principal. The Fund invests in a diversified
mix of publicly-traded, fixed income and equity securities. Asset mix and
security selection are primarily based upon factors expected to reduce risk.
ALLIANCE GROWTH INVESTORS FUND OBJECTIVE. The objective of the Alliance
Growth Investors Fund is high total return consistent with the Fund adviser's
determination of reasonable risk. The Fund invests in a diversified mix of
publicly-traded, fixed income and equity securities. Asset mix and security
selection are based upon factors expected to increase the possibility of high
long-term return.
THE EQ ADVISORS TRUST
The EQ Advisors Trust is a registered open-end management investment company
that offers a selection of professionally managed investment portfolios. The
EQ Advisors Trust commenced operations on May 1, 1997. As a "series" type of
mutual fund, the Trust issues shares of beneficial interest that are
currently divided among eighteen Portfolios. Each Portfolio is a separate
series of the Trust with its own objective and policies. Except for the
Merrill Lynch World Strategy Portfolio, the following EQ Advisors Trust
portfolios are diversified for 1940 Act purposes. The EQ Advisors Trust does
not impose sales charges or "loads" for buying and selling their shares. The
Trustees of the Trust may establish additional Portfolios at any time.
The EQ Advisors Trust prospectus accompanying this prospectus contains
information about the objectives, investment policies and special risks of
the MFS Research, Warburg Pincus Small Company Value, T. Rowe Price Equity
Income, Merrill Lynch World Strategy and BT Equity 500 Index Portfolios. YOU
SHOULD CAREFULLY READ THE EQ ADVISORS TRUST PROSPECTUS BEFORE YOU ALLOCATE
CONTRIBUTIONS OR TRANSFER AMOUNTS TO THESE FUNDS.
MFS RESEARCH FUND OBJECTIVE. The MFS Research Fund seeks to provide long-term
growth of capital and future income by investing a substantial portion of its
assets in common stock or securities convertible into common stock of
companies believed by the adviser to possess better than average prospects
for long-term growth.
14
<PAGE>
WARBURG PINCUS SMALL COMPANY VALUE FUND OBJECTIVE. The Warburg Pincus Small
Company Value Fund seeks long-term capital appreciation by investing
primarily in a portfolio of equity securities of small capitalization
companies (i.e., companies having market capitalizations of $1 billion or
less at the time of initial purchase) that the adviser considers to be
relatively undervalued. Current income is a secondary consideration in
selecting portfolio investments.
T. ROWE PRICE EQUITY INCOME FUND OBJECTIVE. The T. Rowe Price Equity Income
Fund seeks to provide substantial dividend income and also capital
appreciation by investing primarily in dividend paying common stocks of
established companies. Total return will consist primarily of dividend income
and secondarily of capital appreciation (or depreciation).
MERRILL LYNCH WORLD STRATEGY FUND OBJECTIVE. The Merrill Lynch World Strategy
Fund seeks a high total investment return by investing primarily in equity
and fixed income securities, including convertible securities of U.S. and
foreign issuers. Total investment return consists of interest, dividends,
discount accrual and capital changes, including changes in the value of
non-dollar denominated securities and other assets and liabilities resulting
from currency fluctuations. Investing in foreign securities involves special
considerations. The Portfolio may employ a variety of instruments and
techniques to enhance income and to hedge against market and currency risk.
BT EQUITY 500 INDEX FUND OBJECTIVE. The BT Equity 500 Index Fund seeks to
replicate as closely as possible (before the deduction of Fund expenses) the
total return of the Standard & Poor's 500 Composite Stock Price Index ("S&P
500"), by investing in a statistically selected sample of the 500 stocks
included in the S&P 500.
RISKS AND INVESTMENT TECHNIQUES
You should be aware that any investment in securities carries with it a risk
of loss. The different investment objectives and policies of each Fund may
affect the return of each Fund. Additionally, there are market and financial
risks inherent in any securities investment. By market risks, we mean factors
which do not necessarily relate to a particular issuer but which affect the
way markets, and securities within those markets, perform. We sometimes
describe market risk in terms of volatility, that is, the range and frequency
of market value changes. Market risks include such things as changes in
interest rates, general economic conditions and investor perceptions
regarding the value of debt and equity securities. By financial risks we mean
factors associated with a particular issuer which may affect the price of its
securities, such as its competitive posture, its earnings and its ability to
meet its debt obligations. The risk factors and investment techniques
associated with the Alliance Growth Equity, Alliance Aggressive Equity and
Alliance Balanced Funds are stated below. See The Hudson River Trust
prospectus for risk factors and investment techniques associated with an
investment in the Alliance Global, Alliance Conservative Investors and
Alliance Growth Investors Funds. See the EQ Advisors Trust prospectus for
risks and factors and investment techniques associated with an investment in
the MFS Research, Warburg Pincus Small Company Value, T. Rowe Price Equity
Income, Merrill Lynch World Strategy and BT Equity 500 Index Funds.
Mortgage Pass-Through Securities--The Alliance Balanced Fund may invest in
mortgage pass-through securities, which are securities representing interests
in pools of mortgages. Principal and interest payments made on the mortgages
in the pools are passed through to the holder of such securities.
Collateralized Mortgage Obligations--The Alliance Balanced Fund may invest in
collateralized mortgage obligations (CM0s). CMOs are debt securities
collateralized by underlying mortgage loans or pools of mortgage pass-through
securities and are generally issued by limited purpose finance subsidiaries
of U.S. Government instrumentalities.
15
<PAGE>
CMOs are not, however, mortgage pass-through securities. Investors in CMOs
are not owners of the underlying mortgages, but are simply owners of a debt
security backed by such pledged assets.
Asset-Backed Securities--The Alliance Balanced Fund may purchase asset-backed
securities that represent either fractional interests or participation in
pools of leases, retail installment loans or revolving credit receivables
held by a trust or limited purpose finance subsidiary. Such asset-backed
securities may be secured by the underlying assets or may be unsecured.
The Alliance Balanced Fund may invest in other asset-backed securities that
may be developed in the future.
Yankee Securities--The Alliance Balanced Fund may invest in Yankee
securities. Yankee securities are non-U.S. issuers that issue debt securities
that are denominated in U.S. dollars.
Zero-Coupon Bonds--The Alliance Balanced Fund may invest in zero-coupon
bonds. Such bonds may be issued directly by agencies and instrumentalities of
the U.S. Government or by private corporations. Zero-coupon bonds do not make
regular interest payments. Instead, they are sold at a deep discount from
their face value. As a result, their price can be very volatile when interest
rates change.
Repurchase Agreements--In repurchase agreements, the Alliance Balanced Fund
buys securities from a seller, usually a bank or brokerage firm, with the
understanding that the seller will repurchase the securities at a higher
price at a future date. During the term of the repurchase agreement the
Balanced Fund retains the securities subject to the repurchase agreement as
collateral. Such transactions afford an opportunity for the Fund to earn a
fixed rate of return on available cash at minimal market risk, although the
Fund may be subject to various delays and risks or loss if the seller is
unable to meet its obligation to repurchase.
Foreign Currency Forward Contracts--The Alliance Balanced Fund may enter into
contracts for the purchase or sale of a specific foreign currency at a future
date at a price set at the time of the contract. The Fund will enter into
such forward contracts for hedging purposes only.
Debt Securities Subject to Prepayment Risks--Mortgage pass-through securities
and certain collateralized mortgage obligations, asset-backed securities and
other debt instruments in which the Alliance Balanced Fund may invest are
subject to prepayments prior to their stated maturity. It is usually not
possible to accurately predict the rate at which prepayments will be made,
which rate may be affected, among other things, by changes in generally
prevailing market interest rates. If prepayments occur, the Fund suffers the
risk that it will not be able to reinvest the proceeds at as high a rate of
interest as it had previously been receiving. Also, the Fund will incur a
loss to the extent that prepayments are made for an amount that is less than
the value at which the security was then being carried by the fund. Moreover,
securities that may be prepaid tend to increase in value less during times of
declining interest rates, and to decrease in value more during times of
increasing interest rates, than do securities that are not subject to
prepayment.
When-Issued and Delayed Delivery Securities--The Alliance Balanced Fund may
purchase and sell securities on a when-issued or delayed delivery basis. In
these transactions, securities are purchased or sold by a Fund with payment
and delivery taking place in the future in order to secure what is considered
to be an advantageous price or yield to the Fund at the time of entering into
the transaction. However, the market value of such securities at the time of
settlement may be more or less than the purchase price then payable. The Fund
will sell on a forward settlement basis only securities it owns or has the
right to acquire.
16
<PAGE>
Foreign Securities--The Alliance Growth Equity, Alliance Aggressive Equity
and Alliance Balanced Funds may make a limited portion of their investments
in the securities of established foreign companies which do not do
substantial business in the United States. For many foreign securities, there
are dollar-denominated American Depository Receipts (ADRs), which are traded
in the United States on exchanges or over-the-counter, and are issued by
domestic banks. The Funds may invest in foreign securities directly and
through ADRs and may hold some foreign securities outside of the U.S. ADRs do
not lessen the foreign exchange risk inherent in investing in the securities
of foreign issuers. However, by investing in ADRs rather than directly in
foreign issuers' stock, the Funds will avoid currency risks during the
settlement period for either purchases or sales. Foreign investments may
involve risks not present in domestic investments, such as changes in the
political or economic climate of countries in which companies do business.
Foreign securities may be less liquid or subject to greater price volatility
than securities of domestic issuers, and foreign accounting, auditing and
disclosure standards may differ from domestic standards. There may be less
regulation in foreign countries of stock exchanges, brokers, banks, and
listed companies than in the United States. The value of foreign investments
may rise or fall because of changes in currency exchange rates or exchange
controls.
Restricted Securities--The Alliance Growth Equity, Alliance Aggressive Equity
and Alliance Balanced Funds may make investments in restricted securities.
Restricted securities are generally less liquid than registered securities
and market quotations for such securities may not be readily available. The
Funds may not be able to sell restricted securities except pursuant to
registration under applicable Federal and State securities laws or pursuant
to Securities and Exchange Commission rules which limit their sale to certain
purchasers and may require that they be held by the Funds for a specified
period of time prior to resale. Because of these restrictions, at times the
Funds may not be readily able to sell them at fair market value.
Securities of Medium and Smaller Sized Companies--The Alliance Aggressive
Equity Fund invests primarily in the securities of medium and smaller sized
companies, although the Alliance Growth Equity and Alliance Balanced Funds
may also make these investments. Medium and smaller sized companies may be
dependent on the performance of only one or two products. Such companies may
be vulnerable to competition from larger companies with greater resources and
to economic conditions affecting their market sector. Therefore, consistent
earnings may not be as likely in small companies as in large companies. Such
companies may also be more dependent on access to equity markets to raise
capital than larger companies with greater ability to support debt. Small and
intermediate sized companies may be new, without long business or management
histories, and perceived by the market as unproven. Their securities may be
held primarily by insiders or institutional investors, which may have an
impact on marketability. The price of these stocks may rise and fall more
frequently and to a greater extent than the overall market.
Investment Concentration--From time to time, the equity holdings in the
Alliance Growth Equity Fund may be concentrated in the securities of a
relatively small number of issuers. In no event will an investment be made
for the Fund in the securities of one issuer if such investment would cause
more than 10% of the book value of the Alliance Growth Equity Fund to be
invested in the securities of such issuer, and no investment will be made for
the Fund if such investment would cause more than 40% of the book value of
the Fund to be invested in the securities of four or fewer issuers. This
strategy of investment concentration may increase an investor's risk of loss
in the event of a decline in the value of one of these securities. As of
December 31, 1997, 26.5% (of market value) of the Alliance Growth Equity Fund
was held in the stocks of four issuers. See Separate Account No. 4 (Pooled)
Statement of Investments and Net Assets in the SAI.
Debt Instruments Issued by Schedule B Banks--The Alliance Balanced Fund may
invest in debt instruments issued by Schedule B Banks, which are foreign
branches of United States banks. Schedule B Banks are not required to
17
<PAGE>
maintain the same financial reserves which are required of United States
banks, but Schedule B Bank certificates of deposit are fully guaranteed by
the U.S. parent of the issuing bank. Debt instruments issued by Schedule B
Banks may include certificates of deposit and time deposits of London
branches of United States banks ("Eurodollars"). Eurodollar investments are
subject to the types of risks associated with foreign securities. London
branches of the United States banks have extensive government regulation
which may limit both the amount and the type of loans and interest rates. In
addition, the banking industry's profitability is closely linked to
prevailing money market conditions for financing lending operations. Both
general economic conditions and credit risks play an important part in the
operations of the banking industry. United States banks are required to
maintain reserves, are limited in how much they can loan to a single borrower
and are subject to other regulations to promote financial soundness. Not all
of these laws and regulations apply to foreign branches of United States
banks.
Hedging Transactions--The Alliance Balanced Fund may engage in hedging
transactions which are designed to protect against anticipated adverse price
movements in securities owned or intended to be purchased by the Fund. When
interest rates go up, the market value of outstanding debt securities
declines and vice versa. In recent years the volatility of the market for
debt securities has increased significantly, and market prices of longer-term
obligations have been subject to wide fluctuations, particularly as
contrasted with those of short-term instruments. The Fund will take certain
risks into consideration when determining which, if any, options or financial
futures contracts it will use. If the price movements of hedged portfolio
securities are in fact favorable to the Fund, the hedging transactions will
tend to reduce and may eliminate the economic benefit to the Fund which
otherwise would result. Also, the price movements of options and futures used
for hedging purposes may not correlate as anticipated with price movements of
the securities being hedged. This can make a hedge transaction less effective
than anticipated and could result in a loss. The options and futures markets
can sometimes become illiquid and the exchanges on which such instruments are
traded may impose trading halts or delays on the exercise of options and
liquidation of futures positions in certain circumstances. This could in some
cases operate to the Fund's detriment.
Money Market Investments--The Alliance Growth Equity, Alliance Aggressive
Equity and Alliance Balanced Funds may make temporary investments in
government obligations, short-term commercial paper and other money market
instruments. They may buy these directly or acquire units in our Separate
Account No. 2A. Separate Account No. 2A provides an efficient means for
certain of our other separate accounts to invest cash positions on a pooled
basis at no additional costs. Separate Account No. 2A seeks to obtain a high
level of current income, preserve its assets and maintain liquidity. It
invests only in short-term securities which mature in 60 days or less from
the date of purchase or which are subject to repurchase agreements requiring
repurchases in 60 days or less. Units in Separate Account No. 2A are not
registered under the 1933 Act.
The kinds of direct investments the Funds make in money market instruments
will be payable only in United States dollars and will consist principally of
securities issued or guaranteed by the United States Government or one of its
agencies or instrumentalities, negotiable certificates of deposit, bankers'
acceptances or bank time deposits, repurchase agreements (covering securities
issued or guaranteed by the United States Government or one of its agencies
or instrumentalities, certificates of deposit or bankers' acceptances),
commercial paper that is rated Prime-1 by Moody's Investors Service
("Moody's") or A-1 or A-1 Plus by Standard & Poor's Corporation ("S&P"),
unrated commercial paper, master demand notes or variable amount floating
rate notes of any issuer that has an outstanding issue of unsecured debt that
is currently rated Aa or better by Moody's or AA or better by S&P, and any
debt securities issued or guaranteed by an issuer, which is currently rated
Aa or better by Moody's or AA or better by S&P, with less than one year to
maturity. Such investments may include Eurodollars, certificates of deposit
and commercial paper issued by Schedule B Banks.
Convertible Securities--The Alliance Growth Equity, Alliance Aggressive
Equity and Alliance Balanced Funds may invest in convertible preferred stocks
or convertible debt instruments. Convertible securities contain both debt and
18
<PAGE>
equity features. Because of their debt element, they may provide some
protection when stock prices decline. Nevertheless, convertible securities
may lose significant value in periods of extreme market volatility.
THE GENERAL ACCOUNT OPTIONS
Contributions to the General Account Options become part of our general
account, which supports all of our insurance and annuity guarantees as well
as our general obligations. The general account, as part of our insurance and
annuity operations, is subject to regulation and supervision by the Insurance
Department of the State of New York and to insurance laws and regulations of
all jurisdictions in which we are authorized to do business. Because of
applicable exemptive and exclusionary provisions, interests in the general
account have not been registered under the 1933 Act, nor is the general
account an investment company under the Investment Company Act of 1940.
Accordingly, neither the general account nor any interests therein are
subject to regulation under the 1933 Act or the 1940 Act, and we have been
advised that the staff of the Securities and Exchange Commission has not made
a review of the disclosures which are included in this prospectus for your
information and which relate to the general account and the General Account
Options. These disclosures, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
GUARANTEED RATE ACCOUNTS
THE GUARANTEES. Contributions to the Guaranteed Rate Accounts (GRAs) are
credited until maturity with the interest rate in effect on the date of
receipt. The rate is expressed as an effective annual rate, reflecting daily
compounding and the deduction of asset-based fees. GRAs with maturities of
approximately three and approximately five years are available under the
Program. AMOUNTS ALLOCATED TO A GRA MAY GENERALLY NOT BE REMOVED PRIOR TO
MATURITY.
New guaranteed rates are offered each Wednesday and are available for a
seven-day period. Call the AIM System to obtain the current GRA rates.
Interest accrues from the day after your contribution or transfer is credited
through the maturity date of the GRA, which is either approximately three or
approximately five years from the end of the seven-day offering period. We
guarantee the amount of your contributions and the interest credited, subject
to any penalties applicable upon premature withdrawal. See Premature
Withdrawals and Transfers from a GRA in the SAI for a description of such
penalties and when they apply. For a discussion of maturing GRAs, see
Maturing GRAs in the SAI.
PREMATURE WITHDRAWALS AND TRANSFERS
o You may not transfer from one GRA to another or from a GRA to another
Investment Option except at maturity.
o You may transfer other amounts at any time to a GRA at the current
guaranteed rate.
o Withdrawals may be made from a GRA before maturity if: you are disabled;
you attain age 70 1/2; you die; or you are not self-employed and your
employment is terminated.
o You may not remove GRA funds before maturity to take a loan, hardship or
other in-service withdrawal, as a result of a trustee-to-trustee transfer,
or to receive benefits from a terminated plan.
o Certain other withdrawals prior to maturity are permitted, but may be
subject to penalty. See Procedures for Withdrawals, Distributions and
Transfers from a GRA in the SAI.
19
<PAGE>
MONEY MARKET GUARANTEE ACCOUNT
THE GUARANTEES. All amounts held in the Money Market Guarantee Account are
credited with the same rate of interest. The rate changes monthly and is
expressed as an effective annual rate, reflecting daily compounding and the
deduction of asset-based fees and charges. The rate will approximate current
market rates for money market mutual funds minus these fees. Call the AIM
System to obtain the current monthly rate. On January 1 each year we set an
annual minimum rate for this Account. The minimum guaranteed interest rate
for 1998 is 2.5% (before fees).
CONTRIBUTIONS. Contributions may be made at any time and will earn the
current rate from the day after the contribution is credited through the end
of the month or, if earlier, the day of withdrawal or transfer. Balances in
the Account at the end of the month automatically begin receiving interest at
the new rate until transferred or withdrawn. We guarantee the amount of your
contributions and the interest credited.
DISTRIBUTIONS AND TRANSFERS. Distributions, withdrawals and transfers may be
made at any time assuming your employer's plan permits.
PART IV: FUND PERFORMANCE
The following tables provide a historical view of investment performance. The
information presented includes performance results for each Fund, along with
data representing unmanaged market indices.
UNMANAGED MARKET INDICES
Benchmark indices, while providing a broader perspective on relative
performance, are only a tool for comparison. At any time, the composition of
a Fund will differ from the benchmarks presented. Also, performance data for
the unmanaged market indices do not reflect any deductions for investment
advisory, brokerage or other expenses of the type typically associated with
an actively managed fund. This effectively overstates the rate of return of
the market indices relative to that which would be available to a typical
investor, and limits the usefulness of these indices in assessing the
performance of the Funds. Since the Funds do not distribute dividends or
interest, the market indices have been adjusted to reflect reinvestment of
dividends and interest to provide comparability.
STANDARD AND POOR'S 500 INDEX (S&P 500)--an unmanaged weighted index of the
securities of 500 industrial, transportation, utility and financial companies
widely regarded by investors as representative of the stock market.
STANDARD & POOR'S MIDCAP 400 (TOTAL RETURN) INDEX (S&P MIDCAP TR)--an
unmanaged market-weighted index with each stock affecting the index in
proportion to its market value. It consists of 400 domestic stocks chosen for
market size (median market capitalization falls in the $200 million to $5
billion range), liquidity, and industry group representation.
CONSUMER PRICE INDEX (URBAN CONSUMERS--NOT SEASONALLY ADJUSTED)(CPI)--an
index of inflation.
LEHMAN AGGREGATE INDEX--an unmanaged bond index which includes fixed rate
debt issues rated investment grade or higher by Moody's Investors Service,
Standard and Poor's Corporation, or Fitch Investor's Service, in that order.
All issues have at least one year to maturity and an outstanding par value of
at least $100 million for U.S. Government issues and $50 million for all
others.
20
<PAGE>
LEHMAN GOVERNMENT/CORPORATE BOND INDEX (LEHMAN)--an unmanaged index widely
regarded by investors as representative of the bond market.
LEHMAN TREASURY BOND INDEX (LEHMAN TREASURY)--an unmanaged bond index which
includes all public obligations of the U.S. Treasury (excluding foreign
targeted issues).
MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX (MSCI WORLD)--an
arithmetical average weighted by market value of the performance of 1,520
companies listed on the stock exchanges of the United States, Europe, Canada,
Australia, New Zealand and the Far East.
HOW PERFORMANCE DATA ARE PRESENTED
The following tables show Fund performance on several different bases: annual
percent changes in Fund Unit Values, average annual rates of return and the
total value as of December 31, 1997 of a $10,000 investment made on January
1, 1988. The Fund performance shown may not represent your actual experience;
nor does it reflect the effect of the record maintenance and report or
enrollment fees. The average annual rates of return are time-weighted, assume
an investment at the beginning of each period, and include the reinvestment
of investment income.
The Alliance Global, Alliance Conservative Investors and Alliance Growth
Investors Funds became available under the Program on July 1, 1993. The
performance figures prior to that date for these Funds reflect (1)
hypothetical performance based on the actual performance of the Alliance
Global, Alliance Conservative Investors and Alliance Growth Investors
Portfolios, respectively, from the date each commenced operations and (2) the
deduction of the Alliance Program Expense Charge, the financial accounting
fee and the daily accrual of direct expenses attributable to the Alliance
Growth Equity Fund. After July 1, 1993, they reflect actual performance and,
for 1993, annualized actual expenses. See Part VII: Deductions and Charges.
No performance is provided for the MFS Research, Warburg Pincus Small Company
Value, T. Rowe Price Equity Income and Merrill Lynch World Strategy Funds
which became available under the Program on August 1, 1997. The respective
Portfolios of the EQ Advisors Trust commenced operations on May 1, 1997. See
the attached EQ Advisors Trust prospectus for performance information
regarding those portfolios. Such information does not reflect the Program
Expense Charge that would reduce the results shown in the EQ Advisors Trust
prospectus.
In addition, no performance is provided for the BT Equity 500 Index Fund
which will become available on July 1, 1998. The BT Equity 500 Index
Portfolio commenced operations on December 31, 1997.
21
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
PERCENT CHANGES IN FUND UNIT VALUES*
- -----------------------------------------------------
ANNUAL PERIOD ENDING
LAST BUSINESS DAY OF 1988 1989 1990
- -------------------------- ------- ------- --------
<S> <C> <C> <C>
FUND
- -------------------------- ------- ------- --------
Alliance Growth Equity 15.5% 43.0% -12.3%
- -------------------------- ------- ------- --------
Alliance Aggressive Equity 0.7 45.2 7.5
- -------------------------- ------- ------- --------
Alliance Balanced 13.4 24.9 -1.9
- -------------------------- ------- ------- --------
Alliance Global 9.3 25.4 -7.4
- -------------------------- ------- ------- --------
Alliance Conservative
Investors -- 1.7 5.0
- -------------------------- ------- ------- --------
Alliance Growth Investors -- 2.6 9.4
- -------------------------- ------- ------- --------
COMPARATIVE INDICES 1988 1989 1990
- -------------------------- ------- ------- --------
S&P 500 16.6% 31.7% -3.1%
- -------------------------- ------- ------- --------
S&P Midcap TR 20.9 35.6 -5.1
- -------------------------- ------- ------- --------
S&P 500/Lehman Aggregate
(50%/50%) 12.2 23.1 2.9
- -------------------------- ------- ------- --------
MSCI World 23.3 16.6 -17.0
- -------------------------- ------- ------- --------
S&P 500/Lehman Treasury
(30%/70%) 9.9 19.6 5.1
- -------------------------- ------- ------- --------
S&P 500/Lehman (70%/30%) 13.9 26.5 0.3
- -------------------------- ------- ------- --------
CPI 4.4 4.6 6.2
- -------------------------- ------- ------- --------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PERCENT CHANGES IN FUND UNIT VALUES*
- -------------------------------------------------------------------------------------
ANNUAL PERIOD ENDING
LAST BUSINESS DAY OF 1991 1992 1993 1994 1995 1996 1997
- -------------------------- ------- ------ ------- ------- ------- ------- -------
FUND
- -------------------------- ------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Growth Equity 50.4% 0.1% 18.0% -2.8% 30.3% 16.4% 25.5%
- -------------------------- ------- ------ ------- ------- ------- ------- -------
Alliance Aggressive Equity 85.1 -4.2 13.1 -5.1 29.6 20.9 10.6
- -------------------------- ------- ------ ------- ------- ------- ------- -------
Alliance Balanced 39.7 -3.9 10.8 -9.2 18.9 10.0 12.1
- -------------------------- ------- ------ ------- ------- ------- ------- -------
Alliance Global 29.1 -1.9 30.8 3.6 16.8 12.9 10.1
- -------------------------- ------- ------ ------- ------- ------- ------- -------
Alliance Conservative
Investors 18.4 4.3 9.4 -5.9 18.3 3.7 11.7
- -------------------------- ------- ------ ------- ------- ------- ------- -------
Alliance Growth Investors 47.3 3.5 13.9 -4.8 24.2 11.0 15.2
- -------------------------- ------- ------ ------- ------- ------- ------- -------
COMPARATIVE INDICES 1991 1992 1993 1994 1995 1996 1997
- -------------------------- ------- ------ ------- ------- ------- ------- -------
S&P 500 30.5% 7.6% 10.1% 1.3% 37.6% 23.0% 33.4%
- -------------------------- ------- ------ ------- ------- ------- ------- -------
S&P Midcap TR 50.1 11.9 13.9 -3.6 30.9 19.2 32.3
- -------------------------- ------- ------ ------- ------- ------- ------- -------
S&P 500/Lehman Aggregate
(50%/50%) 23.2 7.5 9.9 -0.8 28.0 13.3 21.5
- -------------------------- ------- ------ ------- ------- ------- ------- -------
MSCI World 18.3 -5.2 22.5 5.1 20.7 13.5 15.8
- -------------------------- ------- ------ ------- ------- ------- ------- -------
S&P 500/Lehman Treasury
(30%/70%) 19.8 7.3 10.5 -2.0 24.1 8.8 16.7
- -------------------------- ------- ------ ------- ------- ------- ------- -------
S&P 500/Lehman (70%/30%) 26.2 7.6 10.3 -0.1 32.1 16.9 26.3
- -------------------------- ------- ------ ------- ------- ------- ------- -------
CPI 3.0 2.9 2.7 2.7 2.9 3.3 1.9
- -------------------------- ------- ------ ------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
AVERAGE ANNUAL RATES OF RETURN--DECEMBER 31, 1997*
- -----------------------------------------------------------------------------
FUND 10 YEARS 5 YEARS 3 YEARS 1 YEAR
- ---------------------------------- ---------- --------- --------- --------
<S> <C> <C> <C> <C>
Alliance Growth Equity 16.9% 16.9% 23.9% 25.5%
- ---------------------------------- ---------- --------- --------- --------
Alliance Aggressive Equity 17.9 13.2 20.1 10.6
- ---------------------------------- ---------- --------- --------- --------
Alliance Balanced 10.6 8.1 13.6 12.1
- ---------------------------------- ---------- --------- --------- --------
Alliance Global 12.2 14.5 13.2 10.1
- ---------------------------------- ---------- --------- --------- --------
Alliance Conservative Investors -- 7.1 11.1 11.7
- ---------------------------------- ---------- --------- --------- --------
Alliance Growth Investors -- 11.5 16.7 15.2
- ---------------------------------- ---------- --------- --------- --------
COMPARATIVE INDICES 10 YEARS 5 YEARS 3 YEARS 1 YEAR
- ---------------------------------- ---------- --------- --------- --------
S&P 500 18.1% 20.1% 31.2% 33.4%
- ---------------------------------- ---------- --------- --------- --------
S&P Midcap TR 19.5 17.8 27.3 32.3
- ---------------------------------- ---------- --------- --------- --------
S&P 500/Lehman Aggregate (50%/50%) 14.4 14.6 21.7 21.5
- ---------------------------------- ---------- --------- --------- --------
MSCI World 10.6 15.3 16.6 15.8
- ---------------------------------- ---------- --------- --------- --------
S&P 500/Lehman Treasury (30%/70%) 12.4 11.9 17.2 16.7
- ---------------------------------- ---------- --------- --------- --------
S&P 500/Lehman (70%/30%) 16.0 17.0 25.6 26.3
- ---------------------------------- ---------- --------- --------- --------
CPI 3.4 2.6 2.6 1.9
- ---------------------------------- ---------- --------- --------- --------
</TABLE>
* Hypothetical performance shown in italics.
PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE PERFORMANCE. NO PROVISIONS
HAVE BEEN MADE FOR THE EFFECT OF TAXES ON INCOME AND GAINS OR UPON
DISTRIBUTION.
22
<PAGE>
GROWTH OF $10,000 INITIAL INVESTMENT
- -----------------------------------------------------------------------------
Although historical percentage change data is valuable in evaluating fund
performance, it is often easier to understand the information in more graphic
examples. One approach to this is the use of "mountain charts." Mountain
charts, such as the ones below illustrate the growth of a hypothetical
investment over time for each of the Funds. The mountain charts for the
Alliance Growth Equity, Alliance Aggressive Equity and Alliance Balanced
Funds illustrate the growth through December 31, 1997 of an investment of
$10,000 made on January 1, 1988. The mountain charts for the Alliance Global,
Alliance Conservative Investors and Alliance Growth Investors Funds
illustrate the growth through December 31, 1997 of an investment of $10,000
made on January 1, 1988, January 1, 1989 and January 1, 1989, respectively.
No mountain charts have been provided for the MFS Research, Warburg Pincus
Small Company Value, T. Rowe Price Equity Income and Merrill Lynch World
Strategy Funds because these Funds were not available under the Program until
August 1, 1997. No mountain chart has been provided for the BT Equity 500
Index Fund because it was not in existence during these periods.
ALLIANCE GROWTH EQUITY FUND
[GRAPHIC OMITTED]
ALLIANCE AGGRESSIVE EQUITY FUND
[GRAPHIC OMITTED]
ALLIANCE BALANCED FUND
[GRAPHIC OMITTED]
23
<PAGE>
ALLIANCE GLOBAL FUND(A)
[GRAPHIC OMITTED]
ALLIANCE CONSERVATIVE INVESTORS FUND(A)
[GRAPHIC OMITTED]
ALLIANCE GROWTH INVESTORS FUND(A)
[GRAPHIC OMITTED]
(a) The Alliance Global, Alliance Conservative Investors and Alliance Growth
Investors Funds became available under the Program on July 1, 1993. The
underlying Alliance Global Portfolio commenced operations on August 27,
1987. The underlying Alliance Conservative Investors and Alliance Growth
Investors Portfolios commenced operations on October 2, 1989.
24
<PAGE>
INVESTMENT OF CONTRIBUTIONS IN THE FUNDS
PURCHASE OF FUND UNITS
Amounts allocated to a Fund are used to purchase Units. Your interest in each
Fund is represented by the value of your Units in that Fund. The number of
Units you purchase in a Fund is calculated by dividing the amount allocated
by the Unit Value calculated as of the close of business on the day your
purchase is made. The number of Units credited will not vary because of any
subsequent fluctuation in the Unit Value; however, the value of the Unit
fluctuates with the investment experience of the Fund. Such experience
reflects the investment income and realized and unrealized capital gains and
losses of that Fund, and the deductions and charges we make to the Fund.
BUSINESS DAY
A business day is any day both we and the New York Stock Exchange are open.
Contributions, transfers, and allocation changes are effective on the
business day they are received. Distribution requests are also effective on
the business day they are received unless, as in the Master Plans, there are
plan provisions to the contrary. However, we may have to delay the processing
of any transaction which is not accompanied by a properly completed form or
which is not mailed to the correct address. An Account Executive will
generally be available to speak with you each business day from 9 a.m. to 5
p.m. eastern time. We may, however, close due to emergency conditions.
HOW WE DETERMINE THE UNIT VALUE
We determine the Unit Value at the end of each business day. The Unit Value
for each Fund is determined by first calculating a gross unit value
reflecting only investment performance and then adjusting it for Program
expenses to obtain the Fund Unit Value. We calculate the gross unit value by
multiplying the gross unit value for the preceding business day by the net
investment factor for that subsequent business day and, for the Alliance
Growth Equity, Alliance Aggressive Equity and Alliance Balanced Funds, then
deducting audit and custodial fees. We calculate the net investment factor as
follows:
o First, we take the value of the Fund's assets at the close of business on
the preceding business day.
o Next, we add the investment income and capital gains, realized and
unrealized, that are credited to the assets of the Fund during the
business day for which we are calculating the net investment factor.
o Then we subtract the capital losses, realized and unrealized, charged to
the Fund during that business day.
o Finally, we divide this amount by the value of the Fund's assets at the
close of the preceding business day.
The Fund Unit Value is calculated on every business day by multiplying the
Fund Unit Value for the last business day of the previous month by the net
change factor for that business day. The net change factor for each business
day is equal to (a) minus (b) where
(a) is the gross unit value for that business day divided by the gross unit
value for the last business day of the previous month; and
(b) is the charge to the Fund for that month for the daily accrual of fees
and expenses times the number of days since the end of the preceding
month.
For information on the valuation of assets of the Funds, see How We
Value the Assets of the Funds in the SAI.
The value of the investments of the Alliance Global, Alliance Conservative
Investors and Alliance Growth Investors Funds in the corresponding Hudson
River Trust Portfolios is calculated by multiplying the number of shares held
by Separate Account No. 51 in each Portfolio by the net asset value per share
of that Portfolio determined as of the close of business on the same day as
the respective Unit Values of the Alliance Global, Alliance Conservative
Investors and Alliance Growth Investors Funds are determined.
25
<PAGE>
The value of the investments of the MFS Research, Warburg Pincus Small
Company Value, T. Rowe Price Equity Income, Merrill Lynch World Strategy and
BT Equity 500 Index Funds in the corresponding EQ Advisors Trust Portfolios
is calculated by multiplying the number of shares held by Separate Account
No. 66 in each Portfolio by the net asset value per share of that Portfolio
determined as of the close of business on the same day as the respective Unit
Values of the MFS Research, Warburg Pincus Small Company Value, T. Rowe Price
Equity Income, Merrill Lynch World Strategy and BT Equity 500 Index Funds are
determined.
PART V: EQUITABLE LIFE AND THE INVESTMENT MANAGERS
EQUITABLE LIFE
Equitable Life is a New York stock life insurance company that has been in
business since 1859. For more than 100 years we have been among the largest
life insurance companies in the United States. Equitable Life has been
selling annuities since the turn of the century. Our Home Office is located
at 1290 Avenue of the Americas, New York, New York 10104. We are authorized
to sell life insurance and annuities in all fifty states, the District of
Columbia, Puerto Rico and the Virgin Islands. We maintain local offices
throughout the United States. We are one of the nation's leading pension fund
managers.
Equitable Life is a wholly-owned subsidiary of The Equitable Companies
Incorporated (the "Holding Company"). The largest stockholder of the Holding
Company is AXA-UAP ("AXA"). As of December 31, 1997, AXA beneficially owned
58.7% of the outstanding shares of common stock of the Holding Company. Under
its investment arrangements with Equitable Life and the Holding Company, AXA
is able to exercise significant influence over the operations and capital
structure of the Holding Company and its subsidiaries, including Equitable
Life. AXA, a French company, is the holding company for an international
group of insurance and related financial service companies.
Equitable Life, the Holding Company and their subsidiaries managed
approximately $274.1 billion of assets as of December 31, 1997, including
third party assets of approximately $216.9 billion. These assets are
primarily managed for retirement and annuity programs for businesses,
tax-exempt organizations and individuals. This broad customer base includes
nearly half the Fortune 100, more than 42,000 small businesses, state and
local retirement funds in more than half the 50 states, approximately 250,000
employees of educational and non-profit institutions, as well as nearly
500,000 individuals. Millions of Americans are covered by Equitable Life's
annuity, life, health and pension contracts.
THE SEPARATE ACCOUNTS
Separate accounts are used to fund benefits under group annuity contracts and
other agreements for tax-deferred retirement programs we administer. The
separate accounts which have the Alliance Growth Equity, Alliance Aggressive
Equity and Alliance Balanced Funds were established pursuant to the Insurance
Law of the State of New York in 1968, 1969 and 1979, respectively. The
separate account which holds the Alliance Global, Alliance Conservative
Investors and Alliance Growth Investors Funds was established in 1993. The
separate account which holds the MFS Research, Warburg Pincus Small Company
Value, T. Rowe Price Equity Income, Merrill Lynch World Strategy and BT
Equity 500 Index Funds was established in 1997. The assets of the separate
accounts are our property. However, you have a claim under the group annuity
contract equal to the value of your accumulation in each Fund. Income, gains
and losses, whether or not realized, from assets allocated to the Funds are,
in accordance with the group annuity contract, credited to or charged against
the Fund without regard to our other income, gains
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or losses. This means that assets supporting account balances in the Separate
Accounts are not subject to claims of Equitable's creditors. The portion of
each Fund's assets we hold on your behalf may not be used to satisfy
obligations that may arise out of any other business we conduct. We may
transfer amounts owed to us, such as fees and expenses, to our general
account at any time.
Because of exclusionary provisions, none of the Separate Accounts are subject
to regulation under the 1940 Act. However, The Hudson River Trust (Class IA
shares) and EQ Advisors Trust (Class IB shares), are purchased by Separate
Account Nos. 51 and 66, respectively, and are registered as open-end
management investment companies under the 1940 Act.
INVESTMENT MANAGEMENT OF THE FUNDS
We use the personnel and facilities of Alliance Capital Management L.P.
("Alliance") for portfolio management, securities selection and transaction
services in managing the assets of the Alliance Growth Equity, Alliance
Aggressive Equity and Alliance Balanced Funds. Alliance is also the
investment adviser of The Hudson River Trust. The Alliance Global, Alliance
Conservative Investors and Alliance Growth Investors Funds are divisions of
our Separate Account No. 51 and invest in corresponding Portfolios of The
Hudson River Trust.
Alliance is a publicly-traded limited partnership which is indirectly
majority-owned by Equitable Life. Equitable Life and Alliance are registered
investment advisers under the Investment Advisers Act of 1940. As of December
31, 1997, Alliance had total assets under management of over $218.7 billion.
Alliance acts as an investment adviser to various separate accounts and
general accounts of Equitable Life and other affiliated insurance companies.
Alliance also provides management and consulting services to mutual funds,
endowment funds, insurance companies, foreign entities, qualified and non-tax
qualified corporate funds, public and private pension and profit-sharing
plans, foundations and tax-exempt organizations. Alliance's main office is
located at 1345 Avenue of the Americas, New York, New York 10105.
EQ Financial Consultants, Inc. ("EQF"), subject to the supervision and
direction of the Trustees of EQ Advisors Trust, manages and administers EQ
Advisors Trust. EQF is an investment adviser registered under the Investment
Advisers Act of 1940, and a broker-dealer registered under the Securities
Exchange Act of 1934. EQF currently furnishes specialized investment advice
to other clients, including individuals, pension and profit-sharing plans,
trusts, charitable organizations, corporations, and other business entities.
EQF is a Delaware corporation and an indirect, wholly owned subsidiary of
Equitable Life.
EQF is responsible for providing management and administrative services to EQ
Advisors Trust and selects the investment advisers for EQ Advisors Trust's
Portfolios, monitors the EQ Advisors Trust Advisers' investment programs and
results, reviews brokerage matters, oversees compliance by EQ Advisors Trust
with various Federal and state statutes, and carries out the directives of
its Board of Trustees.
Pursuant to a service agreement, Chase Global Funds Services Company assists
EQF in the performance of its administrative responsibilities to the EQ
Advisors Trust with other necessary administrative, fund accounting and
compliance services. EQ Financial Consultants, Inc.'s main office is located
at 1290 Avenue of the Americas, New York, NY 10104.
T. Rowe Price Associates, Inc., Massachusetts Financial Services Company,
Warburg Pincus Asset Management, Inc., Merrill Lynch Asset Management, L.P.
and Bankers Trust Company serve as the investment advisers (each an
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"EQAT Adviser" and together the "EQAT Advisers") to one or more of the EQ
Advisors Trust portfolios. Each EQAT Adviser is a well known investment fund
manager in the U.S. and/or Europe. Additional information regarding each EQAT
Adviser appears in the EQ Advisors Trust prospectus, which accompanies this
prospectus.
The securities held in the Alliance Growth Equity, Alliance Aggressive Equity
and Alliance Balanced Funds must be authorized or approved by the Investment
Committee of our Board of Directors. Subject to the Investment Committee's
broad supervisory authority, our investment officers and managers have
complete discretion over the assets of these Funds and have been given
discretion as to sales and, within specified limits, purchases of stocks,
other equity securities and certain debt securities. When an investment
opportunity arises that is consistent with the objectives of more than one
account, investment opportunities are allocated among accounts in an
impartial manner based on certain factors such as investment objective and
current investment and cash positions.
We, together with the Holding Company, own 76.2% of the outstanding common
stock of Donaldson, Lufkin & Jenrette, Inc. (DLJ). A DLJ subsidiary,
Donaldson, Lufkin & Jenrette Securities Corporation, is one of the nation's
largest investment banking and securities firms. Another DLJ subsidiary,
Autranet, Inc., is a securities broker that markets independently originated
research to institutions. Through the Pershing Division of Donaldson, Lufkin
& Jenrette Securities Corporation, DLJ supplies correspondent services,
including order execution, securities clearance and other centralized
financial services, to numerous independent regional securities firms and
banks.
To the extent permitted by law and consistent with the Fund transaction
practices discussed in this prospectus, and subject to the consent of Fund
contractholders, the Funds may engage in securities and other transactions
with the above entities or may invest in shares of the investment companies
with which those entities have affiliations. In 1997, there were no such
transactions through DLJ subsidiaries.
VOTING RIGHTS
No voting rights apply to any of the Separate Accounts or to the General
Account Options. As legal owner of the shares of The Hudson River Trust held
in Separate Account No. 51 which invests in units of the Alliance Global,
Alliance Conservative Investors and Alliance Growth Investors Funds and of
the shares of the EQ Advisors Trust held in Separate Account No. 66 which
invests in units of the MFS Research, Warburg Pincus Small Company Value, T.
Rowe Price Equity Income, Merrill Lynch World Strategy and BT Equity 500
Index Funds, we do, however, have the right to vote on certain matters. The
Hudson River Trust and the EQ Advisors Trust are not required to hold annual
meetings of shareholders and may elect not to do so. If a meeting of
shareholders is held, they may vote on such matters as election of directors
and any other matters requiring a vote by shareholders under the 1940 Act.
Equitable Life will vote the shares of The Hudson River Trust allocated to
the Alliance Global, Alliance Conservative Investors and Alliance Growth
Investors Funds and the shares of the EQ Advisors Trust allocated to the MFS
Research, Warburg Pincus Small Company Value, T. Rowe Price Equity Income,
Merrill Lynch World Strategy and BT Equity 500 Index Funds in accordance with
instructions received from employers, participants or trustees, as the case
may be, in the respective Funds. Each participant for whom we maintain
records and, in other cases, the employer or trustee, will be allowed to
instruct us on how to vote shares of The Hudson River Trust in proportion to
their interest in the Alliance Global, Alliance Conservative Investors and
Alliance Growth Investors Funds and of the EQ Advisors Trust in proportion to
their interest in the MFS Research, Warburg Pincus Small Company Value, T.
Rowe Price Equity Income, Merrill Lynch World Strategy and BT Equity 500
Index Funds as of the record date for the shareholder meeting. If we do not
receive instructions in time from all shareholders, we will vote the shares
for which no instructions have been received in the same proportion as we
vote shares for which we have received instructions. If you invest in The
Hudson River Trust and/or the EQ Advisors Trust, you will receive periodic
reports relating to the Trust and proxy material, together with a voting
instruction form, in connection with shareholder meetings.
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Currently, we control The Hudson River Trust and EQ Advisors Trust. These
Trust shares are held by other separate accounts of ours and by separate
accounts of insurance companies unaffiliated with us. Shares held by these
separate accounts will generally be voted according to the instructions of
the owners of insurance policies and contracts funded through those separate
accounts, thus diluting the effect of your voting instructions.
PART VI: PROVISIONS OF THE CONTRACT AND SERVICES WE PROVIDE
ADOPTION OF THE PROGRAM BY EMPLOYERS
To adopt a Members Retirement Program, you as the employer or trustee must
complete the appropriate Participation Agreement. If you would like to
discuss enrollment in the Program, call our Retirement Program Specialists at
1-800-523-1125. They can help you complete the Participation Agreement for
review by your tax advisor.
For our prototype self-directed plan, you as the employer must use the
prototype plan adoption agreement. You must also adopt the Pooled Trust and
arrange separately for plan level recordkeeping and brokerage services. We
will provide recordkeeping services only for assets held in the Pooled Trust.
You can use any plan recordkeeper of your choice or you can arrange through
us to hire Trust Consultants, Inc. at a special rate. In addition, you can
arrange through us brokerage services from our affiliate, Pershing Discount
Brokerage Services, at special rates or use any other broker of your choice.
EMPLOYER RESPONSIBILITIES
If you are an employer and you adopt our Members Retirement Plan, you as the
employer and plan administrator will have certain responsibilities relating
to the administration and qualification of your plan. See Your
Responsibilities as Employer in the SAI for a list of responsibilities which
you will have if you adopt the Members Retirement Plan. If you, as an
employer, have an individually designed plan, you already have these
responsibilities, which will not be increased in any way by your adoption of
the Pooled Trust for investment only. If you utilize our prototype
self-directed plan, you will have responsibilities as the plan administrator
and will also have to appoint a plan trustee; these responsibilities will be
greater than those under the Members Retirement Plan. (You should consult
your legal adviser for an understanding of your legal responsibilities under
the self-directed plan.) If you use an individually designed plan, it is your
responsibility to determine that the terms of your plan are consistent with
the provisions of the Pooled Trust and our practices described in this
prospectus and the SAI. We try in this prospectus to make it clear which
actions you are to take as employer and which you are to take as participant.
We will give you guidance and assistance in the performance of your
responsibilities. The ultimate responsibility, however, rests with you.
CONTRIBUTIONS
EMPLOYER RESPONSIBILITIES
Employers should send contribution checks or money orders payable to
Equitable Life to the address shown under Corresponding With the Program. The
preferred form of payment is a single check in U.S. dollars on your business
or personal account payable to Equitable Life. Payment may also be in the
form of a single money order, bank draft
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or cashier's check payable directly to Equitable Life. These checks, money
orders and drafts are accepted subject to collection. Cash and traveler's
checks are not acceptable. Third party checks endorsed to Equitable Life are
not acceptable forms of payment unless the check is rollover money directly
from a qualified retirement plan, a tax-free exchange under the Internal
Revenue Code, or a trustee check that involves no refund. We reserve the
right to reject a payment if an unacceptable form of payment is received. All
contributions must be allocated by the participant and must be accompanied by
a properly completed Contribution Remittance form. Contributions are credited
on the day of receipt. Failure to use the proper form, or to complete the
form properly, however, may result in a delay in crediting contributions for
the entire business. Employers should not permit employees to send post-tax
contributions directly to the Program. See Your Responsibilities as Employer
in the SAI.
ALLOCATION OF CONTRIBUTIONS BY PARTICIPANTS
o You may allocate your contribution among as many Investment Options as you
wish.
o You may change your allocation instructions as often as you wish by
calling the AIM System. Your new instructions become effective on the
business day we receive them; provided that is before 4 p.m. eastern time,
and the remittance form is properly completed. Current participants should
refer to their AIM System brochures.
o You may allocate employer contributions in different percentages than your
employee contributions. The allocation percentages you elect for employer
contributions will automatically apply to 401(k) qualified non-elective
contributions, qualified matching contributions and matching
contributions. The allocation percentages you elect for employee
contributions will automatically apply to both your post-tax employee
contributions and your 401(k) salary deferral contributions.
o If we have not received valid instructions, we will allocate your
contributions to the Money Market Guarantee Account.
Under the Members Retirement Plan, participants make all investment
allocations. Under an individually designed plan or our self-directed
prototype plan, either the participant or the trustee makes investment
allocations, depending on the terms of the plan.
TRANSFERS AMONG INVESTMENT OPTIONS
GENERAL RULES
o Generally, amounts may be transferred to or from the Investment Options at
any time. However, no transfers from the Guaranteed Rate Accounts are
permitted prior to maturity.
o There is no charge for transfers and no tax liability.
o To make a transfer, give us instructions through the AIM System.
o All transfers are made as of the close of business on the day we receive
your instructions, provided we receive your request by 4:00 p.m. eastern
time. Transfers by phone must be made and confirmed by 4:00 p.m. eastern
time. Transfer requests completed after that time or on a non-business day
will be processed as of the close of business on the following business
day.
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To transfer by telephone, you must have a Personal Security Code (PSC)
number. You must have a touch-tone telephone to make transfers on the AIM
System. Procedures have been established by Equitable Life that are
considered to be reasonable and are designed to confirm that instructions
communicated by telephone are genuine. Such procedures include requiring
certain personal identification information prior to acting on telephone
instructions and providing written confirmation of instructions communicated
by telephone. If Equitable Life does not employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, it may be
liable for any losses arising out of any action on its part or any failure or
omission to act as a result of its own negligence, lack of good faith, or
willful misconduct. In light of the procedures established, Equitable Life
will not be liable for following telephone instructions that it reasonably
believes to be genuine. We may discontinue the telephone transfer service at
any time without notice.
PAYMENTS OR WITHDRAWALS FROM THE FUNDS
Payments or withdrawals out of the Funds ordinarily will be made promptly
upon request in accordance with Plan provisions. However, we can defer
payments, applications and withdrawals from the Funds for any period during
which the New York Stock Exchange is closed for trading, sales of securities
are restricted or determination of the fair market value of assets of the
Funds is not reasonably practicable because of an emergency.
DISTRIBUTIONS AND BENEFIT PAYMENT OPTIONS
PARTICIPANT BENEFITS: RETIREMENT, DISABILITY AND TERMINATION OF EMPLOYMENT
Under the Members Retirement Plan or our self-directed prototype plan, you
are eligible for benefits upon retirement, death or disability, or upon
termination of employment with a vested benefit. ("Vested" refers to the
nonforfeitable portion of your benefits under the plan.) If you are a
participant in an individually designed plan, your eligibility for retirement
benefits depends on the terms of that plan. If you own more than 5% of the
business, you must begin to receive your benefits no later than April 1 of
the year after you reach age 70 1/2. For all other participants, distribution
must begin by April 1st of the later of the year after attaining age 70 1/2
or retirement from the employer sponsoring the plan.
The Program is flexible as to how and when you can receive your benefits, but
you are also subject to extremely complicated legal requirements. Certain
plan distributions may result in penalty taxes. A general explanation of the
federal income tax treatment of distributions and benefit payment options is
provided in Federal Income Tax Considerations in both this prospectus and the
SAI. If you retire, become disabled or terminate your employment, you should
discuss the available options with your financial advisor. Our Account
Executives can be of assistance.
PARTICIPANT WITHDRAWALS PRIOR TO RETIREMENT
o You may withdraw all or part of your Account Balance under the Members
Retirement Plan attributable to post-tax employee contributions at any
time, provided that you withdraw at least $300 at a time (or, if less,
your entire post-tax Account Balance). See Part VIII: Federal Income Tax
Considerations.
o If you are married, your spouse must generally consent in writing before
you can make any type of withdrawal, except for the purchase of a
Qualified Joint and Survivor Annuity.
o Self-employed persons may generally not receive a distribution prior to
age 59 1/2.
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o Employees may generally not receive a distribution prior to separation
from service.
o Hardship withdrawals before age 59 1/2 may be permitted under 401(k) and
certain other profit sharing plans.
Under an individually designed plan and our self-directed plan, the
availability of pre-retirement withdrawals depends on the terms of the plan.
We suggest that you ask your employer what types of withdrawals are available
under your plan. See Procedures for Withdrawals, Distributions and Transfers
in the SAI for a more detailed discussion of these general rules.
Generally you may not make withdrawals from the Guaranteed Rate Accounts
prior to maturity. See The Guaranteed Rate Accounts in Part III.
PARTICIPANT DEATH BENEFITS
o If you die before the entire benefit due you has been paid, the remainder
of your benefits will be paid to your beneficiary.
o If you die before you are required to begin receiving benefits, the law
requires your entire benefit to be distributed no more than five years
after your death. There are exceptions--(1) A beneficiary who is not your
spouse may elect payments over his/her life or a fixed period which does
not exceed the beneficiary's life expectancy, provided payments begin
within one year of your death. (2) If your benefit is payable to your
spouse, your spouse may elect to receive benefits over his/her life or a
period certain which does not exceed his or her life expectancy beginning
any time up to the date you would have attained age 70 1/2 or, if later,
one year after your death, or (3) Your spouse may be able to roll over all
or part of the death benefit to an individual retirement arrangement.
o If at your death you were already receiving annuity benefits, your
beneficiary will receive the survivor benefits, if any, under the form of
the annuity selected. If an annuity benefit was not selected, your
beneficiary can continue to receive benefits based on the payment option
you selected or can select a different payment option so long as payments
are made at least as rapidly as with the payment option you originally
selected.
o To designate a beneficiary or to change an earlier designation, have your
employer send us your completed beneficiary designation form. Your spouse
must consent in writing to a designation of any non-spouse beneficiary, as
explained in Procedures for Withdrawals, Distributions and
Transfers--Spousal Consent Requirements in the SAI.
If you are a participant in the Members Retirement Plan and you die without
designating a beneficiary, your vested benefit will automatically be paid to
your spouse or, if you are not married, to the first surviving class of (a)
your children, (b) your parents and (c) your brothers and sisters. If none of
them survive you, your vested benefit will be paid to your estate. If you are
a participant in our prototype self-directed plan and you die without
designating a beneficiary, your vested benefit will automatically be paid to
your spouse or, if you are not married, to the first surviving class of (a)
your children, (b) your grandchildren, (c) your parents, (d) your brothers
and sisters and (e) your nephews and nieces. If none of them survive you,
your vested benefit will be paid to your estate.
Under the Members Retirement Plan, on the day we receive proof of your death,
we automatically transfer your Account Balance in the Funds to the Money
Market Guarantee Account unless your beneficiary instructs otherwise. All
amounts are held until your beneficiary requests a distribution or transfer.
Our Account Executives can explain these and other requirements affecting
death benefits.
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BENEFIT PAYMENT OPTIONS
Once you are eligible to receive benefits you may, if your plan permits,
select one or more of the following forms of distribution:
o Qualified Joint and Survivor Annuity
o Installment Payments
o Lump Sum Payment
o Life Annuity
o Life Annuity--Period Certain
o Joint and Survivor Annuity
o Joint and Survivor Annuity--Period Certain
o Cash Refund Annuity
See Types of Benefits in the SAI for detailed information regarding each of
the above options, and Procedures for Withdrawals, Distributions and
Transfers in the SAI.
If you are married and the value of your account balance or vested benefits
is greater than $5,000, federal law generally requires you to receive a
Qualified Joint and Survivor Annuity payable to you for life and then to your
surviving spouse for life, unless you and your spouse have properly waived
that form of payment in advance. Certain self-directed prototypes and
individually designed plans are not subject to this requirement.
Under the Members Retirement Plan and the self-directed prototype plan, you
may designate a non-spouse beneficiary any time after the earlier of the
first day of the plan year in which you attain age 35 or the date on which
you separate from service with your employer. If you designate a beneficiary
other than your spouse prior to your reaching age 35, your spouse must
consent to the designation and, upon your reaching age 35, must again give
his or her consent or the designation will lapse. In order for you to make a
withdrawal, elect a form of benefit other than a Qualified Joint and Survivor
Annuity or designate a non-spouse beneficiary, your spouse must consent to
your election in writing within the 90 day period before your annuity
starting date. To consent, your spouse must sign on the appropriate line on
your election of benefits or beneficiary designation form. Your spouse's
signature must be witnessed by a notary public or plan representative.
If you change your mind, you may revoke your election and elect a Qualified
Joint and Survivor Annuity or designate your spouse as beneficiary, simply by
filing the appropriate form. Your spouse's consent is not required for this
revocation.
It is also possible for your spouse to sign a blanket consent form. By
signing this form, your spouse gives you the right to name any beneficiary
or, if applicable, form of distribution you want. Once you file such a form,
you may change your election whenever you want, even without spousal consent.
Spousal consent to a withdrawal or benefit in a form other than a Qualified
Joint and Survivor Annuity is not required under certain self-directed
prototype profit sharing plans that do not offer life annuity benefits.
The minimum amount that can be used to purchase any type of annuity is
$5,000. Usually, an annuity administrative charge of $350 will be deducted
from the amount used to purchase the annuity. If we give any group pension
client with a qualified plan a better annuity purchase rate than those
currently guaranteed under the Program, we will also make those rates
available to Program participants. The annuity administrative charge may be
greater than $350 in that case.
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LOANS TO PARTICIPANTS
The Members Retirement Plan permits you to borrow a portion (not to exceed
$50,000) of your vested Account Balance in all your plans, if your employer
has elected this feature. Your employer can tell you whether loans are
available under your plan. If you are a sole proprietor, a partner who owns
more than 10% of the business, or a shareholder-employee of an S Corporation
who owns more than 5% of the business (including family members of these
prohibited individuals), you presently may not borrow from your vested
Account Balance without first obtaining a prohibited transaction exemption
from the Department of Labor. Consult with your attorney or tax advisor
regarding the advisability and procedures for obtaining such an exemption.
Loans are also available under our self-directed prototype plan and under an
individually designed plan if the terms of your plan allow them.
You, the participant, must pay interest on your loan; the interest paid may
not be deductible. All interest that you pay will be added to your Account
Balance and will be taxable upon distribution. If you fail to repay the loan
when due, the amount of the unpaid balance may be taxable and subject to
additional penalty taxes. Loans are subject to restrictions under federal tax
laws, and all plans of the employer are aggregated for purposes of these
restrictions. You should apply for a loan through your employer. Loan kits
containing all necessary forms, along with an explanation of how to set
interest rates, are available from our Account Executives. YOU MAY NOT TAKE A
LOAN FROM THE GUARANTEED RATE ACCOUNTS PRIOR TO MATURITY. IF YOU ARE MARRIED,
YOUR SPOUSE MUST CONSENT IN WRITING BEFORE YOU CAN TAKE A LOAN.
YEAR 2000 PROGRESS
We rely upon various computer systems in order to administer the Program and
operate the Investment Options. Some of these systems belong to service
providers who are not affiliated with us. In 1995, we began addressing the
question of whether our computer systems would recognize the year 2000
before, on and after January 1, 2000 and we believe we have identified those
of our systems critical to business operations that are not Year 2000
compliant. By year end 1998, we expect that the work of modifying or replacing
non-compliant systems will substantially be completed and expect a
comprehensive test of its Year 2000 compliance will be performed in the first
half of 1999. We are in the process of seeking assurances from third party
service providers that they are acting to address the Year 2000 issue with
the goal of avoiding any material adverse effect on services provided to you
and on operations of the Investment Options. Any significant unsolved
difficulty related to the Year 2000 compliance initiatives could have a
material adverse effect on the ability to administer the Program and operate
the Investment options. Assuming the timely completion of computer
modifications by us and third-party service providers, there should be no
material adverse effect on our ability to perform these functions.
The Year 2000 issue may impact issuers of portfolio securities held by the
Investment Options to varying degrees. We are unable to predict what impact,
if any, the Year 2000 issue will have on issuers of portfolio securities held
by the Investment Options.
PART VII: DEDUCTIONS AND CHARGES
No deductions are made from contributions or withdrawals for sales expenses.
Fees and charges apply to amounts held for each plan. Asset-based fees are
charged against the assets of each Fund. The Unit Values of the Funds are
reduced to reflect the deduction of those fees. Rates for Guaranteed Rate
Accounts
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and for the Money Market Guarantee Account reflect the deduction of
applicable asset-based fees. Unless otherwise noted, fees which are set in
fixed dollar amounts are deducted by reducing the number of Units in the
appropriate Funds and the number of dollars in each General Account Option.
The amount allocable to the three-year or five-year Guaranteed Rate Account
will be taken from your most recent GRA in that Account.
MEMBERS RETIREMENT PLAN (PENSION AND PROFIT SHARING),
PROTOTYPE SELF-DIRECTED PLAN AND INVESTMENT ONLY FEES
RECORD MAINTENANCE AND REPORT FEE. At the end of each calendar quarter, we
deduct a record maintenance and report fee of $3.75 from your Account
Balance. We reserve the right to charge varying fees based on the requested
special mailings, reports and services given to your retirement plan, if you
request special mailings, reports, and services.
ENROLLMENT FEE. There is a non-refundable one-time enrollment fee of $25 for
each participant. If the enrollment fee is not paid by your employer, it may
be deducted from contributions or from your Account Balance. We may waive
this fee under certain circumstances. If we do not maintain individual
participant records under the Pooled Trust, the employer is instead charged
$25 for each plan or trust.
PROTOTYPE SELF-DIRECTED PLAN FEES. An employer who participates in our
prototype self-directed plan will incur additional fees not payable to us,
such as brokerage and administration fees.
PROGRAM EXPENSE CHARGE. A daily charge at an annual rate of 1.00% is made
against your account balance. All investment returns and interest rates
reflect the deduction of this charge.
This fee is applied toward the cost of maintenance of the Investment Options,
promotion of the Program, commissions, administrative costs, such as
enrollment and answering participant inquiries, and overhead expenses such as
salaries, rent, postage, telephone, travel, legal, actuarial and accounting
costs, office equipment and stationery. During 1997, we received $1,889,847
under the Program Expense Charge.
INVESTMENT MANAGEMENT AND ACCOUNTING FEES. These charges apply only to assets
in the Funds named below. These charges are reflected in the computation of
the Unit Values applicable for each Fund.
We receive fees for investment management services for the Alliance Growth
Equity, Alliance Aggressive Equity and Alliance Balanced Funds. The
investment management and accounting fee covers the investment management and
financial accounting services we provide for these Funds, as well as a
portion of our related administrative costs. This fee is charged daily at an
effective annual rate of .50% of the net assets of the Alliance Growth Equity
and Balanced Funds and an effective annual rate of .65% for the Alliance
Aggressive Equity Fund.
We receive fees for financial accounting services for the Alliance Global,
Alliance Conservative Investors and Alliance Growth Investors Funds. This fee
is charged daily at an effective annual rate of .20% of the net assets of
these Funds.
HUDSON RIVER TRUST ANNUAL EXPENSES. The Alliance Global, Alliance
Conservative Investors and Alliance Growth Investors Funds are indirectly
subject to investment advisory and other expenses charged against assets of
the corresponding Portfolios of The Hudson River Trust. These expenses are
described in The Hudson River Trust prospectus accompanying this prospectus.
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EQ ADVISORS TRUST ANNUAL EXPENSES. The MFS Research, Warburg Pincus Small
Company Value, T. Rowe Price Equity Income, Merrill Lynch World Strategy and
BT Equity 500 Index Funds are subject to investment management and advisory
fees, 12b-1 fees and other expenses charged against assets of the
corresponding Portfolios of the EQ Advisors Trust. These expenses are
described in the EQ Advisors Trust prospectus accompanying this prospectus.
OTHER EXPENSES. Certain costs and expenses are charged directly to the Funds.
These may include transfer taxes, Securities and Exchange Commission filing
fees and certain related expenses including printing of SEC filings,
prospectuses and reports, proxy mailings, other mailing costs, legal expenses
and (for the Alliance Global, Conservative Investors and Growth Investors
Funds only) custodians' fees and outside auditing expenses.
ANNUITY ADMINISTRATIVE CHARGE. If a participant elects an annuity option, a
$350 charge will usually be deducted from the amount used to purchase the
annuity to reimburse us for administrative expenses associated with
processing the application for the annuity and with issuing each month's
annuity payment. See Distributions and Benefit Payment Options in Part VI for
details.
PREMIUM TAXES. In certain jurisdictions, amounts used to purchase an annuity
are subject to charges for premium and other applicable taxes (rates
currently range up to 5%). Taxes depend, among other things, on your place of
residence, applicable laws and the retirement benefit you select. We will
deduct such charges based on your place of residence at the time the annuity
payments begin.
FEES PAID TO ASSOCIATIONS. We may pay associations a fee for enabling the
Program to be made available to their memberships. The fee may be based on
the number of employers whom we solicit, the number who participate in the
Program, and/or the value of Program assets. We make these payments without
any additional deduction or charge under the Program.
GENERAL. We will give you written notice of any change in the fees and
charges. We may also establish a separate fee schedule for requested
non-routine administrative services. During 1997 we received total fees and
charges under the Program of $3,040,831.
PART VIII: FEDERAL INCOME TAX CONSIDERATIONS
Current federal income tax rules relating to adoption of the Program and
generally to distributions to participants under qualified retirement plans
are outlined briefly below. The rules relating to contributions are outlined
briefly in the SAI under Provisions of the Members Retirement Plan. For
purposes of this outline we have assumed that you are not a participant in
any other qualified retirement plan. We have not attempted to discuss other
current federal income tax rules that govern participation, vesting, funding
or prohibited transactions, although some information on these subjects
appears here and in the SAI; nor do we discuss the reporting and disclosure
or fiduciary requirements of the Employee Retirement Income Security Act. In
addition, we do not discuss the effect, if any, of state tax laws that may
apply. FOR INFORMATION ON THESE MATTERS, WE SUGGEST THAT YOU CONSULT YOUR TAX
ADVISOR.
TAX CHANGES
The United States Congress has in the past considered and may in the future
consider proposals for legislation that, if enacted, could change the tax
treatment of annuities. In addition, the Treasury Department may amend
existing regulations, issue new regulations, or adopt new interpretations of
existing laws. State tax laws or, for United States
36
<PAGE>
residents, foreign tax laws, may affect the tax consequences to the
Participant or the beneficiary. These laws may change from time to time
without notice and, as a result, the tax consequences may be altered. There
is no way of predicting whether, when or in what form any such change would
be adopted.
Any such change could have retroactive effects regardless of the date of
enactment. For information on these matters, we suggest consulting your tax
adviser.
The Internal Revenue Service does not have to approve your adoption of the
Pooled Trust. If you adopt the Members Retirement Plan, you will not need IRS
approval unless you adopt certain provisions. We will tell you whether it is
desirable for you to submit your plan to the Internal Revenue Service for
approval. If you make such a submission, you will have to pay an IRS user's
fee.
DISTRIBUTIONS: TAX CONSEQUENCES
In this section, the word "you" refers to the plan participant.
Amounts distributed to a participant from a qualified plan are generally
subject to federal income tax as ordinary income when benefits are
distributed to you or your beneficiary. Generally speaking, only your
post-tax contributions, if any, are not taxed when distributed.
LUMP SUM DISTRIBUTIONS. If your benefits are distributed to you in a lump sum
after you have participated in the plan for at least five taxable years, you
may be able to use five-year averaging. Under this method, the tax on the
lump sum distribution is calculated separately from taxes on any other income
you may have during the year. The tax is calculated at ordinary income tax
rates in the year of the distribution, but as if it were your only income in
each of five years. The tax payable is the sum of the five years'
calculations. To qualify for five-year averaging, the distribution must
consist of your entire balance in the plan and must be made in one taxable
year of the recipient after you have attained age 59 1/2. Five-year averaging
is available only for one lump sum distribution.
If you were born before 1936, you may elect to have special rules apply to
one lump sum distribution. You may elect either ten-year averaging using 1986
rates or five-year averaging using then current rates. In addition, you may
elect separately to have the portion of your distribution attributable to
pre-1974 contributions taxed at a flat 20% rate.
Effective January 1, 2000, five year averaging on lump sum distributions may
no longer be used.
ELIGIBLE ROLLOVER DISTRIBUTIONS. Many types of distributions from qualified
plans are "eligible rollover distributions" that can be transferred directly
to another qualified plan or individual retirement arrangement ("IRA"), or
rolled over to another plan or IRA within 60 days of the receipt of the
distribution. If a distribution is an "eligible rollover distribution," 20%
mandatory federal income tax withholding will apply unless the distribution
is directly transferred to a qualified plan or IRA. See Eligible Rollover
Distributions and Federal Income Tax Withholding in the SAI for a more
detailed discussion.
ANNUITY OR INSTALLMENT PAYMENTS. Each payment you receive is treated as
ordinary income except where you have a "cost basis" in the benefit. Your
cost basis is equal to the amount of your post-tax employee contributions,
plus any employer contributions you were required to include in gross income
in prior years. A portion of each annuity or installment payment you receive
will be excluded from gross income. If you (and your survivor) continue to
receive payments after your cost basis has been paid out, all amounts will be
taxable.
37
<PAGE>
IN-SERVICE WITHDRAWALS; HARDSHIP WITHDRAWALS. Some plans allow in-service
withdrawals of after-tax contributions. The portion of each in-service
withdrawal attributable to cost basis is received income tax-free. The
portion that is attributable to earnings will be included in your gross
income. Amounts contributed before January 1, 1987 to employer plans which on
May 5, 1986 permitted such withdrawals are taxable withdrawals only to the
extent that they exceed the amount of your cost basis. Other amounts are
treated as partly a return of cost basis with the remaining portion treated
as earnings. Amounts included in gross income under this rule may also be
subject to the additional 10% penalty tax on premature distributions
described below. In addition, 20% mandatory federal income tax withholding
may also apply.
PREMATURE DISTRIBUTIONS. You may be liable for an additional 10% penalty tax
on all taxable amounts distributed before age 59 1/2 unless the distribution
falls within a specified exception or is rolled over into an IRA or other
qualified plan.
The exceptions to the penalty tax include (a) distributions made on account
of your death or disability, (b) distributions beginning after separation
from service in the form of a life annuity or installments over your life
expectancy (or the joint lives or life expectancies of you and your
beneficiary), (c) distributions due to separation from active service after
age 55 and (d) distributions used to pay deductible medical expenses.
WITHHOLDING. Under the Members Plans, 20% mandatory income tax withholding
will apply to all "eligible rollover distributions" that are not directly
rolled over to a qualified plan or IRA. If a distribution is not an eligible
rollover distribution, the recipient may elect out of withholding. See
Eligible Rollover Distributions and Federal Income Tax Withholding in the
SAI. Under an individually designed plan or our prototype self-directed plan
that uses the Pooled Trust for investment only, we will pay the full amount
of the distribution to the plan's trustee. The trustee is responsible for
withholding federal income tax upon distributions to you or your beneficiary.
OTHER TAX CONSEQUENCES. Federal estate and gift and state and local estate,
inheritance, and other tax consequences of participation in the Program
depend on the residence and the circumstances of each participant or
beneficiary. For complete information on tax considerations, you should
consult a qualified tax advisor.
PART IX: MISCELLANEOUS
CHANGE OR DISCONTINUANCE OF THE PROGRAM. The group annuity contract has been
amended from time to time, and may be amended in the future. No future change
can affect annuity benefits in the course of payment. Provided certain
conditions are met, we may terminate the offer of any of the Investment
Options and offer new ones with different terms.
We may terminate the contract at any time. If the contract is terminated, we
will not accept any further contributions. We will continue to hold amounts
allocated to the Guaranteed Rate Accounts until maturity. Amounts already
invested in the Investment Options may remain in the Program and you may also
elect payment of benefits through us.
DISQUALIFICATION OF PLAN. If your plan is found not to qualify under the
Internal Revenue Code, we may return the plan's assets to the employer, as
the plan administrator, or we may disallow future investments in the separate
accounts.
38
<PAGE>
REPORTS. We send reports annually to employers showing the aggregate Account
Balances of all participants and information necessary to complete annual IRS
filings.
TRUSTEE. The sole responsibility of Chase Manhattan Bank is to serve as a
party to the group annuity contract. It has no responsibility for the
administration of the Program or for any distributions or duties under the
group annuity contract.
REGULATION. We are subject to regulation and supervision by the Insurance
Department of the State of New York, which periodically examines our affairs.
We are also subject to the insurance laws and regulations of all
jurisdictions in which we are authorized to do business. This regulation does
not, however, involve any supervision of the investment policies of the Funds
or of the selection of any investments except to determine compliance with
the law of New York. We are required to submit annual statements of our
operations, including financial statements, to the insurance departments of
the various jurisdictions in which we do business for purposes of determining
solvency and compliance with local insurance laws and regulations.
LEGAL PROCEEDINGS. Equitable Life and its affiliates are parties to various
legal proceedings, none of which, in our view, are likely to have a material
adverse affect upon the Separate Account, or our ability to meet our
obligations under the Program.
ADDITIONAL INFORMATION. A registration statement relating to the offering
described in this prospectus has been filed with the Securities and Exchange
Commission under the Securities Act of 1933. Certain portions of the
Registration Statement have been omitted from this prospectus and the SAI
pursuant to the rules and regulations of the Commission. The omitted
information may be obtained by requesting a copy of the registration
statement from the Commission's principal office in Washington, D.C., and
paying the Commission's prescribed fees or by accessing the Securities and
Exchange Commission's Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) System.
EXPERTS. The financial statements as of December 31, 1997 and for each of the
two years in the period then ended included in the SAI for Separate Account
Nos. 3, 4, 10, and 51 and for one year in the period then ended for Separate
Account No.66 and the condensed financial information for each of the five
years shown for Separate Account Nos. 3, 4, 10 and 51, and for one year for
Separate Account No. 66 in the period ended December 31, 1997 included in
this prospectus and the financial statements as of December 31, 1997 and for
each of the three years in the period ended December 31, 1997 included in the
SAI for Equitable Life have been so included in reliance upon the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
ACCEPTANCE. The employer or plan sponsor, as the case may be, is solely
responsible for determining whether the Program is a suitable funding vehicle
and should, therefore, carefully read the prospectus and installation
materials before entering into a Participation Agreement.
39
<PAGE>
TABLE OF CONTENTS
OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
The Contract...................................... SAI-2
Your Responsibilities as Employer................. SAI-2
Procedures for Withdrawals, Distributions
and Transfers.................................... SAI-3
Types of Benefits................................. SAI-6
Provisions of the Members Retirement Plan ....... SAI-8
Investment Restrictions Applicable to the
Alliance Growth Equity, Aggressive Equity and
Balanced Funds................................... SAI-11
How We Value the Assets of the Funds.............. SAI-12
Summary of Unit Values for the Funds.............. SAI-13
Fund Transactions................................. SAI-14
Investment Management and Financial
Accounting Fee................................... SAI-16
Underwriter....................................... SAI-16
Our Management.................................... SAI-17
Financial Statements.............................. SAI-19
</TABLE>
CLIP AND MAIL TO US TO RECEIVE A
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------------------------------------------------
To: The Equitable Life Assurance Society
of the United States
Box 2468 G.P.O.
New York, NY 10116
Please send me a copy of the Statement of Additional Information for the
Members Retirement Program Prospectus dated May 1, 1998.
Name:
--------------------------------------------------------------------
Address:
--------------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-----------------------------------------------------------------------------
40
<PAGE>
INVESTMENT OPTION CHARACTERISTICS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
ALLIANCE GROWTH ALLIANCE AGGRESSIVE ALLIANCE BALANCED ALLIANCE GLOBAL
EQUITY FUND EQUITY FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Designed for Long term growth of Long term growth of Competitive return Long term growth of
(Objective) capital capital through a combination capital
of growth of capital
and current income
Invests Primarily in Common stocks and other Common stocks and other Common stocks and other The Global Portfolio
equity-type securities equity-type securities equity-type securities, of the Hudson River
generally issued by issued by medium and publicly traded debt Trust, which in turn,
large and smaller sized companies securities and money primarily invests in
intermediate-sized with strong growth market instruments--mix equity securities of
companies potential determined by portfolio non-United States as
manager well as United States
companies
Risk to Principal Average for a growth Greatest risk of all Somewhat lower than the Just below average for
fund Alliance Funds Growth Equity Fund a growth fund
Primary Growth Capital appreciation Capital appreciation Capital appreciation, Capital appreciation
Potential and reinvested reinvested dividends
Through dividends and interest
Income Guarantee No No No No
Volatility of Somewhat more volatile Highly volatile Generally lower than Somewhat more volatile
Return than the S&P 500 pure equity funds, but than the S&P 500
degree may vary
depending on market
conditions
Transfers to Other Permitted daily Permitted daily Permitted daily Permitted daily
Options
Withdrawal No No No No
Penalties
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
- -----------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS
ALLIANCE CONSERVATIVE ALLIANCE GROWTH MFS RESEARCH SMALL COMPANY
INVESTORS FUND INVESTORS FUND FUND VALUE FUND
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Designed for High total return without High total return Long term growth of Long term capital
(Objective) undue risk to principal consistent with capital and appreciation
reasonable risk future income
Invests Primarily in The Conservative The Growth Investors Common stocks or Portfolio of equity
Investors Portfolio of Portfolio of the securities convertible securities of small
the Hudson River Trust, Hudson River Trust, into common stock of capitalization
which in turn, primarily which in turn, companies that possess companies that are
invests in a diversified primarily invests in a better than average considered relatively
mix of publicly-traded diversified mix of prospects for undervalued
securities. Asset mix publicly-traded long-term growth
generally consists of 30% securities. Asset mix
equity and 70% fixed generally consists of
income securities but 30% fixed income and
will vary depending on 70% equity securities
market conditions. but will vary
depending on market
conditions.
Risk to Principal Lowest risk of all equity Below average for a Average for a fund Greater than the S&P
options growth fund with moderate growth 500
Primary Growth Capital appreciation, Capital appreciation, Capital appreciation Long-term capital
Potential reinvested dividends and reinvested dividends and income appreciation with
Through interest and interest current income
Income Guarantee No No No No
Volatility of Very low volatility Somewhat less volatile Somewhat more volatile More volatile than the
Return than the S&P 500 than the S&P 500 S&P 500
Transfers to Other Permitted daily Permitted daily Permitted daily Permitted daily
Options
Withdrawal No No No No
Penalties
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE MERRILL LYNCH BT EQUITY MONEY MARKET
EQUITY INCOME WORLD STRATEGY 500 INDEX GUARANTEED GUARANTEE
FUND FUND FUND RATE ACCOUNTS ACCOUNT
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Designed for Substantial High total investment Replicate, as closely Principal and interest Principal and
(Objective) dividend income return as possible (before guaranteed--interest interest guaran-
and capital deduction of expenses) rates reflect teed--short
appreciation the total return of the maturities term--rates
S&P 500 Index
Invests Primarily in Dividend-paying Portfolio of equity and The BT Equity 500 Index Contributions credited Contributions
common stocks fixed income Portfolio invests in with fixed rate of credited with
of established securities, including a statistically interest until the guaranteed
companies convertible securities selected sample maturity date current rate of
of U.S. and foreign of the 500 stocks in interest
issuers the S&P 500.
Risk to Principal Lower risk than Greater risk than a Approximately equal to Equitable Life Equitable Life
a fund focusing domestic bond fund the S&P 500 index guarantees principal guarantees
on growth stocks, and interest principal and
but greater risk interest
than a bond fund.
Primary Growth Dividend income Capital appreciation Capital appreciation Interest income Interest income
Potential and capital and reinvested and reinvested
Through appreciation dividends dividends
Income Guarantee No No No Yes--subject to Yes
withdrawal
penalties
Volatility of Somewhat more Not available per Fund Generally equal to the Equitable Life Equitable Life
Return volatile than manager S&P 500 Index guarantees interest guarantees
the S&P 500 rate until the monthly interest
maturity date rate
Transfers to Other Permitted daily Permitted daily Permitted Daily Permitted only at Permitted daily
Options maturity
Withdrawal No No No Prior to maturity, No
Penalties withdrawals may not be
permitted or may be
subject to penalty
</TABLE>
The Funds each have different investment objectives and policies that can
affect the returns of each Fund and the market and financial risks to which
each is subject. The Funds involve a greater potential for growth but involve
risks that are not present with the Guaranteed Options. There is no assurance
that any of the investment objectives of the Funds will be achieved or that
the risk to principal or volatility of return will be as indicated.
<PAGE>
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
MAY 1, 1998
MEMBERS RETIREMENT PROGRAM OF
THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
Separate Account Units of interest under a group annuity contract with THE
EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, 1290 Avenue of The
Americas, New York, New York 10104, which funds the Members Retirement
Program. Toll-free telephone number 1-800-526-2701.
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the prospectus dated May 1, 1998 for the Members
Retirement Program of The Equitable Life Assurance Society of the United
States.
A copy of the prospectus to which this Statement of Additional Information
relates is available at no charge by writing to Equitable Life at Box 2468
G.P.O., New York, New York 10116 or by calling our toll-free telephone
number.
The following information is contained primarily in the prospectus:
Investment Objectives and Policies
Investment Advisory Services
Certain of the cross references in this Statement of Additional Information
are contained in the prospectus dated May 1, 1998 to which this Statement of
Additional Information relates.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
The Contract................................................. SAI-2
Your Responsibilities as Employer............................ SAI-2
Procedures for Withdrawals, Distributions and
Transfers................................................... SAI-3
Pre-Retirement Withdrawals................................. SAI-3
Benefit Distributions...................................... SAI-3
Spousal Consent Requirements............................... SAI-4
Eligible Rollover Distributions and Federal Income
Tax Withholding........................................... SAI-4
Premature Withdrawals and Transfers from a
GRA....................................................... SAI-5
Maturing GRAs.............................................. SAI-6
Types of Benefits............................................ SAI-6
Provisions of the Members Retirement Plan.................... SAI-8
Plan Eligibility Requirements.............................. SAI-8
Contributions to Qualified Plans........................... SAI-8
Contributions to the Members
Retirement Plan........................................... SAI-8
The Members Retirement Plan and Section
404(c) of ERISA........................................... SAI-10
Vesting.................................................... SAI-11
Investment Restrictions Applicable to the Alliance Growth
Equity, Alliance Aggressive Equity and Alliance Balanced
Funds....................................................... SAI-11
How We Value the Assets of the Funds......................... SAI-12
Summary of Unit Values for the Funds......................... SAI-13
Fund Transactions............................................ SAI-14
Investment Management and Financial Accounting
Fee........................................................ SAI-16
Underwriter.................................................. SAI-16
Our Management............................................... SAI-17
Financial Statements......................................... SAI-19
</TABLE>
- ------------
Copyright 1998 by The Equitable Life Assurance Society of The United States.
All rights reserved.
<PAGE>
ADDITIONAL INFORMATION ABOUT THE PROGRAM
THE CONTRACT
The Program is funded through a group annuity contract with The Equitable
Life Assurance Society of the United States (Equitable Life). The contract
governs the Investment Options that are offered under the Program. Equitable
Life has the right to terminate the contract. See Part IX:
Miscellaneous--Change or Discontinuance of the Program in the prospectus. The
Trustee holds the contract for the benefit of employers and participants in
the Program.
YOUR RESPONSIBILITIES AS EMPLOYER
If you adopt the Members Retirement Plan, you as the employer and plan
administrator will have certain responsibilities, including:
o sending us your contributions at the proper time and in the proper
form;
o maintaining all personnel records necessary for administering your
plan;
o determining who is eligible to receive benefits;
o forwarding to us all the forms your employees are required to submit;
o distributing summary plan descriptions and participant annual reports
to your employees and former employees;
o distributing our prospectuses and confirmation notices to your
employees and, in some cases, former employees, if under your plan they
can direct the investment of their account balances;
o filing an annual information return for your plan with the Internal
Revenue Service, if required;
o providing us the information with which to run special
non-discrimination tests, if you have a 401(k) plan or your plan
accepts post-tax employee or employer matching contributions;
o determining the amount of all contributions for each participant in the
plan;
o forwarding salary deferral and post-tax employee contributions to us;
o selecting interest rates and monitoring default procedures, if you
elect the loan provisions in the plan; and
o providing us with written instructions for allocating forfeiture
amounts for the plan year the forfeiture occurs.
If you, as an employer, have an individually designed plan, your
responsibilities will not be increased in any way by your adoption of the
Pooled Trust. If you adopt our self-directed prototype plan, you will be
completely responsible for administering the plan and complying with all of
the reporting and disclosure requirements applicable to qualified plans, with
the assistance of the recordkeeper of your choice.
We will give you guidance and assistance in the performance of your
responsibilities. The ultimate responsibility, however, rests with you. If
you have questions about any of your obligations, you can contact our Account
Executives at 1-800-526-2701 or write to the Members Retirement Program at
Box 2468 G.P.O., New York, New York 10116.
SAI-2
<PAGE>
PROCEDURES FOR WITHDRAWALS, DISTRIBUTIONS AND TRANSFERS
PRE-RETIREMENT WITHDRAWALS. Under the Members Retirement Plan, self-employed
persons may generally not receive a distribution prior to age 59 1/2, and
employees may generally not receive a distribution prior to separation from
service. However, if your employer maintains the Members Retirement Plan as a
profit sharing plan, you may request distribution of benefits after you reach
age 59 1/2 even if you are still working. In addition, if your employer has
elected to make hardship withdrawals available under your plan, you may request
distribution before age 59 1/2 in the case of financial hardship (as defined in
your plan). In a 401(k) plan, the plan's definition of hardship applies to
employer contributions but not to your 401(k) contributions--including employee
pre-tax contributions, employer qualified non-elective contributions and
qualified matching contributions. To withdraw your own 401(k) contributions,
plus interest earned on these amounts prior to 1989, you must demonstrate
financial hardship within the meaning of applicable Income Tax Regulations.
Each withdrawal must be at least $1,000 (or, if less, your entire Account
Balance or the amount of your hardship withdrawal under a profit sharing or
401(k) plan). If your employer terminates the plan, all amounts (subject to GRA
restrictions) may be distributed to participants at that time.
YOU MAY WITHDRAW ALL OR PART OF YOUR ACCOUNT BALANCE UNDER THE MEMBERS
RETIREMENT PLAN ATTRIBUTABLE TO POST-TAX EMPLOYEE CONTRIBUTIONS AT ANY TIME,
SUBJECT TO ANY WITHDRAWAL RESTRICTIONS APPLICABLE TO THE INVESTMENT OPTIONS,
provided that you withdraw at least $300 at a time (or, if less, your Account
Balance attributable to post-tax employee contributions). See Federal Income
Tax Considerations in the prospectus.
All benefit payments (including withdrawals due to plan terminations) will be
paid in accordance with the rules described below under Benefit Distributions.
All other withdrawals will be effected as of the close of business on the day
we receive the properly completed form.
If you are married, your spouse must consent in writing before you can make
any type of withdrawal, except for the purchase of a Qualified Joint and
Survivor Annuity. See Spousal Consent Requirements below.
Under the self-directed prototype plan you may receive a distribution upon
attaining normal retirement age as specified in the plan, or upon separation
from service. If your employer maintains the self-directed prototype plan as
a profit sharing plan, an earlier distribution of funds that have accumulated
after two years is available if you incur a financial hardship, as defined in
the plan. In addition, if you are married, your spouse may have to consent in
writing before you can make any type of withdrawal, except for the purchase
of a Qualified Joint and Survivor Annuity. See Spousal Consent Requirements
below.
Under an individually designed plan the availability of pre-retirement
withdrawals depends on the terms of the plan. We suggest that you ask your
employer what types of withdrawals are available under your plan.
PLEASE NOTE THAT GENERALLY YOU MAY NOT MAKE WITHDRAWALS FROM THE GUARANTEED
RATE ACCOUNTS PRIOR TO MATURITY EVEN IF THE EMPLOYER PLAN PERMITS WITHDRAWALS
PRIOR TO THAT TIME. (SEE PREMATURE WITHDRAWALS AND TRANSFERS FROM A GRA).
Benefit Distributions. In order for you to begin receiving benefits under the
Members Retirement Plan, your employer must send us your properly completed
Election of Benefits form and, if applicable, Beneficiary Designation form.
If we receive your properly completed forms on or before the 15th of the
month, your benefits will commence as of the close of business on the first
business day of the next month; if your forms arrive after the 15th, your
benefits will commence as of the close of business on the first business day
of the second following month.
Under an individually designed plan and our self-directed prototype plan,
your employer must send us a Request for Disbursement Form. We will send
single sum payments to your plan's trustee as of the close of business on the
day we receive a properly completed form. If you wish to receive annuity
payments, your plan's trustee may purchase an annuity contract from us.
Annuity payments will be paid directly to you and will commence as of the
close of business
SAI-3
<PAGE>
on the first business day of the next month if we receive your properly
completed forms on or before the 15th of the month. If we receive your
properly completed forms after the 15th, annuity payments will commence as of
the close of business on the first business day of the second following
month.
Please note that we use the value of your vested benefits at the close of
business on the day payment is due to determine the amount of benefits you
receive. We will not, therefore, begin processing your check until the
following business day. You should expect your check to be mailed within five
days after processing begins. Annuity checks can take longer. If you are
withdrawing more than $50,000 and you would like expedited delivery at your
expense, you may elect to do so on your Election of Benefits Form.
Distributions under a qualified retirement plan such as yours are subject to
extremely complicated legal requirements. When you are ready to retire, we
suggest that you discuss the available payment options with your employer or
financial advisor. Our Account Executives can provide you or your employer
with information.
SPOUSAL CONSENT REQUIREMENTS. Under the Members Retirement Plan and the
self-directed prototype plan, you may designate a non-spouse beneficiary any
time after the earlier of the first day of the plan year in which you attain
age 35 or the date on which you separate from service with your employer. If
you designate a beneficiary other than your spouse prior to your reaching age
35, your spouse must consent to the designation and, upon reaching age 35,
must give his or her consent or the designation will lapse. In order for you
to make a withdrawal, elect a form of benefit other than a Qualified Joint
and Survivor Annuity or designate a non-spouse beneficiary, your spouse must
consent to your election in writing within the 90 day period before your
annuity starting date. To consent, your spouse must sign the appropriate line
on your election of benefits or beneficiary designation form. Your spouse's
signature must be witnessed by a notary public or plan representative.
If you change your mind, you may revoke your election and elect a Qualified
Joint and Survivor Annuity or designate your spouse as beneficiary, simply by
filing the appropriate form. Your spouse's consent is not required for this
revocation.
It is also possible for your spouse to sign a blanket consent form. By
signing this form, your spouse consents not just to a specific beneficiary or
form of distribution, but gives you the right to name any beneficiary or form
of distribution you want. Once you file such a form, you may change your
election whenever you want, even without spousal consent. No spousal consent
to a withdrawal or benefit in a form other than a Qualified Joint and
Survivor Annuity is required under certain self-directed and
individually-designed profit sharing plans that do not offer life annuity
benefits.
ELIGIBLE ROLLOVER DISTRIBUTIONS AND FEDERAL INCOME TAX WITHHOLDING. All
"eligible rollover distributions" are subject to mandatory federal income tax
withholding of 20% unless the Participant elects to have the distribution
directly rolled over to a qualified plan or individual retirement arrangement
(IRA). An "eligible rollover distribution" is generally any distribution that
is not one of a series of substantially equal periodic payments made (not
less frequently than annually) (1) for the life (or life expectancy) of the
plan participant or the joint lives (or joint life expectancies) of the
participant and his or her designated beneficiary, or (2) for a specified
period of 10 years or more. In addition, the following are not subject to
mandatory 20% withholding:
o certain corrective distributions under Internal Revenue Code (Code)
Section 401(k) plans;
o certain defaulted loans that are treated as distributions; and
o a distribution to a beneficiary other than to a surviving spouse or a
current or former spouse under a qualified domestic relations order.
If a distribution is made to a Participant's surviving spouse, or to a
current or former spouse under a qualified domestic relations order, the
distribution may be an eligible rollover distribution, subject to mandatory
20% withholding, unless one of the exceptions described above applies.
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If a distribution is not an "eligible rollover distribution" income tax will
be withheld from all taxable payments unless the recipient elects not to have
income tax withheld.
PREMATURE WITHDRAWALS AND TRANSFERS FROM A GRA. You may transfer amounts from
other Investment Options to a GRA at any time. Transfers may not be made from
one GRA to another or from a GRA to one of the other Investment Options until
the maturity date of the GRA. Likewise, you may not remove amounts from a GRA
prior to maturity in order to obtain a plan loan or make a hardship or
in-service withdrawal. If your plan's assets are transferred to another
funding vehicle from the Program or if your plan is terminated, we will
continue to hold your money in GRAs until maturity. All such GRAs will be
held in the Pooled Trust under the investment-only arrangement. See Transfers
Among Investment Options in Part VI of the Prospectus.
Withdrawals are not permitted prior to maturity unless they are permitted
under your plan and are Exempt or Qualified, as explained below. Exempt
Withdrawals may be made without penalty at any time. Qualified Withdrawals
are subject to a penalty. No Qualified Withdrawals are permitted from a
five-year GRA during the first two years after the end of its offering
period; this rule does not apply if the amount of the applicable penalty is
less than the interest you have accrued. If you have more than one GRA and
you are taking a partial withdrawal or installments, amounts held in your
most recently purchased three-year or five-year GRA will be used first to
make withdrawal or installment payments.
Exempt Withdrawal. Amounts may be withdrawn without penalty from a GRA prior
to its maturity if:
o you are a professional age 59 1/2 or older and you elect an installment
payout of at least three years or an annuity benefit;
o you are not a professional and you attain age 59 1/2;
o you are not a professional and you terminate employment (including
retirement);
o you are disabled;
o you attain age 70 1/2; or
o you die.
If you are a participant under a plan which was adopted by an employer which
is not a member of a professional association which makes the Program
available as a benefit of membership, the above rules will be applied
substituting the term "highly compensated" for "professional" and "non-highly
compensated" for "not a professional." For this purpose, "highly compensated"
shall have the meaning set forth under Provisions of the Members
Plans--Contributions to the Members Retirement Plan below.
Qualified Withdrawal. You may withdraw amounts with a penalty from a GRA
prior to its maturity if you are a professional and you take a payment upon
retirement after age 59 1/2 under a distribution option of less than three
years duration. The interest paid to you upon withdrawal will be reduced by
an amount calculated as follows:
(i) the amount by which the three-year GRA rate being offered on the
date of withdrawal exceeds the GRA rate from which the withdrawal is
made, times
(ii) the years and/or fraction of a year until maturity, times
(iii) the amount withdrawn from the GRA.
We will make this calculation based on GRA rates without regard to deductions
for the applicable Program expense charge. If the three-year GRA is not being
offered at the time of withdrawal, the adjustment will be based on then
current rates on U.S. Treasury notes or for a comparable option under the
Program.
Your original contributions will never be reduced by this adjustment. No
adjustment is made if the current three-year GRA rate is equal to or less
than the rate for the GRA from which the Qualified Withdrawal is being made.
A separate
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adjustment is calculated for each GRA. If the interest accumulated in one GRA
is insufficient to recover the amount calculated under the formula, the
excess may be deducted as necessary from interest accumulated in other same
duration GRAs in the same Guaranteed Rate Account.
EXAMPLE: You contribute $1,000 to a three-year GRA on January 1 with a rate
of 4%. Two years later you make a Qualified Withdrawal. Your GRA balance is
$1,082. The current GRA rate is 6%; (i) 6%-4%=2%, (ii) 2% x 1 year = 2%,
(iii) 2% x $1,082 = $21.64. The withdrawal proceeds would be $1,082-$21.64 =
$1,060.36.
MATURING GRAS
o Your confirmation notice lists the maturity date for each GRA you hold.
o You may arrange in advance for the reinvestment of your maturing GRAs by
using the Account Investment Management (AIM) System. (GRA maturity
allocation changes requests received on a business day before 4:00 P.M.
Eastern Time are effective four days after we receive them. GRA maturity
allocation changes requests received after 4:00 P.M. Eastern Time or on
a non-business day are effective four days after the next business day
after we receive them.)
o The instructions you give us remain in effect until you change them
(again, your GRA maturity allocation change request will be processed as
described above.)
o You may have different instructions for your GRAs attributable to
employer contributions than for your GRAs attributable to employee
contributions.
o If you have not provided GRA maturity instructions, your maturing GRAs
will be allocated to the Money Market Guarantee Account.
TYPES OF BENEFITS
Under the Members Retirement Plan, and under most self-directed prototype
plans, except as provided below, you may select one or more of the following
forms of distribution once you are eligible to receive benefits. Please see
Benefit Distributions under Procedures for Withdrawals, Distributions and
Transfers. Not all of these distribution forms may be available to you, if
your employer has adopted an individually designed plan or a self-directed
prototype profit sharing plan that does not offer annuity benefits. We
suggest you ask your employer what types of benefits are available under your
plan.
QUALIFIED JOINT AND SURVIVOR ANNUITY. An annuity providing equal monthly
payments for your life and, after your death, for your surviving spouse's
life. No payments will be made after you and your spouse die, even if you
have received only one payment. THE LAW GENERALLY REQUIRES THAT IF THE VALUE
OF YOUR VESTED BENEFITS EXCEEDS $5,000, YOU MUST RECEIVE A QUALIFIED JOINT
AND SURVIVOR ANNUITY UNLESS YOUR SPOUSE CONSENTS IN WRITING TO A CONTRARY
ELECTION. Please see Spousal Consent Requirements under Procedures for
Withdrawals, Distributions and Transfers for an explanation of the procedures
for electing not to receive a Qualified Joint and Survivor Annuity.
LUMP SUM PAYMENT. A single payment of all or part of your vested benefits. If
you take a lump sum payment of only part of your balance, it must be at least
$1,000. If you have more than one GRA, amounts held in your most recent GRA
will first be used to make payment. IF YOUR VESTED BENEFIT IS $5,000 OR LESS,
YOU WILL RECEIVE A LUMP SUM PAYMENT OF THE ENTIRE AMOUNT.
Periodic Installments. Monthly, quarterly, semi-annual or annual payments
over a period of at least three years, where the initial payment on a monthly
basis is at least $300. You can choose either a time-certain payout, which
provides variable payments over a specified period of time, or a
dollar-certain payout, which provides level payments
SAI-6
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over a variable period of time. During the installment period, your remaining
Account Balance will be invested in whatever Options you designate; each
payment will be drawn pro rata from all the Options you have selected. If you
have more than one GRA, amounts held in your most recently purchased
three-year or five-year GRA will first be used to make installment payments.
If you die before receiving all the installments, we will make the remaining
payments to your beneficiary. We do not offer installments for benefits under
individually designed plans or under our self-directed prototype plan.
LIFE ANNUITY. An annuity providing monthly payments for your life. No
payments will be made after your death, even if you have received only one
payment.
LIFE ANNUITY--PERIOD CERTAIN. An annuity providing monthly payments for your
life or, if longer, a specified period of time. If you die before the end of
that specified period, payments will continue to your beneficiary until the
end of the period. Subject to legal limitations, you may specify a minimum
payment period of 5, 10, 15 or 20 years; the longer the specified period, the
smaller the monthly payments will be.
JOINT AND SURVIVOR ANNUITY. An annuity providing monthly payments for your
life and that of your beneficiary. You may specify the percentage of the
annuity payment to be made to your beneficiary. Subject to legal limitations,
that percentage may be 100%, 75%, 50%, or any percentage you specify.
JOINT AND SURVIVOR ANNUITY--PERIOD CERTAIN. An annuity providing monthly
payments for your life and that of your beneficiary or, if longer, a
specified period of time. If you and your beneficiary both die before the end
of the specified period, payments will continue to your contingent
beneficiary until the end of the period. Subject to legal limitations, you
may specify a minimum payment period of 5, 10, 15 or 20 years and the
percentage of the annuity payment to be made to your beneficiary (as noted
above under Joint and Survivor Annuity); the longer the specified period, the
smaller the monthly payments will be.
CASH REFUND ANNUITY. An annuity providing equal monthly payments for your
life with a guarantee that the sum of those payments will be at least equal
to the portion of your vested benefits used to purchase the annuity. If upon
your death the sum of the monthly payments to you is less than that amount,
your beneficiary will receive a lump sum payment of the remaining guaranteed
amount.
The cost of the fixed annuity is determined from tables in the group annuity
contract which show the amounts necessary to purchase each $1 of monthly
payment (after deduction of any applicable taxes and the annuity
administrative charge described below). Payments depend on the annuity
selected, your age, and the age of your beneficiary if you select a joint and
survivor annuity. We may change the tables in the contract no more than once
every five years.
The minimum amount that can be used to purchase any type of annuity is
$5,000. Usually, an annuity administrative charge of $350 will be deducted
from the amount used to purchase the annuity. If we give any group pension
client with a qualified profit sharing plan a better annuity purchase rate
than those currently available for the Program, we will also make those rates
available to Program participants. The annuity administrative charge may be
greater than $350 in that case.
Under a Qualified Joint and Survivor Annuity or a Cash Refund Annuity, the
amount of the monthly payments is fixed at retirement and remains level
throughout the distribution period. Under the Life Annuity, Life
Annuity--Period Certain, Joint and Survivor Annuity and Joint and Survivor
Annuity--Period Certain, you may select either fixed or variable payments.
The variable payments reflect the investment performance of the Growth Equity
Fund. If you are interested in a variable annuity, when you are ready to
select your benefit please ask our Account Executives for our variable
annuity prospectus supplement.
The chart below shows the relative financial value of the different annuity
options, based on our current rates for fixed annuities. This chart is
provided as a sample. The numbers provided in the Rate per $1.00 of Annuity
column, which
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are used to calculate the monthly annuity provided, are subject to change.
The example assumes the annuitant's age is 65 1/2 years, the joint
annuitant's age is the same and the amount used to purchase the annuity is
$100,000. The annuity administrative charge of $350 is deducted from the
purchase price of $100,000, leaving a total of $99,650 to be applied to
purchase the annuity. Certain legal requirements may limit the forms of
annuity available to you.
<TABLE>
<CAPTION>
AMOUNT TO BE
APPLIED ON RATE PER MONTHLY
ANNUITY FORM $1.00 OF ANNUITY
ANNUITY FORM ELECTED ANNUITY PROVIDED
- -------------------------------------------- -------------- ---------- ----------
<S> <C> <C> <C>
Life......................................... $99,650 $143.06 $696.56
Cash Refund.................................. 99,650 150.82 660.72
5 Year Certain Life.......................... 99,650 144.62 689.05
10 Year Certain Life......................... 99,650 148.55 670.82
15 Year Certain Life......................... 99,650 153.87 647.62
100% Joint & Survivor Life................... 99,650 168.01 593.12
75% Joint & Survivor Life.................... 99,650 161.16 618.33*
50% Joint & Survivor Life.................... 99,650 155.13 642.36*
100% Joint & Survivor--5 Year Certain
Life**...................................... 99,650 168.04 593.01
100% Joint & Survivor--10 Year Certain
Life**...................................... 99,650 168.27 592.20
100% Joint & Survivor--15 Year Certain
Life**...................................... 99,650 168.91 589.96
100% Joint & Survivor--20 Year Certain
Life**...................................... 99,650 170.10 585.83
</TABLE>
* Represents the amount payable to the primary annuitant. A surviving
joint annuitant would receive the applicable percentage of the amount
paid to the primary annuitant.
** You may also elect a Joint and Survivor Annuity--Period Certain with a
monthly benefit payable to the surviving joint annuitant in any
percentage you specify.
PROVISIONS OF THE MEMBERS RETIREMENT PLAN
PLAN ELIGIBILITY REQUIREMENTS. Under the Members Retirement Plan, the
employer specifies the eligibility requirements for its plan in the
Participation Agreement. The employer may exclude any employee who has not
attained a specified age (not to exceed 21) and completed a specified number
of years (not to exceed two) in each of which he completed 1,000 hours of
service. No more than one year of eligibility service may be required for a
401(k) arrangement.
The Members Retirement Plan provides that a sole proprietor, partner or
shareholder may, upon commencement of employment or upon first becoming
eligible to participate in any qualified plan of the employer, make a
one-time irrevocable election not to participate in the plan or to make a
reduced contribution. This election applies to all plans of the employer, now
and in the future, and should be discussed with your tax advisor.
CONTRIBUTIONS TO QUALIFIED PLANS. Current federal income tax rules relating
to contributions under qualified retirement plans are outlined briefly below.
For purposes of this outline we have assumed that you are not a participant
in any other qualified retirement plan.
The employer's contributions to the plan are deductible in the year for which
they are made. As a general rule, employer contributions must be made for any
year by the due date (including extensions) for filing the employer's federal
income tax return for that year. However, under Department of Labor ("DOL")
rules, participants' salary deferrals under a 401(k) plan must generally be
contributed by the employer as soon as practicable after the payroll period
for which the deferral is made, but no later than the 15th business day of
the month following the month in which participant contributions are withheld
or received by the employer.
If the employer contributes more to the plan than is deductible under the
rules described below, the employer may be liable for a 10% penalty tax on
that nondeductible amount and may risk disqualifying the plan.
CONTRIBUTIONS TO THE MEMBERS RETIREMENT PLAN. The employer makes annual
contributions to its plan based on the plan's provisions.
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An employer that adopts the Members Retirement Plan as a profit sharing plan
makes contributions in discretionary amounts to be determined annually. The
aggregate employer contribution to the plan, including participants' salary
deferrals under a 401(k) arrangement, is limited to 15% of all participants'
compensation for the plan year. For plan purposes, compensation for
self-employed persons does not include deductible plan contributions made on
behalf of the self-employed person.
A 401(k) arrangement is available as part of the profit sharing plan. Under a
401(k) arrangement, employees are permitted to make contributions to the plan
on a pre-tax basis. The maximum amount that may be contributed by
highly-compensated employees is limited depending upon the amount that is
contributed by non-highly compensated employees and the amount the employer
designates as a nonforfeitable 401(k) contribution. Different rules apply to
a SIMPLE 401(k) or safe harbor 401(k). In 1998, a "highly compensated"
employee for this purpose is (a) an owner of more than 5% of the business, or
(b) anyone with earnings of more than $80,000 from the business in 1997. For
(b), the employer may elect to include only employees in the highest paid
20%. In any event, the maximum amount each employee may defer is limited to
$10,000 for 1998 reduced by that employee's salary reduction contributions to
simplified employee pension plans established before 1997 (SARSEPs) SIMPLE
Plans, employee contributions to tax deferred Section 403(b) arrangements,
and contributions deductible by the employee under a trust described under
Section 501(c)(18) of the Code. The maximum amount a participant may defer in
a SIMPLE 401(k) plan for 1998 is $6,000.
Beginning in 1998, matching contributions to a 401(k) plan on behalf of a
self-employed individual will no longer be treated as elective deferrals and
will be treated the same as matching contributions of other employees.
Effective January 1, 1999 employers may adopt a safe harbor 401(k)
arrangement. Under this arrangement, an employer agrees to offer a matching
contribution equal to 100% of salary deferral contributions up to 3% of
compensation and 50% of salary deferral contributions that exceed 3% but are
less than 5% of compensation. These contributions must be non-forfeitable. If
these contributions are made and proper notification given, the plan is not
subject to non-discrimination testing on salary deferral and above
contributions.
If the employer adopts the Members Retirement Plan as a defined contribution
pension plan, its contribution is equal to the percentage of each
participant's compensation that is specified in the Participation Agreement.
Under either type of plan, compensation in excess of $160,000 in 1998 must be
disregarded in making contributions. Contributions may be integrated with
Social Security which means that contributions with respect to each
participant's compensation in excess of the integration level may exceed
contributions made with respect to compensation below the integration level,
within limits imposed by the Code. Your Account Executive can help you
determine the legally permissible contribution.
Except in the case of certain non-top heavy plans, contributions on behalf of
non-key employees must be at least 3% of compensation (or, under the profit
sharing plan, the percentage contributed on behalf of key employees, if less
than 3%). In 1998, a "key employee" means (a) an owner of one of the ten
largest (but more than 1/2%) interests in the business with earnings of more
than $30,000, or (b) an officer of the business with earnings of more than
$65,000 or (c) an owner of more than 5% of the business, or (d) an owner of
more than 1% of the business with earnings of more than $150,000. For
purposes of (b), no more than 50 employees (or, if less, the greater of three
or 10% of the employees) shall be treated as officers.
Certain plans may also permit participants to make post-tax contributions. We
will maintain a separate account to reflect each participant's post-tax
contributions and the earnings (or losses) thereon. Post-tax contributions
are now subject to complex rules under which the maximum amount that may be
contributed by highly compensated employees is limited, depending on the
amount contributed by non-highly compensated employees. IF THE EMPLOYER
PERMITS HIGHLY-COMPENSATED EMPLOYEES TO MAKE POST-TAX CONTRIBUTIONS, THE
EMPLOYER SHOULD MAKE SURE THAT ALL NON-DISCRIMINATION TESTS ARE PASSED. If an
employer employs only "highly compensated" employees (as defined
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above), post-tax contributions may not be made to the plan. In addition, the
employer may make matching contributions to certain plans, i.e.,
contributions which are based upon the amount of post-tax or pre-tax 401(k)
contributions made by plan participants. Special non-discrimination rules
also apply to matching contributions and may limit the amount of matching
contributions that may be made on behalf of highly compensated employees.
Contributions on behalf of each participant are limited to the lesser of
$30,000 and 25% of his earnings (excluding, in the case of self-employed
persons, all deductible plan contributions). The participant's post-tax
contributions are taken into account for purposes of applying this
limitation.
Each participant's Account Balance equals the sum of the amounts accumulated
in each Investment Option. We will maintain separate records of each
participant's interest in each of the Investment Options attributable to
employer contributions, 401(k) non-elective contributions, 401(k) elective
contributions, post-tax employee contributions and employer matching
contributions. Any amounts rolled over from the plan of a previous employer
will also be accounted for separately. Our records will also reflect each
participant's degree of vesting (see below) in his Account Balance
attributable to employer contributions and employer matching contributions.
The participant will receive an individual confirmation of each transaction
(including the deduction of record maintenance and report fees). The
participant will also receive an annual statement showing his Account Balance
in each Investment Option attributable to each type of contribution. Based on
information supplied by you, we will run the required special
non-discrimination tests (Actual Deferral Percentage and Actual Contribution
Percentage) applicable to 401(k) plans (other than SIMPLE 401(k) and safe
harbor 401(k)) and plans that accept post-tax employee contributions or
employer matching contributions.
Non-discrimination tests do not apply to SIMPLE 401(k) plans, as long as the
employer makes a matching contribution equal to 100% of the amount deferred
by each participant, up to 3% of compensation or a 2% non-elective
contribution to all eligible employees and follows the notification and
filing requirements outlined in the SIMPLE 401(k) model amendment to the
Master Plan.
Under a SIMPLE 401(k) the employer must offer all eligible employees the
opportunity to defer part of their salary into the plan and make either a
matching or non-elective contribution. The matching contribution must be
based on a formula of 100% of the salary deferral amount up to 3% of
compensation. The non-elective contribution is 2% of compensation and must be
made to all eligible employees even those not deferring. The matching or
non-elective contribution must be non-forfeitable. Employees must be notified
of which contribution the employer will make 60 days before the beginning of
the year.
Elective deferrals to a 401(k) plan are subject to applicable FICA (Social
Security) and FUTA (unemployment) taxes.
THE MEMBERS RETIREMENT PLAN AND SECTION 404(C) OF ERISA. The Members
Retirement Plan is a participant directed individual account plan designed to
comply with the requirements of Section 404(c) of ERISA. Section 404(c) of
ERISA, and the related Department of Labor (DOL) regulation, provide that if
a participant or beneficiary exercises control over the assets in his or her
plan account, plan fiduciaries will not be liable for any loss that is the
direct and necessary result of the participant's or beneficiary's exercise of
control. This means that if the employer plan complies with Section 404(c),
participants can make and are responsible for the results of their own
investment decisions.
Section 404(c) plans must, among other things, make a broad range of
investment choices available to participants and beneficiaries and must
provide them with enough information to make informed investment decisions.
The Members Retirement Plan provides the broad range of investment choices
and information that are needed in order to meet the requirements of Section
404(c). Our suggested summary plan descriptions, annual reports,
prospectuses, and confirmation notices provide the required investment
information; it is the employer's responsibility, however, to see that this
information is distributed in a timely manner to participants and
beneficiaries. You should read this information carefully before making your
investment decisions.
SAI-10
<PAGE>
VESTING. Vesting refers to the nonforfeitable portion of a participant's
Account Balance attributable to employer contributions under the Members
Retirement Plan. The participant's Account Balance attributable to 401(k)
contributions, post-tax employee contributions and rollover contributions is
nonforfeitable at all times.
A participant will become fully vested in all benefits if still employed at
death, disability, attainment of normal retirement age or upon termination of
the plan. If the participant terminates employment before that time, any
benefits that have not yet become vested under the plan's vesting schedule
will be forfeited. The normal retirement age is 65 under the Members
Retirement Plan.
Except as described below in the case of certain non-top heavy plans,
benefits must vest in accordance with any of the schedules below or one at
least as favorable to participants:
<TABLE>
<CAPTION>
SCHEDULE A SCHEDULE B SCHEDULE C
YEARS OF VESTED VESTED VESTED
SERVICE PERCENTAGE PERCENTAGE PERCENTAGE
- ---------- ------------ ------------ ------------
<S> <C> <C> <C>
1 0% 0% 0%
2 100 20 0
3 100 40 100
4 100 60 100
5 100 80 100
6 100 100 100
</TABLE>
If the plan requires more than one year of service for participation, it must
use Schedule A or one at least as favorable to participants.
Provided the employer plan is not "top-heavy," within the meaning of Section
416 of the Code, and provided that the plan does not require more than one
year of service for participation, an employer may, in accordance with
provisions of the Members Retirement Plan, instead elect one of the following
vesting schedules or one at least as favorable to participants:
<TABLE>
<CAPTION>
SCHEDULE F SCHEDULE G
YEARS OF VESTED VESTED
SERVICE PERCENTAGE PERCENTAGE
- ------------- ------------ ------------
<S> <C> <C>
less than 3 0% 0%
3 20 0
4 40 0
5 60 100
6 80 100
7 100 100
</TABLE>
All contributions to a SIMPLE 401(k) plan are 100% vested and not subject to
the vesting schedule above. This does not include employer and matching
contributions made to a plan before amending to a SIMPLE 401(k) plan.
Non-elective and matching contributions required under a safe harbor 401(k)
arrangement are 100% vested and not subject to the vesting schedule above.
INVESTMENT RESTRICTIONS APPLICABLE TO THE ALLIANCE GROWTH EQUITY, ALLIANCE
AGGRESSIVE EQUITY AND ALLIANCE BALANCED FUNDS
For an explanation of the investment restrictions applicable to the Alliance
Global, Alliance Conservative Investors and Alliance Growth Investors Funds,
see Investment Restrictions in The Hudson River Trust prospectus which
appears behind the Members Retirement Program prospectus.
For an explanation of the investment restrictions applicable to the MFS
Research, Warburg Pincus Small Company Value, T. Rowe Price Equity Income,
Merrill Lynch World Strategy and BT Equity 500 Index Funds, see Investment
Restrictions in the EQ Advisors Trust Statement of Additional Information.
SAI-11
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None of the Alliance Growth Equity, Alliance Aggressive Equity and Alliance
Balanced Funds will:
o trade in foreign exchange (except transactions incidental to the
settlement of purchases or sales of securities for a Fund);
o make an investment in order to exercise control or management over a
company;
o underwrite the securities of other companies, including purchasing
securities that are restricted under the 1933 Act or rules or
regulations thereunder (restricted securities cannot be sold publicly
until they are registered under the 1933 Act), except as stated below;
o make short sales, except when the Fund has, by reason of ownership of
other securities, the right to obtain securities of equivalent kind and
amount that will be held so long as they are in a short position;
o trade in commodities or commodity contracts (except the Alliance
Balanced Fund is not prohibited from entering into hedging transactions
through the use of stock index or interest rate future contracts, as
described in the prospectus);
o purchase real estate or mortgages, except as stated below. The Funds
may buy shares of real estate investment trusts listed on stock
exchanges or reported on the National Association of Securities
Dealers, Inc. automated quotation system ("NASDAQ");
o have more than 5% of its assets invested in the securities of any one
registered investment company. A Fund may not own more than 3% of an
investment company's outstanding voting securities. Finally, total
holdings of investment company securities may not exceed 10% of the
value of the Fund's assets;
o purchase any security on margin or borrow money except for short-term
credits necessary for clearance of securities transactions;
o make loans, except loans through the purchase of debt obligations or
through entry into repurchase agreements; or
o invest more than 10% of its total assets in restricted securities, real
estate investments, or portfolio securities not readily marketable.
The Alliance Growth Equity and Alliance Balanced Funds will not make an
investment in an industry if that investment would make the Fund's holding in
that industry exceed 25% of its assets. The United States government, and its
agencies and instrumentalities, are not considered members of any industry.
The Alliance Growth Equity and Alliance Aggressive Equity Funds will not
purchase or write puts and calls (options).
HOW WE VALUE THE ASSETS OF THE FUNDS
The assets of the Funds are valued as follows:
o STOCKS listed on national securities exchanges or traded on the NASDAQ
national market system are valued at the last sale price. If on a
particular day there is no sale, they are valued at the latest
available bid price reported on a composite tape. Other unlisted
securities reported on the NASDAQ system are valued at inside (highest)
quoted bid prices.
o FOREIGN SECURITIES not traded directly, or in American Depository
Receipt (ADR) form, in the United States, are valued at the last sale
price in the local currency or an exchange in the country of origin.
Foreign currency is converted into dollars at current exchange rates.
SAI-12
<PAGE>
o UNITED STATES TREASURY SECURITIES and other obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities are valued at representative quoted prices.
o LONG-TERM PUBLICLY TRADED CORPORATE BONDS (i.e., maturing in more than
a year) are valued at prices obtained from a bond pricing service of a
major dealer in bonds when such prices are available; however, in
circumstances where it is deemed appropriate to do so, an
over-the-counter or exchange quotation may be used.
o CONVERTIBLE PREFERRED STOCKS listed on national securities exchanges
are valued at their last sale price or, if there is no sale, at the
latest available bid price.
o CONVERTIBLE BONDS and UNLISTED CONVERTIBLE PREFERRED STOCKS are valued
at bid prices obtained from one or more major dealers in such
securities; where there is a discrepancy between dealers, values may be
adjusted based on recent premium spreads to the underlying common
stock.
o SHORT-TERM DEBT SECURITIES that mature in more than 60 days are valued
at representative quoted prices. Short-term securities that mature in
60 days or less are valued at amortized cost, which approximates market
value. The Funds may also acquire short-term debt securities through
units in our Separate Account No. 2A. These unit values are calculated
in the same way as Fund Units. The assets of Separate Account No. 2A
are valued as described above.
o OPTION CONTRACTS listed on organized exchanges are valued at last sale
prices or closing asked prices, in the case of calls, and at quoted bid
prices, in the case of puts. The market value of a put or call will
usually reflect, among other factors, the market price of the
underlying security. When a Fund writes a call option, an amount equal
to the premium received by the Fund is included in the Fund's financial
statements as an asset and an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current
market value of the option written. The current market value of a
traded option is the last sale price or, in the absence of a sale, the
last offering price. When an option expires on its stipulated
expiration date or a Fund enters into a closing purchase or sales
transaction, the Fund realizes a gain or loss without regard to any
unrealized gain or loss on the underlying security, and the liability
related to such option is extinguished. When an option is exercised,
the Fund realizes a gain or loss from the sale of the underlying
security, and the proceeds of the sale are increased by the premium
originally received, or reduced by the price paid for the option.
Our investment officers determine in good faith the fair market value of
securities and other assets that do not have a readily available market price
in accordance with accepted accounting practices and applicable laws and
regulations.
SUMMARY OF UNIT VALUES FOR THE FUNDS
Set forth below are Unit Values for the Funds, computed to the nearest cent
on the last business day of the periods specified. The value of a Alliance
Growth Equity Fund Unit was established at $10.00 on January 1, 1968, for the
National Association of Realtors Members Retirement Program (NAR Program),
which was merged into the Members Retirement Program on December 27, 1984.
The Alliance Aggressive Equity Fund and Alliance Balanced Fund Unit Values
under the Program were established at $10.00 on May 1, 1985, the date on
which the Funds were first made available under the Program. The Alliance
Global, Alliance Conservative Investors and Alliance Growth Investors Unit
Values under the Program were established at $10.00 on July 1, 1993, the date
on which these Funds were first made available under the Program. The MFS
Research, Warburg Pincus Small Company Value, T. Rowe Price Equity Income and
Merrill Lynch World Strategy Fund Unit Values under the Program were
established at $10.48, $10.49, $10.35 and $10.28, respectively on August 1,
1997. The BT Equity 500 Index Fund Unit Value under the Program will be
established on the date on which it becomes available under the Program.
SAI-13
<PAGE>
The Alliance Global, Alliance Conservative Investors and Alliance Growth
Investors Fund Unit Values before July 1, 1993 reflect hypothetical
performance based on (1) the actual performance of the Alliance Global
Portfolio since August 27, 1987 and the Alliance Conservative Investors and
Alliance Growth Investors Portfolios since October 2, 1989, respectively, the
dates each commenced operations, and (2) the deduction of the Program Expense
Charge, the financial accounting fee and the daily accrual of direct expenses
attributable to the Alliance Growth Equity Fund. Since July 1, 1993, they
reflect actual performance. See Deductions and Charges in the prospectus for
a description of the charges which will apply.
UNIT VALUES OF THE FUNDS
<TABLE>
<CAPTION>
WARBURG
CONSERVATIVE GROWTH MFS PINCUS T. ROWE PRICE MERRILL LYNCH
LAST BUSINESS GROWTH AGGRESSIVE BALANCED GLOBAL INVESTORS INVESTORS RESEARCH SMALL CO. EQUITY INCOME WORLD STRATEGY
DAY OF EQUITY FUND EQUITY FUND FUND FUND(1) FUND(1) FUND(1) FUND VALUE FUND FUND FUND
- ------------- ----------- ----------- -------- ------ ------------ --------- -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988.......... $ 74.54 $10.85 $13.42 $ 5.74 -- -- -- -- -- --
1989.......... 106.57 15.75 16.76 7.20 $ 7.23 $ 5.52 -- -- -- --
1990.......... 93.41 16.93 16.45 6.67 7.59 6.04 -- -- -- --
1991.......... 140.45 31.33 22.97 8.61 8.99 8.90 -- -- -- --
1992.......... 140.51 30.01 22.07 8.45 9.38 9.21 -- -- -- --
1993.......... 165.88 33.95 24.45 11.05 10.22 10.49 -- -- -- --
1994.......... 161.15 32.21 22.19 11.45 9.62 9.98 -- -- -- --
1995.......... 209.90 41.74 26.39 13.38 11.39 12.40 -- -- -- --
1996.......... 244.25 50.46 29.02 15.11 11.81 13.76 -- -- -- --
1997 ......... 306.51 55.83 32.54 16.63 13.19 15.85 10.34 10.62 11.02 9.47
March 1998 .. 342.56 64.11 35.38 19.00 13.86 17.31 11.97 11.38 11.97 10.20
</TABLE>
(1) Unit Values reflect hypothetical performance through July 1, 1993 and
actual performance thereafter.
FUND TRANSACTIONS
The Alliance Growth Equity, Alliance Aggressive Equity and Alliance Balanced
Funds are charged for securities brokers' commission, transfer taxes and
other fees relating to securities transactions. Transactions in equity
securities for each of these Funds are executed primarily through brokers
that receive a commission paid by the Fund. The brokers are selected by
Alliance Capital Management L.P. ("Alliance") for The Hudson River Trust
portfolios and Equitable Life and by the Advisers of the EQ Advisors Trust
for their respective portfolios. For 1997, 1996 and 1995, the Alliance Growth
Equity Fund paid $3,698,148, $5,682,578 and $6,044,623, respectively, in
brokerage commissions; the Alliance Aggressive Equity Fund paid $1,876,011,
$1,268,209 and $1,547,073, respectively, in brokerage commissions; and the
Alliance Balanced Fund paid $424,352, $931,317 and $1,016,342, respectively,
in brokerage commissions. Similar fees are paid by the corresponding Hudson
River Trust Portfolios in which the Alliance Global, Alliance Conservative
Investors and Alliance Growth Investors Funds invest.
Alliance and Equitable Life and the Advisers of the EQ Advisers Trust
Portfolios seek to obtain the best price and execution of all orders placed
for their respective portfolios, considering all the circumstances. If
transactions are executed in the over-the-counter market, they will deal with
the principal market makers, unless more favorable prices or better execution
is otherwise obtainable. There are occasions on which portfolio transactions
for the Funds may be executed as part of concurrent authorizations to
purchase or sell the same security for certain other accounts or clients
advised by Alliance and Equitable Life. These concurrent authorizations
potentially can be either advantageous or disadvantageous to the Funds. When
these concurrent authorizations occur, the objective is to allocate the
executions among the Funds and the other accounts in a fair manner.
We also consider the amount and quality of securities research services
provided by a broker. Typical research services include general economic
information and analyses and specific information on and analyses of
companies,
SAI-14
<PAGE>
industries and markets. Factors in evaluating research services include the
diversity of sources used by the broker and the broker's experience,
analytical ability, and professional stature. The receipt of research
services from brokers tends to reduce our expenses in managing the Funds.
This is taken into account when setting the expense charges.
Brokers who provide research services may charge somewhat higher commissions
than those who do not. However, we will select only brokers whose commissions
we believe are reasonable in all the circumstances. Of the brokerage
commissions paid by the Alliance Growth Equity, Alliance Aggressive Equity
and Alliance Balanced Funds during 1997, $1,279,938, $799,430 and $197,851,
respectively, were paid to brokers providing research services on
transactions of $2,255,341,604, $958,618,139 and $254,843,012, respectively.
We periodically evaluate the services provided by brokers and prepare
internal proposals for allocating among those various brokers business for
all the accounts we manage or advise. That evaluation involves consideration
of the overall capacity of the broker to execute transactions, its financial
condition, its past performance and the value of research services provided
by the broker in servicing the various accounts advised or managed by us. We
have no binding agreements with any firm as to the amount of brokerage
business which the firm may expect to receive for research services or
otherwise. There may, however, be understandings with certain firms that we
will continue to receive services from such firms only if such firms are
allocated a certain amount of brokerage business. We may try to allocate such
amounts of business to such firms to the extent possible in accordance with
the policies described above.
Research information obtained by us may be used in servicing all accounts
under our management, including our general account. Similarly, not all
research provided by a broker or dealer with which the Funds transact
business will necessarily be used in connection with those Funds.
Transactions for the Funds in the over-the-counter market are normally
executed as principal transactions with a dealer that is a principal
market-maker in the security, unless a better price or better execution can
be obtained from another source. Under these circumstances, the Funds pay no
commission. Similarly, portfolio transactions in money market and debt
securities will normally be executed through dealers or underwriters under
circumstances where the Fund pays no commission.
When making securities transactions for Funds that do not involve paying a
brokerage commission (such as the purchase of short-term debt securities), we
seek to obtain prompt execution in an effective manner at the best price.
Subject to this general objective, we may give orders to dealers or
underwriters who provide investment research. None of the Funds will pay a
higher price, however, and the fact that we may benefit from such research is
not considered in setting the expense charges.
In addition to using brokers and dealers to execute portfolio securities
transactions for accounts we manage, we may enter into other types of
business transactions with brokers or dealers. These other transactions will
be unrelated to allocation of the Funds' portfolio transactions.
SAI-15
<PAGE>
INVESTMENT MANAGEMENT AND FINANCIAL ACCOUNTING FEE
The table below shows the amount we received under the investment management
and financial accounting fee under the Program during each of the last three
years. See Part VII: Deductions and Charges in the prospectus.
<TABLE>
<CAPTION>
FUND 1997 1996 1995
- ------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Alliance Growth Equity.......... $331,600 $256,818 $199,240
Alliance Aggressive Equity ..... 176,278 119,359 73,380
Alliance Balanced............... 75,436 64,630 54,768
Alliance Global*................ 20,762 14,005 8,833
Alliance Conservative
Investors*..................... 19,781 21,570 4,253
Alliance Growth Investors* ..... 9,140 7,186 4,880
</TABLE>
* Represents only financial accounting fees for these Funds.
UNDERWRITER
EQ Financial Consultants, Inc. ("EQF"), a wholly-owned subsidiary of
Equitable Life, may be deemed to be the principal underwriter of separate
account units under the group annuity contract. EQF is registered with the
SEC as a broker-dealer under the 1934 Act and is a member of the National
Association of Securities Dealers, Inc. EQF's principal business address is
1290 Avenue of the Americas, New York, NY 10104. The offering of the units
under the contract is continuous. No underwriting commissions have been paid
during any of the last three fiscal years with respect to units of interest
under the contract. See Part VII: Deductions and Charges in the prospectus.
SAI-16
<PAGE>
OUR MANAGEMENT
Equitable Life is managed by a Board of Directors which is elected by its
shareholders. Its directors and certain of its executive officers and their
principal occupations are as follows:
<TABLE>
<CAPTION>
DIRECTORS
NAME PRINCIPAL OCCUPATION
- ----------------------------- -------------------------------------------------------------------------------------
<S> <C>
Francoise Colloc'h Senior Executive Vice President Human Resources and Communications, AXA-UAP
Henri de Castries Senior Executive Vice President, Financial Services and Life Insurance Activities,
AXA-UAP
Joseph L. Dionne Chairman and Chief Executive Officer, The McGraw-Hill Companies
Denis Duverne Senior Vice President International, AXA-UAP
William T. Esrey Chairman and Chief Executive Officer, Sprint Corporation
Jean-Rene Fourtou Chairman and Chief Executive Officer, Rhone Paulenc, S.A.
Norman C. Francis President, Xavier University of Louisiana
Donald J. Greene Counselor-at-Law, Partner, Le Boeuf, Lamb, Greene & MacRae
John T. Hartley Director and retired Chairman and Chief Executive Officer, Harris Corporation
John H. F. Haskell, Jr. Director and Managing Director, SBC Warburg Dillon Read, Inc.
Mary R. (Nina) Henderson President, Best Foods Grocery; Vice President, Best Foods
W. Edwin Jarmain President, Jarmain Group Inc.
G. Donald Johnston, Jr. Retired Chairman and Chief Executive Officer, JWT Group, Inc.
George T. Lowy Counselor-at-Law, Partner, Cravath, Swaine & Moore
Didier Pineau-Valencienne Chairman and Chief Executive Officer, Schneider, S.A.
George J. Sella, Jr. Retired Chairman of the Board and Chief Executive Officer, American Cyanamid
Company
Dave H. Williams Chairman and Chief Executive Officer, Alliance Capital Management, L.P.
</TABLE>
SAI-17
<PAGE>
Unless otherwise indicated, the following persons have been involved in the
management of Equitable Life in various executive positions during the last
five years.
<TABLE>
<CAPTION>
OFFICER-DIRECTORS
NAME PRINCIPAL OCCUPATION
- ----------------------- ---------------------------------------------------------------------------------
<S> <C>
Edward D. Miller Chairman of the Board and Chief Executive Officer; prior to August 1997, Senior
Vice Chairman, Chase Manhattan Corp. Prior to 1996, President, Chemical Bank,
prior thereto, Vice Chairman.
Stanley B. Tulin Vice Chairman of the Board and Chief Financial Officer; prior thereto, Senior
Executive Vice President and Chief Financial Officer. Prior to May 1996,
Chairman, Insurance Consulting and Actuarial Practice, Coopers & Lybrand.
Michael Hegarty President and Chief Operating Officer. Prior to January 1998, Vice Chairman,
Chase Manhattan Corporation; prior thereto, Vice Chairman (1995 to 1996) and
Senior Executive Vice President (1991 to 1995), Chemical Bank.
OTHER OFFICERS
NAME PRINCIPAL OCCUPATION*
- ----------------------- ---------------------------------------------------------------------------------
Leon B. Billis Executive Vice President and Chief Information Officer
Jose Suquet Senior Executive Vice President and Chief Distribution Officer
Robert E. Garber Executive Vice President and General Counsel
Jerome S. Golden Executive Vice President; formerly with JG Resources and BT Variable
Peter D. Noris Executive Vice President and Chief Investment Officer. Prior to May 1995, Vice
President/Manager, Insurance Company Investment Strategies Group, Salomon
Brothers, Inc. Prior to November 1992, as Principal, Fixed Income Insurance
Group, Morgan Stanley & Company
Harvey Blitz Senior Vice President and Deputy Chief Financial Officer
Kevin R. Byrne Senior Vice President and Treasurer
Alvin H. Fenichel Senior Vice President and Controller
Paul J. Flora Senior Vice President and Auditor
Mark A. Hug Senior Vice President; formerly, Vice President, Aetna
Michael S. Martin Senior Vice President and Chief Marketing Officer
Douglas Menkes Senior Vice President and Corporate Actuary; formerly, Milliman and Robertson,
Inc.
Anthony C. Pasquale Senior Vice President
Donald R. Kaplan Vice President and Chief Compliance Officer
Pauline Sherman Vice President, Secretary and Associate General Counsel
</TABLE>
* Current positions listed are with Equitable Life unless otherwise
specified.
SAI-18
<PAGE>
FINANCIAL STATEMENTS
The financial statements of Equitable Life included in this Statement of
Additional Information should be considered only as bearing upon the ability
of Equitable Life to meet its obligations under the group annuity contract.
They should not be considered as bearing upon the investment experience of
the Funds. The financial statements of Separate Account Nos. 3 (Pooled), 4
(Pooled), 10 (Pooled), 51 (Pooled) and 66 (Pooled) reflect applicable fees,
charges and other expenses under the Program as in effect during the periods
covered, as well as the charges against the accounts made in accordance with
the terms of all other contracts participating in the respective separate
accounts, if applicable.
<TABLE>
<CAPTION>
<S> <C>
Separate Account Nos. 3 (Pooled), 4 (Pooled) and 10 (Pooled):
Report of Independent Accountants -- Price Waterhouse LLP........................................... SAI-20
Separate Account No. 3 (Pooled)(The Alliance Aggressive Equity Fund):
Statement of Assets and Liabilities, December 31, 1997.............................................. SAI-21
Statements of Operations and Changes in Net Assets for the Years Ended
December 31, 1997 and 1996......................................................................... SAI-22
Portfolio of Investments, December 31, 1997......................................................... SAI-23
Separate Account No. 4 (Pooled)(The Alliance Growth Equity Fund):
Statement of Assets and Liabilities, December 31, 1997.............................................. SAI-27
Statements of Operations and Changes in Net Assets for the Years Ended
December 31, 1997 and 1996......................................................................... SAI-28
Portfolio of Investments, December 31, 1997......................................................... SAI-29
Separate Account No. 10 (Pooled)(The Alliance Balanced Fund):
Statement of Assets and Liabilities, December 31, 1997.............................................. SAI-34
Statements of Operations and Changes in Net Assets for the Years Ended
December 31, 1997 and 1996......................................................................... SAI-35
Portfolio of Investments, December 31, 1997......................................................... SAI-36
Separate Account No. 51 (Pooled)
Report of Independent Accountants--Price Waterhouse LLP.............................................. SAI-51
Separate Account No. 51 (Pooled)(The Alliance Global, Alliance Conservative Investors and Alliance
Growth Investors Funds):
Statements of Assets and Liabilities, December 31, 1997............................................. SAI-52
Statements of Operations and Changes in Net Assets for the year ended December 31, 1997 and 1996 ... SAI-53
Separate Account No. 66 (Pooled)
Report of Independent Accountants-- Price Waterhouse LLP............................................. SAI-54
Separate Account No. 66 (Pooled)(The MFS Research, Warburg Pincus Small Company Value,
T. Rowe Price Equity Income and Merrill Lynch World Strategy Funds):
Statements of Assets and Liabilities, December 31, 1997 ............................................ SAI-55
Statements of Operations and Changes in Net Assets from August 1, 1997 through
December 31, 1997 ................................................................................. SAI-56
Separate Account Nos. 3 (Pooled), 4 (Pooled), 10 (Pooled), 51 (Pooled) and 66 (Pooled):
Notes to Financial Statements....................................................................... SAI-57
The Equitable Life Assurance Society of the United States:
Report of Independent Accountants -- Price Waterhouse LLP........................................... SAI-63
Consolidated Balance Sheets, December 31, 1997 and 1996............................................. SAI-64
Consolidated Statements of Earnings Years Ended
December 31, 1997, 1996 and 1995................................................................... SAI-65
Consolidated Statement of Shareholder's Equity Years Ended
December 31, 1997, 1996 and 1995................................................................... SAI-66
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995................................................................... SAI-67
Notes to Consolidated Financial Statements.......................................................... SAI-68
</TABLE>
SAI-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of The Equitable Life Assurance
Society of the United States and the Contractowners
of Separate Account Nos. 3, 4 and 10
of The Equitable Life Assurance Society of the United States
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and changes in net assets and the selected per unit data (included
under Condensed Financial Information in the prospectus of the Members
Retirement Program) present fairly, in all material respects, the financial
position of Separate Account Nos. 3 (Pooled) (Alliance Aggressive Equity
Fund), 4 (Pooled) (Alliance Growth Equity Fund) and 10 (Pooled) (Alliance
Balanced Fund) of The Equitable Life Assurance Society of the United States
("Equitable Life") at December 31, 1997 and each of their results of
operations and changes in net assets for each of the two years in the period
then ended and for the selected per unit data for the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and the selected per unit data (hereafter referred to as
"financial statements") are the responsibility of Equitable Life's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at December 31, 1997 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
New York, New York
February 10, 1998
SAI-20
<PAGE>
SEPARATE ACCOUNT NO. 3 (POOLED) (THE ALLIANCE AGGRESSIVE EQUITY FUND)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statement of Assets and Liabilities
December 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments (Notes 2 and 3):
Common stocks -at market value (cost: $397,187,129) ......................................... $412,280,763
Participation in Separate Account No. 2A -at amortized cost, which approximates market
value, equivalent to 4 units at $270.27 ..................................................... 1,200
Receivables:
Securities sold ............................................................................. 46,819,407
Dividends.................................................................................... 94,222
- --------------------------------------------------------------------------------------------- --------------
Total assets................................................................................ 459,195,592
- --------------------------------------------------------------------------------------------- --------------
LIABILITIES:
Payables:
Custodian payable ........................................................................... 345,277
Securities purchased ........................................................................ 16,516,437
Due to Equitable Life's General Account ..................................................... 24,007,857
Investment management fees payable .......................................................... 3,333
Accrued expenses ............................................................................. 159,701
- --------------------------------------------------------------------------------------------- --------------
Total liabilities .......................................................................... 41,032,605
- --------------------------------------------------------------------------------------------- --------------
NET ASSETS ................................................................................... $418,162,987
============================================================================================= ==============
</TABLE>
See Notes to Financial Statements.
SAI-21
<PAGE>
SEPARATE ACCOUNT NO. 3 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Operations and Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
- ------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
FROM OPERATIONS:
INVESTMENT INCOME (NOTE 2):
Dividends ...................................................................... $ 1,728,486 $ 888,868
Interest ....................................................................... 456,291 1,847,954
- ------------------------------------------------------------------------------- --------------- ---------------
Total .......................................................................... 2,184,777 2,736,822
EXPENSES (NOTE 4) .............................................................. (5,757,006) (5,268,842)
- ------------------------------------------------------------------------------- --------------- ---------------
NET INVESTMENT LOSS ............................................................ (3,572,229) (2,532,020)
- ------------------------------------------------------------------------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Realized gain from security and foreign currency transactions .................. 93,937,473 83,136,492
- ------------------------------------------------------------------------------- --------------- ---------------
Unrealized appreciation (depreciation) of investments:
Beginning of year ............................................................. 56,470,533 62,843,978
End of year ................................................................... 15,093,634 56,470,533
- ------------------------------------------------------------------------------- --------------- ---------------
Change in unrealized appreciation/depreciation ................................. (41,376,899) (6,373,445)
- ------------------------------------------------------------------------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ................................ 52,560,574 76,763,047
- ------------------------------------------------------------------------------- --------------- ---------------
Increase in net assets attributable to operations .............................. 48,988,345 74,231,027
- ------------------------------------------------------------------------------- --------------- ---------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions .................................................................. 229,831,666 226,778,696
Withdrawals .................................................................... (304,183,884) (199,186,117)
- ------------------------------------------------------------------------------- --------------- ---------------
Increase (decrease) in net assets attributable to contributions and withdrawals (74,352,218) 27,592,579
- ------------------------------------------------------------------------------- --------------- ---------------
INCREASE (DECREASE) IN NET ASSETS .............................................. (25,363,873) 101,823,606
NET ASSETS -- BEGINNING OF YEAR ................................................ 443,526,860 341,703,254
- ------------------------------------------------------------------------------- --------------- ---------------
NET ASSETS -- END OF YEAR ...................................................... $ 418,162,987 $ 443,526,860
=============================================================================== =============== ===============
</TABLE>
See Notes to Financial Statements.
SAI-22
<PAGE>
SEPARATE ACCOUNT NO. 3 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments
December 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 3)
- ---------------------------------------------------- ----------- --------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS
CHEMICALS--SPECIALTY (6.0%)
Crompton & Knowles Corp.............................. 494,300 $13,098,950
Cytec Industries, Inc.*.............................. 251,100 11,786,006
--------------
24,884,956
--------------
STEEL (1.4%)
Ispat International N.V.*............................ 285,400 6,171,775
--------------
TOTAL BASIC MATERIALS (7.4%)......................... 31,056,731
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (8.4%)
Culligan Water Technologies, Inc.*................... 59,800 3,004,950
Philip Services Corp.*............................... 264,900 3,807,937
United States Filter Corp.*.......................... 648,900 19,426,444
USA Waste Services, Inc.*............................ 229,500 9,007,875
--------------
35,247,206
--------------
PRINTING, PUBLISHING & BROADCASTING (3.7%)
Sinclair Broadcast Group............................. 207,600 9,679,350
Young Broadcasting Corp. (Class A)*.................. 145,300 5,630,375
--------------
15,309,725
--------------
PROFESSIONAL SERVICES (4.7%)
Cambridge Technology Partners, Inc.*................. 37,400 1,556,775
Century Business Services, Inc.*..................... 292,000 5,037,000
Consolidation Capital Corp.*......................... 435,600 8,848,125
CORESTAFF, Inc.*..................................... 152,500 4,041,250
--------------
19,483,150
--------------
TRUCKING, SHIPPING (1.8%)
OMI Corp.*........................................... 824,800 7,577,850
--------------
TOTAL BUSINESS SERVICES (18.6%)...................... 77,617,931
--------------
CAPITAL GOODS
AEROSPACE (1.3%)
Howmet International, Inc.*.......................... 363,900 5,435,756
--------------
TOTAL CAPITAL GOODS (1.3%)........................... 5,435,756
--------------
CONSUMER CYCLICALS
AIRLINES (1.5%)
Continental Airlines, Inc. (Class B)*................ 125,000 6,015,625
--------------
APPAREL, TEXTILE (4.4%)
Tommy Hilfiger Corp.*................................ 136,200 4,784,025
Mohawk Industries, Inc.*............................. 187,100 4,104,506
Nautica Enterprises, Inc.*........................... 244,300 5,679,975
Unifi, Inc........................................... 93,300 3,796,144
--------------
18,364,650
--------------
SAI-23
<PAGE>
SEPARATE ACCOUNT NO. 3 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ---------------------------------------------------- ----------- --------------
AUTOS & TRUCKS (2.4%)
Miller Industries, Inc.*............................. 941,300 $ 10,118,975
--------------
AUTO-RELATED (10.4%)
Budget Group, Inc.*.................................. 252,600 8,730,488
Circuit City Stores, Inc. -CarMax Group*............. 362,700 3,264,300
Dollar Thrifty Automotive Group, Inc.*............... 196,800 4,034,400
Republic Industries, Inc.*........................... 968,800 22,585,150
United Rentals, Inc.*................................ 37,000 714,562
US Rentals, Inc.*.................................... 182,800 4,295,800
--------------
43,624,700
--------------
FOOD SERVICES, LODGING (7.6%)
Extended Stay America, Inc.*......................... 342,300 4,257,356
Florida Panthers Holdings, Inc.*..................... 201,500 3,475,875
Host Marriott Corp.*................................. 279,800 5,491,075
ITT Corporation*..................................... 222,200 18,414,825
--------------
31,639,131
--------------
HOUSEHOLD FURNITURE, APPLIANCES (1.7%)
Furniture Brands International, Inc.*................ 166,000 3,403,000
Industrie Natuzzi Spa (ADR).......................... 180,000 3,712,500
--------------
7,115,500
--------------
LEISURE-RELATED (6.3%)
Coach USA, Inc.*..................................... 166,000 5,561,000
MGM Grand, Inc.*..................................... 90,300 3,256,444
Promus Hotel Corp.*.................................. 291,900 12,259,800
Regal Cinemas, Inc.*................................. 190,900 5,321,338
--------------
26,398,582
--------------
TOTAL CONSUMER CYCLICALS (34.3%)..................... 143,277,163
--------------
CONSUMER NONCYCLICALS
DRUGS (6.5%)
Centocor, Inc.*...................................... 392,000 13,034,000
Genzyme Corporation*................................. 186,300 5,169,825
Jones Medical Industries, Inc........................ 152,000 5,814,000
MedImmune, Inc.*..................................... 77,700 3,331,388
--------------
27,349,213
--------------
HOSPITAL SUPPLIES & SERVICES (0.9%)
Dentsply International, Inc.......................... 114,700 3,498,350
--------------
TOTAL CONSUMER NONCYCLICALS (7.4%)................... 30,847,563
--------------
CREDIT-SENSITIVE
BANKS (4.0%)
Astoria Financial Corp............................... 65,400 3,646,050
Dime Bancorp, Inc.................................... 102,600 3,103,650
Friedman, Billings, Ramsey Group, Inc. (Class A)* ... 198,100 3,553,419
SAI-24
<PAGE>
SEPARATE ACCOUNT NO. 3 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ---------------------------------------------------- ----------- --------------
Mercantile Bankshares Corp........................... 92,300 $ 3,611,237
Staten Island Bancorp, Inc.*......................... 146,800 3,073,625
--------------
16,987,981
--------------
FINANCIAL SERVICES (3.1%)
Imperial Credit Industries, Inc.*.................... 449,200 9,208,600
Paine Webber, Inc.................................... 104,400 3,608,325
--------------
12,816,925
--------------
INSURANCE (1.0%)
AFLAC, Inc........................................... 84,900 4,340,513
--------------
MORTGAGE-RELATED (0.8%)
Resource America, Inc................................ 68,800 3,147,600
--------------
REAL ESTATE (1.5%)
Imperial Credit Commercial Mortgage Investment
Corp................................................ 423,200 6,189,300
--------------
UTILITY-- TELEPHONE (1.0%)
Telephone & Data Systems, Inc........................ 91,300 4,251,156
--------------
TOTAL CREDIT-SENSITIVE (11.4%)....................... 47,733,475
--------------
ENERGY
OIL-- INTERNATIONAL (1.0%)
Gulf Canada Resources, Ltd.*......................... 573,900 4,017,300
--------------
OIL--SUPPLIES & CONSTRUCTION (3.7%)
BJ Services Co.*..................................... 55,800 4,014,112
Diamond Offshore Drilling, Inc....................... 102,600 4,937,625
Nabors Industries, Inc.*............................. 72,200 2,269,788
Rowan Cos., Inc.*.................................... 132,900 4,053,450
--------------
15,274,975
--------------
RAILROADS (0.7%)
Wisconsin Central Transport Corp.*................... 139,300 3,256,138
--------------
TOTAL ENERGY (5.4%).................................. 22,548,413
--------------
TECHNOLOGY
ELECTRONICS (8.8%)
Altera Corp.*........................................ 105,400 3,491,375
Atmel Corp.*......................................... 116,500 2,162,531
Flextronics International, Ltd.*..................... 87,500 3,018,750
Hadco Corp........................................... 69,000 3,122,250
KLA-Tencor Corp.*.................................... 43,800 1,691,775
Lycos, Inc.* ........................................ 62,100 2,569,388
Networks Associates, Inc.*........................... 142,900 7,555,837
Parametric Technology Corp.*......................... 69,700 3,302,037
Sterling Commerce, Inc.*............................. 153,900 5,915,531
Xilinx, Inc.*........................................ 111,900 3,923,494
--------------
36,752,968
--------------
OFFICE EQUIPMENT SERVICES (1.4%)
Comverse Technology, Inc.*........................... 154,100 6,009,900
--------------
SAI-25
<PAGE>
SEPARATE ACCOUNT NO. 3 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ---------------------------------------------------- ----------- --------------
TELECOMMUNICATIONS (2.6%)
ADC Telecommunications, Inc.*........................ 69,900 $ 2,918,325
American Satellite Network-Rights*................... 9,550 0
Metromedia International Group, Inc.*................ 418,700 3,977,650
Millicom International Cellular S.A.*................ 109,100 4,104,888
--------------
11,000,863
--------------
TOTAL TECHNOLOGY (12.8%)............................. 53,763,731
--------------
TOTAL COMMON STOCKS (98.6%)
(Cost $397,187,129)................................. 412,280,763
--------------
PARTICIPATION IN SEPARATE ACCOUNT NO. 2A,
at amortized cost, which approximates
market value, equivalent to 4 units at
$270.27 each (0.0%)................................. 1,200
--------------
TOTAL INVESTMENTS (98.6%)
(Cost/Amortized Cost $397,188,329).................. 412,281,963
OTHER ASSETS LESS LIABILITIES (1.4%) ................ 5,881,024
--------------
NET ASSETS (100.0%).................................. $418,162,987
==============
</TABLE>
* Non-income producing.
See Notes to Financial Statements.
SAI-26
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED) (THE ALLIANCE GROWTH EQUITY FUND)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statement of Assets and Liabilities
December 31, 1997
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments (Notes 2 and 3):
Common stocks--at market value (cost: $1,945,635,407).......................... $2,635,013,465
Preferred stocks--at market value (cost: $1,742,250)........................... 2,777,625
Long-Term debt securities--at value (amortized cost: $3,016,327) .............. 2,728,125
Participation in Separate Account No. 2A--at amortized cost, which
approximates market value, equivalent to 100,276 units at $270.27 ............ 27,101,569
Cash............................................................................ 64,818
Receivables:
Securities sold................................................................ 15,688,292
Dividends...................................................................... 1,062,061
------------------------------------------------------------------------------ --------------
Total assets.................................................................. 2,684,435,955
------------------------------------------------------------------------------ --------------
LIABILITIES:
Payables:
Securities purchased........................................................... 6,071,076
Due to Equitable Life's General Account........................................ 32,755,106
Investment management fees payable............................................. 7,455
Accrued expenses................................................................ 525,753
Accrued retained by Equitable Life in Separate Account No. 4 (Note 1) .......... 1,095,138
- ------------------------------------------------------------------------------- --------------
Total liabilities............................................................. 40,454,528
- ------------------------------------------------------------------------------- --------------
NET ASSETS (NOTE 1):
Net assets attributable to participants' accumulations.......................... 2,611,671,263
Reserves and other liabilities attributable to annuity benefits................. 32,310,164
- ------------------------------------------------------------------------------- --------------
NET ASSETS...................................................................... $2,643,981,427
=============================================================================== ==============
</TABLE>
See Notes to Financial Statements.
SAI-27
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Operations and Changes in Net Assets
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
- ------------------------------------------------------------------------------ -------------- ---------------
<S> <C> <C>
FROM OPERATIONS:
INVESTMENT INCOME (NOTE 2):
Dividends (net of foreign taxes withheld--1997: $2,138 and 1996: $62,998) ..... $ 13,385,197 $ 13,755,557
Interest....................................................................... 845,517 292,364
- ------------------------------------------------------------------------------ -------------- ---------------
Total.......................................................................... 14,230,714 14,047,921
EXPENSES (NOTE 4).............................................................. (19,783,932) (18,524,630)
- ------------------------------------------------------------------------------ -------------- ---------------
NET INVESTMENT LOSS............................................................ (5,553,218) (4,476,709)
- ------------------------------------------------------------------------------ -------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2):
Realized gain from security and foreign currency transactions.................. 372,430,956 218,176,662
- ------------------------------------------------------------------------------ -------------- ---------------
Unrealized appreciation (depreciation) of investments and foreign currency
transactions:
Beginning of year............................................................. 448,580,808 290,870,386
End of year................................................................... 690,125,231 448,580,808
----------------------------------------------------------------------------- -------------- ---------------
Change in unrealized appreciation/depreciation................................. 241,544,423 157,710,422
- ------------------------------------------------------------------------------ -------------- ---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................................ 613,975,379 375,887,084
- ------------------------------------------------------------------------------ -------------- ---------------
Increase in net assets attributable to operations.............................. 608,422,161 371,410,375
- ------------------------------------------------------------------------------ -------------- ---------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions.................................................................. 546,890,479 552,427,638
Withdrawals.................................................................... (969,496,108) (590,972,941)
- ------------------------------------------------------------------------------ -------------- ---------------
Decrease in net assets attributable to contributions and withdrawals .......... (422,605,629) (38,545,303)
- ------------------------------------------------------------------------------ -------------- ---------------
(Increase) Decrease in accumulated amount retained by Equitable Life in
Separate Account No. 4 (Note 1)................................................ (360,863) 536,145
- ------------------------------------------------------------------------------ -------------- ---------------
INCREASE IN NET ASSETS......................................................... 185,455,669 333,401,217
NET ASSETS--BEGINNING OF YEAR.................................................. 2,458,525,758 2,125,124,541
- ------------------------------------------------------------------------------ -------------- ---------------
NET ASSETS--END OF YEAR........................................................ $2,643,981,427 $2,458,525,758
============================================================================== ============== ===============
</TABLE>
See Notes to Financial Statements.
SAI-28
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments
December 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------- ----------- --------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ---------------------------------------------------- ----------- --------------
<S> <C> <C>
COMMON STOCKS:
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.6%)
United States Filter Corp.* ......................... 554,700 $ 16,606,331
--------------
PROFESSIONAL SERVICES (0.3%)
Corrections Corp. of America*........................ 185,000 6,856,562
--------------
TRUCKING, SHIPPING (0.2%)
Knightsbridge Tankers, Ltd........................... 150,000 4,246,875
OMI Corp.*........................................... 264,000 2,425,500
--------------
6,672,375
--------------
TOTAL BUSINESS SERVICES (1.1%) ...................... 30,135,268
--------------
CONSUMER CYCLICALS
AIRLINES (9.0%)
America West Holdings Corp. (Class B)*............... 542,200 10,098,475
Continental Airlines, Inc. (Class B)*................ 2,600,000 125,125,000
KLM Dutch Airlines................................... 280,000 10,570,000
Northwest Airlines Corp. (Class A)*.................. 1,900,000 90,962,500
Southwest Airlines Co................................ 50,000 1,231,250
--------------
237,987,225
--------------
APPAREL, TEXTILE (0.2%)
Tommy Hilfiger Corp.*................................ 100,000 3,512,500
Wolverine World Wide, Inc............................ 91,000 2,058,875
--------------
5,571,375
--------------
AUTO-RELATED (6.3%)
Republic Industries, Inc.*........................... 7,100,000 165,518,750
--------------
FOOD SERVICES, LODGING (1.9%)
Extended Stay America, Inc.*......................... 1,400,000 17,412,500
Host Marriott Corp.*................................. 1,675,000 32,871,875
Suburban Lodges of America, Inc.*.................... 70,000 931,875
--------------
51,216,250
--------------
HOUSEHOLD FURNITURE, APPLIANCES (0.8%)
Industrie Natuzzi Spa (ADR).......................... 1,011,000 20,851,875
--------------
LEISURE-RELATED (1.3%)
Cendant Corporation*................................. 1,000,000 34,375,000
--------------
RETAIL -- GENERAL (0.8%)
Circuit City Stores--Circuit City Group ............. 400,000 14,225,000
Limited, Inc......................................... 300,000 7,650,000
--------------
21,875,000
--------------
TOTAL CONSUMER CYCLICALS (20.3%) .................... 537,395,475
--------------
SAI-29
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- ---------------------------------------------------- ----------- --------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ---------------------------------------------------- ----------- --------------
CONSUMER NONCYCLICALS
DRUGS (3.6%)
Centocor, Inc.*...................................... 1,230,700 $ 40,920,775
Geltex Pharmaceuticals, Inc.*........................ 700,000 18,550,000
Genzyme Corporation*................................. 100,000 2,775,000
IDEC Pharmaceuticals Corp.*.......................... 75,600 2,598,750
MedImmune, Inc.*..................................... 736,800 31,590,300
--------------
96,434,825
--------------
FOODS (0.2%)
Tysons Foods, Inc.................................... 228,100 4,676,050
--------------
TOBACCO (4.4%)
Loews Corp........................................... 1,100,000 116,737,500
--------------
TOTAL CONSUMER NONCYCLICALS (8.2%) .................. 217,848,375
--------------
CREDIT-SENSITIVE
BANKS (0.2%)
Chase Manhattan Corp................................. 40,000 4,380,000
--------------
FINANCIAL SERVICES (15.0%)
A.G. Edwards, Inc. .................................. 700,000 27,825,000
Green Tree Financial Corp............................ 54,200 1,419,362
Legg Mason, Inc...................................... 1,200,031 67,126,734
MBNA Corp............................................ 4,800,000 131,100,000
Merrill Lynch & Co., Inc............................. 1,400,000 102,112,500
Morgan Stanley, Dean Witter, Discover & Co. ......... 1,000,000 59,125,000
PMI Group, Inc....................................... 100,000 7,231,250
--------------
395,939,846
--------------
INSURANCE (13.1%)
CNA Financial Corp.*................................. 1,700,000 217,175,000
IPC Holdings Ltd..................................... 207,400 6,675,687
Life Re Corporation.................................. 721,000 47,000,188
NAC Re Corp.......................................... 538,700 26,295,294
Travelers Group, Inc................................. 950,000 51,181,250
--------------
348,327,419
--------------
REAL ESTATE (0.4%)
Excel Realty Trust, Inc.............................. 140,000 4,410,000
Imperial Credit Commercial Mortgage Investment
Corp................................................. 25,000 365,625
Imperial Credit Mortgage Holdings.................... 187,500 3,351,562
Novastar Financial, Inc.............................. 75,000 1,185,938
--------------
9,313,125
--------------
SAI-30
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- ---------------------------------------------------- ----------- --------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ---------------------------------------------------- ----------- --------------
UTILITY--TELEPHONE (8.7%)
Telebras Sponsored (ADR)............................. 250,000 $ 29,109,375
Telephone & Data Systems, Inc........................ 4,000,000 186,250,000
Teleport Communications Group, Inc. (Class A)* ...... 300,000 16,462,500
--------------
231,821,875
--------------
TOTAL CREDIT-SENSITIVE (37.4%) ...................... 989,782,265
--------------
ENERGY
OIL--DOMESTIC (0.0%)
Apache Corp.......................................... 15,000 525,938
--------------
OIL--INTERNATIONAL (0.3%)
Gulf Canada Resources Ltd.*.......................... 750,000 5,250,000
IRI International Corporation*....................... 150,000 2,100,000
Petroleo Brasileiro S.A. (ADR)....................... 50,000 1,169,330
--------------
8,519,330
--------------
OIL--SUPPLIES & CONSTRUCTION (15.3%)
Baker Hughes, Inc. .................................. 555,000 24,211,875
BJ Services Co.*..................................... 15,000 1,079,063
Diamond Offshore Drilling, Inc. ..................... 860,000 41,387,500
Dresser Industries, Inc. ............................ 170,000 7,129,375
Halliburton Co. ..................................... 1,400,000 72,712,500
Lukoil Holdings--Spons (ADR)......................... 15,000 1,377,375
Lukoil Holdings--Spons (ADR)(Pref. Shares) .......... 40,000 1,241,576
Nabors Industries, Inc.*............................. 435,000 13,675,312
Noble Drilling Corp.*................................ 1,300,000 39,812,500
Oceaneering International, Inc.*..................... 300,000 5,925,000
Parker Drilling Co.*................................. 5,500,000 67,031,250
Rowan Cos., Inc.*.................................... 3,500,000 106,750,000
Schlumberger, Ltd.................................... 270,000 21,735,000
--------------
404,068,326
--------------
TOTAL ENERGY (15.6%) ................................ 413,113,594
--------------
TECHNOLOGY
ELECTRONICS (2.7%)
Altera Corp.*........................................ 100,000 3,312,500
DBT Online, Inc.*.................................... 160,000 3,990,000
Network Associates, Inc.*............................ 400,000 21,150,000
Sterling Commerce, Inc.* ............................ 650,000 24,984,375
Teradyne, Inc.*...................................... 290,000 9,280,000
U.S. Satellite Broadcasting Co., Inc.*............... 40,000 317,500
Xilinx, Inc.*........................................ 250,000 8,765,625
--------------
71,800,000
--------------
SAI-31
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- ---------------------------------------------------- ----------- --------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ---------------------------------------------------- ----------- --------------
OFFICE EQUIPMENT SERVICES (0.1%)
CheckFree Holdings Corp.*............................ 100,000 $ 2,700,000
--------------
TELECOMMUNICATIONS (14.1%)
ADC Telecommunications, Inc.*........................ 860,000 35,905,000
American Satellite Network-- Rights*................. 70,000 0
Bell Canada International, Inc.*..................... 25,000 381,250
Core Communications, Inc.*........................... 504,000 5,103,000
DSC Communications Corp.*............................ 450,000 10,800,000
MCI Communications Corp.............................. 300,000 12,843,750
Millicom International Cellular S.A.*................ 1,515,000 57,001,875
Nextel Communications, Inc. (Class A)*............... 485,000 12,610,000
Nokia Corp.--Sponsored (A Shares)(ADR)............... 260,000 18,200,000
Powertel, Inc.*...................................... 73,300 1,227,775
Tellabs, Inc.*....................................... 100,000 5,287,500
United States Cellular Corp.*........................ 2,915,400 90,377,400
Vanguard Cellular Systems, Inc. (Class A)* .......... 2,200,000 28,050,000
WorldCom, Inc.*...................................... 3,100,000 93,775,000
--------------
371,562,550
--------------
TOTAL TECHNOLOGY (16.9%) ............................ 446,062,550
--------------
DIVERSIFIED
MISCELLANEOUS (0.2%)
Viad Corp. .......................................... 35,000 675,938
--------------
TOTAL DIVERSIFIED (0.2%) ............................ 675,938
--------------
TOTAL COMMON STOCKS (99.7%)
(Cost $1,945,635,407) .............................. 2,635,013,465
--------------
PREFERRED STOCKS:
CONSUMER CYCLICALS
AIRLINES (0.1%)
Continental Airlines Financial Trust
8.5% Conv........................................... 27,000 2,777,625
--------------
TOTAL CONSUMER CYCLICALS (0.1%) ..................... 2,777,625
--------------
TOTAL PREFERRED STOCKS (0.1%)
(Cost $1,742,250) .................................. 2,777,625
--------------
</TABLE>
SAI-32
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------- ------------ --------------
PRINCIPAL VALUE
AMOUNT (NOTE 3)
- ----------------------------------------------------------------------- ------------ --------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES:
TECHNOLOGY
TELECOMMUNICATIONS (0.1%)
United States Cellular Corp.
Zero Coupon Conv., 2015 ............................................... $7,500,000 $ 2,728,125
--------------
TOTAL TECHNOLOGY (0.1%) ................................................ 2,728,125
--------------
TOTAL LONG-TERM DEBT SECURITIES (0.1%)
(Amortized Cost $3,016,327) ........................................... 2,728,125
--------------
PARTICIPATION IN SEPARATE ACCOUNT NO. 2A,
at amortized cost, which approximates
market value, equivalent to 100,276 units
at $270.27 each (1.0%) ................................................ 27,101,569
--------------
TOTAL INVESTMENTS (100.9%)
(Cost/Amortized Cost $1,977,495,553) .................................. 2,667,620,784
OTHER ASSETS LESS LIABILITIES (-0.9%) .................................. (22,544,219)
AMOUNT RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT NO. 4 (0.0%)(NOTE 1) ................................. (1,095,138)
--------------
NET ASSETS (100.0%) .................................................... $2,643,981,427
==============
Reserves attributable to participants' accumulations ................... 2,611,671,263
Reserves and other contract liabilities attributable to annuity
benefits ............................................................... 32,310,164
--------------
NET ASSETS ............................................................. $2,643,981,427
==============
</TABLE>
* Non-income producing.
See Notes to Financial Statements.
SAI-33
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED) (THE ALLIANCE BALANCED FUND)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statement of Assets and Liabilities
December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments (Notes 2 and 3):
Common stocks--at market value (cost: $108,824,778)................................... $124,460,867
Preferred stocks--at market value (cost: $2,677,383).................................. 3,236,238
Long-term debt securities--at value (amortized cost: $110,232,563) ................... 114,106,615
Participation in Separate Account No. 2A--at amortized cost, which approximates
market value, equivalent to 38,544 units at $270.27.................................. 10,417,265
Receivables:
Securities sold....................................................................... 810,823
Interest.............................................................................. 1,517,146
Dividends............................................................................. 238,861
Other................................................................................. 24,341
- -------------------------------------------------------------------------------------- --------------
Total assets......................................................................... 254,812,156
- -------------------------------------------------------------------------------------- --------------
LIABILITIES:
Payables:
Custodian payable..................................................................... 159,644
Securities purchased.................................................................. 110,274
Due to Equitable Life's General Account............................................... 11,079,033
Investment management fees payable.................................................... 2,561
Accrued expenses ...................................................................... 204,725
- -------------------------------------------------------------------------------------- --------------
Total liabilities.................................................................... 11,556,237
- -------------------------------------------------------------------------------------- --------------
NET ASSETS............................................................................. $243,255,919
====================================================================================== ==============
</TABLE>
See Notes to Financial Statements.
SAI-34
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Operations and Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996
- ------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
FROM OPERATIONS:
INVESTMENT INCOME (NOTE 2):
Interest ................................................................. $ 1,765,490 $ 2,417,609
Dividends (net of foreign taxes withheld--
1997: $109,690 and 1996: $115,641) ...................................... 9,248,201 9,820,381
--------------- ---------------
Total .................................................................... 11,013,691 12,237,990
EXPENSES--(NOTE 4) ....................................................... (3,985,252) (4,691,514)
- ------------------------------------------------------------------------- --------------- ---------------
NET INVESTMENT INCOME .................................................... 7,028,439 7,546,476
- ------------------------------------------------------------------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2):
Realized gain from security and foreign currency transactions ........... 30,478,147 35,223,719
- ------------------------------------------------------------------------- --------------- ---------------
Unrealized appreciation (depreciation) of investments and foreign
currency transactions:
Beginning of year ....................................................... 24,115,275 34,125,491
End of year ............................................................. 20,366,672 24,115,275
- ------------------------------------------------------------------------- --------------- ---------------
Change in unrealized appreciation/depreciation ........................... (3,748,603) (10,010,216)
- ------------------------------------------------------------------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS........................... 26,729,544 25,213,503
- ------------------------------------------------------------------------- --------------- ---------------
Increase in net assets attributable to operations ........................ 33,757,983 32,759,979
- ------------------------------------------------------------------------- --------------- ---------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions ............................................................ 50,198,862 68,031,967
Withdrawals .............................................................. (153,851,256) (161,825,766)
- ------------------------------------------------------------------------- --------------- ---------------
Decrease in net assets attributable to contributions and withdrawals .... (103,652,394) (93,793,799)
- ------------------------------------------------------------------------- --------------- ---------------
DECREASE IN NET ASSETS.................................................... (69,894,411) (61,033,820)
NET ASSETS--BEGINNING OF YEAR............................................. 313,150,330 374,184,150
- ------------------------------------------------------------------------- --------------- ---------------
NET ASSETS--END OF YEAR................................................... $ 243,255,919 $ 313,150,330
========================================================================= =============== ===============
</TABLE>
See Notes to Financial Statements.
SAI-35
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments
December 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
<S> <C> <C>
COMMON STOCKS:
BASIC MATERIALS
CHEMICALS (0.9%)
Akzo Nobel N.V.................................... 600 $ 103,445
Bayer AG ......................................... 4,000 148,416
Ciba Specialty Chemicals AG*...................... 900 107,172
Dow Chemical Co. ................................. 5,000 507,500
Dupont (E.I.) de Nemours & Co. ................... 12,100 726,756
Hitachi Chemical Co. Ltd. ........................ 31,000 183,959
Holliday Chemical Holdings PLC ................... 46,500 174,886
Kuraray Co. Ltd. ................................. 20,000 165,390
Monsanto Co. ..................................... 1,800 75,600
Nippon Chemi-Con Corp. ........................... 12,000 27,841
Toagosei Co. Ltd. ................................ 29,000 40,858
Union Carbide Corp. .............................. 1,100 47,231
--------------
2,309,054
--------------
CHEMICALS--SPECIALTY (0.1%)
NGK Insulators ................................... 18,000 159,877
--------------
METALS & MINING (0.7%)
Aluminum Co. of America .......................... 9,600 675,600
Freeport--McMoran Copper & Gold, Inc. (Class B) . 14,000 220,500
Inco Ltd. ........................................ 900 15,300
Kaiser Aluminum Corp.* ........................... 36,100 318,131
Phelps Dodge Corp. ............................... 2,000 124,500
Steel Dynamics, Inc.* ............................ 20,900 334,400
Toho Titanium* ................................... 1,000 8,423
--------------
1,696,854
--------------
PAPER (0.2%)
Georgia-Pacific Corp. ............................ 1,300 78,975
Kimberly-Clark Corp. ............................. 2,200 108,488
KNP BT (Kon) N.V. ................................ 4,000 92,122
Nippon Paper Industries Co. ...................... 2,000 7,841
UPM-Kymmene Oy ................................... 5,010 100,215
--------------
387,641
--------------
STEEL (0.1%)
Koninklijke Hoogovens N.V. ....................... 2,000 81,963
NatSteel Ltd. .................................... 41,000 55,461
Pohang Iron & Steel Co. Ltd. (ADR) ............... 4,000 69,750
--------------
207,174
--------------
TOTAL BASIC MATERIALS (2.0%)...................... 4,760,600
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.2%)
USA Waste Services, Inc.* ........................ 14,800 580,900
--------------
PRINTING, PUBLISHING & BROADCASTING (1.3%)
Carlton Communications PLC ....................... 26,000 199,841
Gannett Co. ...................................... 12,200 754,112
Liberty Media Group (Class A)* ................... 6,850 248,313
New Straits Times Press BHD ...................... 13,000 16,110
SAI-36
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
New York Times Co. (Class A) ..................... 9,500 $ 628,188
Nippon Television Network Corp. .................. 100 29,326
Reuters Holding PLC (ADR) ........................ 7,200 477,000
Scripps (EW) Co. (Class A) ....................... 11,600 561,875
Television Broadcasts Ltd. ....................... 1,000 2,852
Tokyo Broadcasting System, Inc. .................. 2,000 25,268
United News & Media PLC .......................... 18,551 209,310
Viacom, Inc. (Class B)* .......................... 1,400 58,012
--------------
3,210,207
--------------
PROFESSIONAL SERVICES (0.0%)
Asatsu, Inc. ..................................... 700 10,077
Brisa-Auto Estradas de Portugal SA* .............. 500 17,911
Meitec ........................................... 2,000 56,202
--------------
84,190
--------------
TRUCKING, SHIPPING (0.4%)
Bergesen Dy As (A Shares) ........................ 9,450 222,956
CNF Transportation, Inc. ......................... 8,700 333,863
Frontline Ltd.* .................................. 30,000 121,220
--------------
678,039
--------------
TOTAL BUSINESS SERVICES (1.9%).................... 4,553,336
--------------
CAPITAL GOODS
AEROSPACE (0.6%)
Boeing Co. ....................................... 22,500 1,101,094
British Aerospace ................................ 9,901 283,102
Gulfstream Aerospace Corp.* ...................... 3,200 93,600
--------------
1,477,796
--------------
BUILDING & CONSTRUCTION (0.4%)
Beazer Group PLC ................................. 36,000 95,486
Bouygues ......................................... 2,239 253,717
Daito Trust Construction Co. Ltd. ................ 7,500 45,770
Groupe GTM ....................................... 1,931 129,942
Makita Corp. ..................................... 17,000 162,710
National House Industrial Co. .................... 10,000 68,530
Sho Bond Corp. ................................... 1,500 27,106
Societe Technip .................................. 1,400 147,711
Toda Corp. ....................................... 22,000 59,801
--------------
990,773
--------------
BUILDING MATERIALS & FOREST PRODUCTS (0.3%)
BPB PLC .......................................... 20,500 113,799
Fujikura Ltd. .................................... 4,000 26,463
Holderbank Financiere Glaris AG .................. 275 224,336
Matsushita Electric Works Ltd. ................... 22,000 190,352
Nichiha Corp. .................................... 1,000 6,110
Rugby Group PLC .................................. 50,000 112,090
--------------
673,150
--------------
ELECTRICAL EQUIPMENT (1.8%)
Daikin Industries Ltd. ........................... 29,000 109,250
General Electric Co. ............................. 49,900 3,661,413
SAI-37
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
Johnson Electric Holdings Ltd. ................... 50,400 $ 145,041
Legrand SA ....................................... 750 149,414
Mabuchi Motor Co. ................................ 200 10,153
Sumitomo Electric Industries ..................... 11,000 149,923
--------------
4,225,194
--------------
MACHINERY (1.1%)
Allied Signal, Inc. .............................. 20,700 806,006
Cie Generale de Geophysique SA (ADR)* ............ 1,000 25,625
Fujitec Co. Ltd. ................................. 18,000 99,234
Ishikawajima Harima Heavy Industries Co. Ltd. ... 20,000 29,862
KSB AG ........................................... 500 109,783
Legris Industries SA ............................. 4,390 152,448
Mitsubishi Heavy Industries Ltd. ................. 14,000 58,316
Nitta Corp. ...................................... 1,000 10,107
Rauma Oy ......................................... 250 3,900
Schindler Holding AG Participating Certificate .. 35 36,456
Schindler Holding AG Registered .................. 100 107,378
Siebe PLC ........................................ 10,000 187,228
SMC Corp. ........................................ 400 35,222
Stork N.V. ....................................... 3,600 124,276
TI Group PLC ..................................... 24,558 187,951
United Technologies Corp. ........................ 9,600 699,000
Valmet Oy* ....................................... 6,200 85,562
--------------
2,758,354
--------------
TOTAL CAPITAL GOODS (4.2%)........................ 10,125,267
--------------
CONSUMER CYCLICALS
AIRLINES (0.2%)
Singapore Airlines Ltd. .......................... 2,000 13,052
US Airways Group, Inc.* .......................... 3,100 193,750
Virgin Express Holdings PLC (ADR)* ............... 18,000 373,500
--------------
580,302
--------------
APPAREL, TEXTILE (0.4%)
Tommy Hilfiger Corp.* ............................ 9,800 344,225
Nautica Enterprises, Inc.* ....................... 8,300 192,975
Onward Kashiyama Co. Ltd. ........................ 15,000 173,430
Reebok International Ltd.* ....................... 13,200 380,325
--------------
1,090,955
--------------
AUTO-RELATED (0.6%)
Circuit City Stores, Inc.--CarMax Group* ........ 19,000 171,000
Continental AG ................................... 5,000 112,563
Federal-Mogul Corp. .............................. 5,400 218,700
Magna International, Inc. ........................ 7,800 489,937
Minebea Co. Ltd. ................................. 2,000 21,440
NGK Spark Plug Co. ............................... 8,000 45,329
Republic Industries, Inc.* ....................... 3,200 74,600
Sumitomo Rubber Industries, Inc. ................. 33,000 139,227
Toyoda Automatic Loom Works Ltd. ................. 14,000 257,274
--------------
1,530,070
--------------
SAI-38
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
AUTOS & TRUCKS (0.8%)
Bajaj Auto Ltd. (GDR) ............................ 1,500 $ 29,625
Chrysler Corp. ................................... 9,400 330,762
Ford Motor Co. ................................... 10,200 496,612
General Motors Corp. ............................. 8,000 485,000
Harley-Davidson, Inc. ............................ 18,500 506,438
Honda Motor Co. Ltd. ............................. 1,000 36,677
UMW Holdings BHD ................................. 10,000 7,585
Volkswagen AG .................................... 200 111,729
--------------
2,004,428
--------------
FOOD SERVICES, LODGING (0.2%)
Accor SA ......................................... 200 37,185
Choice Hotels Scandinavia ASA* ................... 20,000 67,797
Compass Group PLC ................................ 27,000 329,915
McDonald's Corp. ................................. 1,000 47,750
--------------
482,647
--------------
HOUSEHOLD FURNITURE, APPLIANCES (0.4%)
Hunter Douglas N.V. .............................. 4,000 140,057
Industrie Natuzzi Spa (ADR) ...................... 600 12,375
Moulinex* ........................................ 3,000 74,121
Pioneer Electric Corp. ........................... 13,000 200,077
Sony Corp. ....................................... 3,500 310,873
Sunbeam Corp. .................................... 6,100 256,963
--------------
994,466
--------------
LEISURE-RELATED (1.1%)
Berjaya Sports Toto BHD .......................... 27,000 69,071
Carnival Corp. (Class A) ......................... 9,100 503,913
Disney (Walt) Co. ................................ 14,033 1,390,144
EMI Group PLC .................................... 1,000 8,610
Granada Group PLC ................................ 16,700 256,993
Hoyts Cinemas Group .............................. 10,000 17,597
Ladbroke Group PLC ............................... 51,864 224,872
NAMCO Ltd. ....................................... 200 5,804
Nintendo Co. Ltd. ................................ 400 39,204
Nippon Broadcasting System ....................... 1,000 39,510
Toei Co. Ltd. .................................... 2,000 7,274
--------------
2,562,992
--------------
PHOTO & OPTICAL (0.2%)
Eastman Kodak Co. ................................ 2,500 152,031
Fuji Photo Film Co. .............................. 5,000 191,424
Noritsu Koki Co. Ltd. ............................ 1,600 39,449
--------------
382,904
--------------
RETAIL-- GENERAL (2.3%)
Aldeasa SA* ...................................... 3,000 63,578
Boots Co. PLC .................................... 14,500 210,278
British Airport Author PLC ....................... 30,000 240,194
CompUSA, Inc.* ................................... 19,600 607,600
Dayton Hudson Corp. .............................. 10,300 695,250
Dickson Concepts International Ltd. .............. 31,000 45,206
SAI-39
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
Home Depot, Inc. ................................. 18,400 $ 1,083,300
Kingfisher PLC ................................... 14,953 208,252
Kohl's Corp.* .................................... 3,800 258,875
Kokuyo Co. Ltd. .................................. 3,000 51,685
Paris Miki, Inc. ................................. 800 8,576
Sato Corp. ....................................... 1,300 22,098
Smith (W.H.) Group PLC ........................... 3,000 19,240
Staples, Inc.* ................................... 9,000 249,750
Vendex International N.V. ........................ 1,500 82,777
Wal Mart Stores, Inc. ............................ 42,200 1,664,262
--------------
5,510,921
--------------
TOTAL CONSUMER CYCLICALS (6.2%)................... 15,139,685
--------------
CONSUMER NONCYCLICALS
BEVERAGES (2.1%)
Anheuser Busch, Inc. ............................. 8,400 369,600
Bass PLC ......................................... 4,900 75,325
Coca-Cola Co. .................................... 40,600 2,704,975
Coca Cola Enterprises, Inc. ...................... 1,600 56,900
Diageo PLC ....................................... 11,000 100,898
Pepsico, Inc. .................................... 33,500 1,220,656
Scottish & Newcastle PLC ......................... 19,500 235,550
Whitbread PLC .................................... 18,500 268,438
--------------
5,032,342
--------------
CONTAINERS (0.2%)
Schmalbach Lubeca AG ............................. 400 66,704
Sealed Air Corp.* ................................ 8,600 531,050
--------------
597,754
--------------
DRUGS (3.5%)
Astra AB (A Shares) .............................. 6,000 104,000
Bristol-Myers Squibb Co. ......................... 18,400 1,741,100
Daiichi Pharmaceutical Co. ....................... 15,000 168,836
Genzyme Corporation* ............................. 9,300 258,075
Lilly Eli & Co. .................................. 4,200 292,425
Merck KGAA ....................................... 3,750 126,112
Merck & Co., Inc. ................................ 21,100 2,241,875
Novartis AG ...................................... 150 243,293
Orion-Yhtyma Oy (B Shares) ....................... 8,700 229,907
Pfizer, Inc. ..................................... 23,840 1,777,570
Rohto Pharmaceutical Co. Ltd. .................... 3,000 19,296
Sankyo Co. Ltd. .................................. 1,000 22,588
Santen Pharmaceutical Co. Ltd. ................... 3,000 34,456
Schering Plough Corp. ............................ 17,500 1,087,187
Taisho Pharmaceutical Co. ........................ 1,000 25,498
Yamanouchi Pharmaceutical Co. Ltd. ............... 3,000 64,318
--------------
8,436,536
--------------
FOODS (1.1%)
Campbell Soup Co. ................................ 14,800 860,250
General Mills, Inc. .............................. 2,000 143,250
Heinz (H.J.) Co. ................................. 2,500 127,031
SAI-40
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
Huhtamaki Oy Series I ............................ 2,200 $ 90,840
Nabisco Holdings Corp. (Class A) ................. 10,520 509,562
Orkla ASA 'A' .................................... 1,890 162,732
Parmalat Finanziaria Spa ......................... 100,440 143,622
Tysons Foods, Inc. ............................... 27,000 553,500
Yakult Honsha Co. ................................ 1,000 5,253
--------------
2,596,040
--------------
HOSPITAL SUPPLIES & SERVICES (1.5%)
Abbott Laboratories .............................. 10,700 701,519
Johnson & Johnson ................................ 25,400 1,673,225
Medtronic, Inc. .................................. 16,400 857,925
PT Tempo Scan Pacific ............................ 40,000 3,091
United Healthcare Corp. .......................... 8,400 417,375
--------------
3,653,135
--------------
RETAIL-- FOOD (0.6%)
Delhaize--Le Lion SA ............................. 1,770 89,676
Familymart Co. ................................... 4,100 146,922
Kroger Co.* ...................................... 17,600 650,100
Promodes ......................................... 400 165,955
Seven-Eleven Japan Co. Ltd. ...................... 1,000 70,750
Woolworths Ltd. .................................. 108,492 362,740
--------------
1,486,143
--------------
SOAPS & TOILETRIES (2.1%)
Avon Products, Inc. .............................. 10,200 626,025
Colgate Palmolive Co. ............................ 11,200 823,200
Estee Lauder Cos. (Class A) ...................... 7,000 360,063
Gillette Corp. ................................... 12,700 1,275,556
Procter & Gamble Co. ............................. 24,300 1,939,444
--------------
5,024,288
--------------
TOBACCO (0.9%)
Imperial Tobacco Group PLC ....................... 1,700 10,721
Japan Tobacco, Inc. .............................. 23 163,078
Philip Morris Cos., Inc. ......................... 43,330 1,963,391
Seita ............................................ 3,000 107,668
Swedish Match AB ................................. 5,500 18,373
Tabacalera SA--A ................................. 1,500 121,546
--------------
2,384,777
--------------
TOTAL CONSUMER NONCYCLICALS (12.0%) .............. 29,211,015
--------------
CREDIT-SENSITIVE
BANKS (3.9%)
Allied Irish Bank ................................ 44,000 426,165
AMMB Holdings BHD ................................ 14,000 9,179
AMMB Holdings BHD Rights-- Equity* ............... 14,000 54
Banco Bilbao Vizcaya SA .......................... 6,000 194,080
Banc One Corp. ................................... 17,200 934,175
Banco Santander SA ............................... 4,000 133,586
Bangkok Bank Public Ltd. ......................... 1,000 2,492
BankAmerica Corp.................................. 1,800 131,400
SAI-41
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
Bank Dagang Nasional Indonesia Tbk ............... 234,000 $ 14,891
Bank of Tokyo--Mitsubishi Ltd. ................... 2,000 27,565
Banque National de Paris ......................... 2,600 138,197
Barnett Banks, Inc. .............................. 9,600 690,000
BPI-SGPS SA* ..................................... 1,200 29,177
Chase Manhattan Corp. ............................ 10,065 1,102,118
Citicorp ......................................... 10,100 1,277,019
Corestates Financial Corp. ....................... 9,000 720,563
Credito Italiano Spa ............................. 40,000 123,324
Dao Heng Bank Group Ltd. ......................... 5,000 12,485
Den Norske Bank ASA .............................. 40,000 188,746
Erste Bank Oesterreichischen Sparkassen AG* ..... 1,120 55,700
First Union Corp. ................................ 17,500 896,875
Istituto Mobiliare Italiano ...................... 12,000 142,428
Long-Term Credit Bank of Japan ................... 44,000 70,413
Morgan (J.P.) & Co., Inc. ........................ 1,400 158,025
NationsBank Corp. ................................ 17,600 1,070,300
Philippine Commercial International Bank ........ 1,000 2,840
Seventy-Seven Bank Ltd. .......................... 23,000 163,783
Shizuoka Bank Ltd. ............................... 1,000 10,720
Skandinaviska Enskilda Banken (Series A) ........ 5,070 64,232
Societe Generale ................................. 1,681 229,030
Sparbanken Sverige AB (A Shares) ................. 3,000 68,262
State Bank of India (GDR) ........................ 4,800 87,360
Suncorp-Metway Ltd.* ............................. 14,866 37,302
Thai Farmers Bank Public Co.-- Warrants* ........ 750 79
Toho Bank ........................................ 1,000 3,982
Wing Hang Bank Ltd. .............................. 31,000 87,611
Yamaguchi Bank ................................... 14,000 171,516
--------------
9,475,674
--------------
FINANCIAL SERVICES (2.2%)
Aiful Corp.* ..................................... 500 33,882
Associates First Capital Corp. ................... 6,000 426,750
Credit Saison Co. ................................ 2,000 49,311
Fleet Financial Group, Inc. ...................... 10,700 801,831
Green Tree Financial Corp. ....................... 9,100 238,306
Household International, Inc. .................... 5,300 676,081
Legg Mason, Inc. ................................. 5,000 279,688
MBNA Corp. ....................................... 18,175 496,405
Merrill Lynch & Co., Inc. ........................ 9,400 685,613
Morgan Stanley, Dean Witter, Discover & Co. ..... 14,100 833,662
Newcourt Credit Group, Inc.* ..................... 2,500 82,745
Nichiei Co. Ltd. ................................. 100 10,643
Peregrine Investment Holdings Ltd. ............... 90,000 63,879
PMI Group, Inc. .................................. 7,500 542,344
Sanyo Shinpan Finance Co. Ltd. ................... 200 8,836
Takefuji Corp. ................................... 800 36,692
Worms Et Compagnie ............................... 300 22,182
--------------
5,288,850
--------------
SAI-42
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
INSURANCE (3.1%)
American International Group, Inc. ............... 14,100 $1,533,375
AMEV N.V. ........................................ 5,300 231,055
ASR Verzekeringsgroep N.V. ....................... 1,500 81,593
Assurances Generales de France ................... 7,650 405,348
Catalana Occidente SA ............................ 1,000 50,915
Corporacion Mapfre Cia International SA ......... 1,600 42,411
General Accident PLC ............................. 8,000 139,797
Hartford Financial Services Group, Inc. ......... 7,400 692,362
Hartford Life, Inc. .............................. 8,400 380,625
ING Groep N.V. ................................... 5,000 210,579
Irish Life PLC ................................... 20,000 113,539
PennCorp Financial Group, Inc. ................... 14,500 517,469
QBE Insurance Group Ltd. ......................... 37,750 169,937
Royal & Sun Alliance Insurance Group PLC ........ 18,700 187,343
SunAmerica, Inc. ................................. 11,200 478,800
Travelers Group, Inc. ............................ 24,700 1,330,713
Travelers Property Casualty Corp. (Class A) ..... 12,300 541,200
Trygg Hansa AB (B Shares) ........................ 6,800 209,160
United Assurance Group PLC ....................... 14,900 129,085
Willis Corroon Group PLC (ADR) ................... 900 11,081
Zurich Versicherungs ............................. 385 183,383
--------------
7,639,770
--------------
MORTGAGE-RELATED (0.5%)
Federal National Mortgage Association ............ 23,300 1,329,556
--------------
REAL ESTATE (0.1%)
City Development Ltd. ............................ 1,000 4,628
Daibiru Corp. .................................... 1,000 7,312
Sumitomo Realty & Development Co. Ltd. ........... 2,000 11,485
Unibail SA ....................................... 1,000 99,859
--------------
123,284
--------------
UTILITY-- ELECTRIC (2.2%)
AES Corp.* ....................................... 13,400 624,775
Baltimore Gas & Electric Co. ..................... 10,200 347,438
Carolina Power & Light Co. ....................... 4,800 203,700
Central & South West Corp. ....................... 21,500 581,844
Cia Paranaense de Energia--Copel (ADR) ........... 10,000 136,875
Cinergy Corp. .................................... 6,900 264,356
CMS Energy Corp. ................................. 12,400 546,375
Consolidated Edison, Inc. ........................ 6,400 262,400
Duke Power Co. ................................... 6,200 343,325
Edison International ............................. 8,500 231,094
Energy Group PLC ................................. 5,000 55,388
FPL Group, Inc. .................................. 3,800 224,912
Hong Kong Electric Holdings Ltd. ................. 34,000 129,217
Houston Industries, Inc. ......................... 11,600 309,575
Malakoff BHD ..................................... 16,000 33,320
Manila Electric Co. .............................. 3,900 12,904
National Grid Group PLC .......................... 1,000 4,767
Powergen PLC (ADR) ............................... 20,600 268,968
SAI-43
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
Texas Utilities Co. .............................. 15,400 $ 640,063
Veba AG .......................................... 2,500 170,233
--------------
5,391,529
--------------
UTILITY --GAS (0.3%)
Anglian Water PLC ................................ 10,000 133,030
ENRON Corp. ...................................... 6,000 249,375
Scottish Power PLC ............................... 44,000 387,693
--------------
770,098
--------------
UTILITY-- TELEPHONE (1.3%)
Ameritech Corp. .................................. 5,900 474,950
AT&T Corp. ....................................... 13,500 826,875
BellSouth Corp. .................................. 11,300 636,331
British Telecommunications PLC ................... 20,000 157,583
Cable & Wireless PLC ............................. 20,800 182,590
Philippine Long Distance Telelphone Co. ......... 1,800 39,111
Sprint Corp. ..................................... 500 29,313
Telecom Italia Spa ............................... 27,777 177,402
Telefonica de Espana ............................. 8,000 228,330
Telekom Malaysia BHD ............................. 28,500 84,265
Teleport Communications Group, Inc. (Class A)* .. 5,200 285,350
--------------
3,122,100
--------------
TOTAL CREDIT-SENSITIVE (13.6%) ................... 33,140,861
--------------
ENERGY
COAL & GAS PIPELINES (0.0%)
BG PLC* .......................................... 36,500 18,283
OMV AG ........................................... 300 41,476
--------------
59,759
--------------
OIL-DOMESTIC (0.6%)
Apache Corp. ..................................... 14,500 508,406
Union Pacific Resources Group, Inc. .............. 17,600 426,800
USX--Marathon Group .............................. 18,100 610,875
--------------
1,546,081
--------------
OIL-- INTERNATIONAL (1.9%)
British Petroleum Co. PLC ........................ 15,000 197,205
Elf Aquitaine .................................... 1,000 116,308
Exxon Corp. ...................................... 35,100 2,147,681
Gulf Canada Resources Ltd.* ...................... 37,800 264,600
Gulf Indonesia Resources Ltd.* ................... 5,100 112,200
Mobil Corp. ...................................... 10,900 786,844
Repsol SA ........................................ 2,750 117,281
Shell Transport & Trading Co. PLC ................ 18,000 130,518
Texaco, Inc. ..................................... 10,400 565,500
Total SA--B ...................................... 1,000 108,831
--------------
4,546,968
--------------
OIL-- SUPPLIES & CONSTRUCTION (0.8%)
BJ Services Co.* ................................. 4,600 330,912
Canadian Fracmaster Ltd.* ........................ 14,300 120,080
Dresser Industries, Inc. ......................... 15,400 645,837
SAI-44
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
Fugro N.V.*....................................... 3,000 $ 91,432
Halliburton Co. .................................. 12,100 628,444
Nabors Industries, Inc.*.......................... 3,700 116,319
Noble Drilling Corp.*............................. 4,300 131,688
--------------
2,064,712
--------------
RAILROADS (0.1%)
Union Pacific Corp. .............................. 200 12,488
--------------
TOTAL ENERGY (3.4%) .............................. 8,230,008
--------------
TECHNOLOGY
ELECTRONICS (2.1%)
Altera Corp.*..................................... 1,709 56,611
Applied Materials, Inc.*.......................... 8,200 247,025
Cisco Systems, Inc.*.............................. 28,150 1,569,362
Fujimi, Inc. ..................................... 400 16,998
Hoya Corp. ....................................... 1,000 31,394
Intel Corp. ...................................... 27,786 1,951,966
Leitch Technology Corp.*.......................... 1,000 30,090
Micronics Japan Co. Ltd. ......................... 2,200 37,902
National Semiconductor Corp.*..................... 7,900 204,906
Nikon Corp. ...................................... 1,000 9,877
Rohm Co. Ltd. .................................... 1,000 101,838
Sankyo Engineering Co. ........................... 2,000 6,126
SMH AG ........................................... 800 107,857
Solectron Corp.*.................................. 6,700 278,469
TDK Corp. ........................................ 1,000 75,345
Tokyo Cathode Laboratory Co.*..................... 1,600 15,804
TOWA Corp. ....................................... 100 2,075
Varitronix International Ltd. .................... 95,000 163,053
Xilinx, Inc.*..................................... 3,600 126,225
Yokogawa Electric Corp. .......................... 1,000 6,171
--------------
5,039,094
--------------
OFFICE EQUIPMENT (1.1%)
Barco N.V. ....................................... 500 91,627
Canon, Inc. ...................................... 1,000 23,277
Compaq Computer Corp. ............................ 13,575 766,139
Dell Computer Corp.*.............................. 3,900 327,600
Hewlett-Packard Co. .............................. 8,100 506,250
International Business Machines Corp. ............ 9,300 972,431
--------------
2,687,324
--------------
OFFICE EQUIPMENT SERVICES (1.2%)
Data Communication System Co. .................... 1,000 13,170
First Data Corp. ................................. 23,200 678,600
Fuji Soft ABC, Inc. .............................. 700 23,959
INES Corp. ....................................... 1,000 7,734
Microsoft Corp.*.................................. 16,325 2,110,006
Nippon System Development ........................ 700 14,364
--------------
2,847,833
--------------
SAI-45
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
TELECOMMUNICATIONS (2.4%)
ACC Corp.*........................................ 1,000 $ 50,500
ADC Telecommunications, Inc.*..................... 5,900 246,325
Asia Satellite Telecommunications Holdings Ltd. . 34,000 58,137
Cox Communications, Inc. (Class A)* .............. 14,400 576,900
DDI Corp. ........................................ 40 105,666
DSC Communications Corp.*......................... 7,600 182,400
Energis PLC*...................................... 27,500 114,718
Intermedia Communications, Inc.*.................. 61 3,706
Lucent Technologies, Inc. ........................ 14,600 1,166,175
MCI Communications Corp. ......................... 20,300 869,094
Northern Telecom Ltd. ............................ 8,900 792,100
Powertel, Inc.*................................... 10,300 172,525
PT Indosat ....................................... 73,000 135,382
PT Telekomunikasi Indonesia ...................... 60,000 31,909
SK Telecom Co. Ltd. (ADR)*........................ 19,360 125,840
Tellabs, Inc.*.................................... 4,600 243,225
Videsh Sanchar Nigam Ltd. (GDR)*.................. 4,800 66,864
Vodafone Group PLC ............................... 20,000 145,676
WorldCom, Inc.*................................... 27,210 823,103
--------------
5,910,245
--------------
TOTAL TECHNOLOGY (6.8%) .......................... 16,484,496
--------------
DIVERSIFIED
MISCELLANEOUS (1.1%)
BTR PLC .......................................... 32,000 98,016
Cie Generale des Eaux ............................ 1,583 220,939
Citic Pacific Ltd. ............................... 11,000 43,722
First Pacific Co. ................................ 75,289 36,435
Minnesota Mining & Manufacturing Co. ............. 2,100 172,331
Montedison Spa ................................... 150,000 134,713
Smith (Howard) Ltd. .............................. 8,000 66,426
Swire Pacific Ltd. (Class A) ..................... 11,000 60,330
Tomkins PLC ...................................... 14,000 65,300
Tyco International Ltd. .......................... 18,800 847,175
U.S. Industries, Inc. ............................ 19,050 573,881
Viad Corp. ....................................... 25,700 496,331
--------------
TOTAL DIVERSIFIED (1.1%) ......................... 2,815,599
--------------
TOTAL COMMON STOCKS (51.2%)
(Cost $108,824,778) ............................. 124,460,867
--------------
PREFERRED STOCKS:
BASIC MATERIALS
CHEMICALS (0.1%)
Henkel KGAA ...................................... 2,500 156,337
--------------
TOTAL BASIC MATERIALS (0.1%) ..................... 156,337
--------------
BUSINESS SERVICES
ENVIRONMENTAL CONTROL (0.1%)
Republic Industries, Inc.
6.5% Exch. Conv. ................................ 7,800 183,300
--------------
SAI-46
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- ------------------------------------------------- ----------- --------------
PRINTING, PUBLISHING & BROADCASTING (0.0%)
ProSieben Media AG*............................... 600 $ 27,515
--------------
TRUCKING, SHIPPING (0.1%)
CNF Trust I
5.0% Conv. Series A ............................. 2,900 165,300
--------------
TOTAL BUSINESS SERVICES (0.2%) ................... 376,115
--------------
CAPITAL GOODS
AEROSPACE (0.1%)
Loral Space & Communications
6.0% Conv. ...................................... 5,800 356,700
--------------
TOTAL CAPITAL GOODS (0.1%) ....................... 356,700
--------------
CONSUMER CYCLICALS
AIRLINES (0.1%)
Continental Airlines Finance Trust
8.5% Conv. ...................................... 2,800 288,050
--------------
RETAIL-- GENERAL (0.0%)
Hornbach Holding AG .............................. 1,000 68,927
--------------
TOTAL CONSUMER CYCLICALS (0.1%) .................. 356,977
--------------
CREDIT-SENSITIVE
UTILITY-- ELECTRIC (0.1%)
AES Trust
$2.6875 Conv. Series A .......................... 3,600 258,300
--------------
TOTAL CREDIT-SENSITIVE (0.1%) .................... 258,300
--------------
ENERGY
OIL-- DOMESTIC (0.1%)
Devon Financing Trust
$3.25 Conv. ..................................... 1,800 131,850
--------------
TOTAL ENERGY (0.1%) .............................. 131,850
--------------
TECHNOLOGY
TELECOMMUNICATIONS (0.6%)
Intermedia Communications, Inc.:
7.0% Conv. ...................................... 4,900 200,900
7.0% Conv. Series D ............................. 2,600 106,600
Mobile Telecommunications
4.5% Conv. ...................................... 3,600 120,600
Nextel Strypes Trust
7.25% Conv. ..................................... 8,300 197,125
Nokia Oyj (A Shares) ............................. 2,600 184,652
QualComm Financial Trust:
5.75% Conv. Series 144A ......................... 5,500 257,469
5.75% Conv. ..................................... 400 18,725
WorldCom, Inc.
8.0% Conv. ...................................... 4,900 513,888
--------------
TOTAL TECHNOLOGY (0.6%) .......................... 1,599,959
--------------
TOTAL PREFERRED STOCKS (1.3%)
(Cost $2,677,383) ............................... 3,236,238
--------------
</TABLE>
SAI-47
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 3)
- ----------------------------------------- -------------- --------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES:
BUSINESS SERVICES
PRINTING, PUBLISHING & BROADCASTING
(1.9%)
Turner Broadcasting System, Inc.
8.375%, 2013 ............................ $4,000,000 $4,488,080
--------------
PROFESSIONAL SERVICES (0.1%)
Career Horizons, Inc.
7.0% Conv., 2002 ........................ 120,000 249,600
Personnel Group of America
5.75% Conv., 2004 ....................... 75,000 85,125
--------------
334,725
--------------
TOTAL BUSINESS SERVICES (2.0%) ........... 4,822,805
--------------
CAPITAL GOODS
AEROSPACE (0.1%)
Orbital Sciences Corp.
5.0% Conv., 2002 ........................ 105,000 134,138
--------------
BUILDING & CONSTRUCTION (0.0%)
Halter Marine Group, Inc.
4.5% Conv., 2004 ........................ 100,000 112,375
--------------
MACHINERY (0.1%)
DII Group, Inc.
6.0% Conv., 2002 ........................ 155,000 236,956
--------------
TOTAL CAPITAL GOODS (0.2%) ............... 483,469
--------------
CONSUMER CYCLICALS
FOOD SERVICES, LODGING (0.2%)
Cendant Corp.
4.75% Conv., 2003 ....................... 315,000 423,675
--------------
RETAIL --GENERAL (0.1%)
U.S. Office Products Co.
5.5% Conv., 2001 ........................ 245,000 291,244
--------------
TOTAL CONSUMER CYCLICALS (0.3%) .......... 714,919
--------------
CONSUMER NONCYCLICALS
DRUGS (0.2%)
MedImmune, Inc.:
7.0% Conv. Sub., 2003 ................... 65,000 147,794
7.0% Conv., 2003 ........................ 100,000 227,375
Quintiles Transnational Corp.
4.25% Conv., 2000 ....................... 165,000 185,419
--------------
560,588
--------------
HOSPITAL SUPPLIES & SERVICES (0.2%)
FPA Medical Management, Inc.
6.5% Conv., 2001 ........................ 220,000 224,400
RES-Care, Inc.
6.0% Conv., 2004 ........................ 165,000 188,100
--------------
412,500
--------------
TOTAL CONSUMER NONCYCLICALS (0.4%) ...... 973,088
--------------
SAI-48
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 3)
- ----------------------------------------- -------------- --------------
CREDIT-SENSITIVE
BANKS (2.1%)
St. George Bank Ltd.
7.15%, 2005 ............................. $ 4,850,000 $ 4,996,567
Sumitomo Bank International
0.75% Conv., 2001 .......................Yen 26,000,000 208,538
5,205,105
--------------
FINANCIAL SERVICES (1.8%)
Corp. Andina de Fomento
7.25%, 2007 ............................. $ 4,000,000 4,071,624
RAC Financial Group, Inc.
7.25% Conv., 2003 ....................... 125,000 301,250
--------------
4,372,874
--------------
INSURANCE (2.3%)
John Hancock Mutual Life Insurance Co.
7.375%, 2024 ............................ 5,000,000 5,245,950
Penn Treaty American Corp.
6.25% Conv., 2003 ....................... 175,000 225,531
--------------
5,471,481
--------------
MORTGAGE-RELATED (9.7%)
Federal Home Loan Mortgage Corp.
7.0%, 2011 .............................. 8,408,930 8,537,697
Federal National Mortgage Association:
6.5%, 2011 .............................. 8,586,766 8,592,133
7.0%, 2026 .............................. 6,398,518 6,442,508
--------------
23,572,338
--------------
U.S. GOVERNMENT (26.3%)
U.S. Treasury:
6.125% Note, 1998........................ 4,000,000 4,013,752
6.375% Note, 1999 ....................... 6,200,000 6,256,191
6.0% Note, 2000 ......................... 6,800,000 6,848,878
6.25% Note, 2001 ........................ 10,775,000 10,943,359
6.5% Note, 2001 ......................... 11,400,000 11,681,443
6.5% Note, 2002 ......................... 6,590,000 6,783,581
6.875% Note, 2006 ....................... 7,050,000 7,545,707
6.125% Bonds, 2027 ...................... 9,810,000 10,079,775
--------------
64,152,686
--------------
TOTAL CREDIT-SENSITIVE (42.2%) ........... 102,774,484
--------------
ENERGY
COAL & GAS PIPELINES (0.1%)
Nabors Industries, Inc.
5.0% Conv., 2006 ........................ 170,000 307,700
--------------
OIL-SUPPLIES & CONSTRUCTION (0.3%)
Diamond Offshore Drilling, Inc.
3.75% Conv. Sub. Note, 2007 ............. 175,000 231,656
Parker Drilling Corp.
5.5% Conv. Sub. Note, 2004 .............. 150,000 160,781
SAI-49
<PAGE>
SEPARATE ACCOUNT NO. 10 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 3)
- ----------------------------------------- -------------- --------------
Seacor Holdings, Inc.
5.375% Conv., 2006....................... $140,000 $ 158,550
--------------
550,987
--------------
TOTAL ENERGY (0.4%) ...................... 858,687
--------------
TECHNOLOGY
ELECTRONICS (1.3%)
Altera Corp.
5.75% Conv. Sub. Note, 2002.............. 225,000 308,813
Baan Co.
4.5% Conv. Sub. Note, 2001............... 175,000 268,188
Integrated Process Equipment Corp.
6.25% Conv., 2004........................ 325,000 269,344
Level One Communications, Inc.
4.0% Conv., 2004 ........................ 225,000 211,500
Photronics, Inc.
6.0% Conv., 2004......................... 285,000 326,681
Quantum Corp.
5.0% Conv., 2003......................... 55,000 99,825
Sanmina Corp.
5.5% Conv., 2002......................... 205,000 496,869
SCI Systems, Inc.
5.0% Conv., 2006......................... 255,000 474,937
Solectron Corp.
6.0% Conv., 2006......................... 165,000 226,256
Wind River Systems, Inc.
5.0% Conv., 2002......................... 210,000 224,700
Xilinx, Inc.
5.25% Conv., 2002........................ 285,000 275,737
--------------
3,182,850
--------------
TELECOMMUNICATIONS (0.1%)
Comverse Technology, Inc.:
5.75% Conv. Sub. Note, 2006.............. 265,000 285,538
5.75% Conv., 2006........................ 10,000 10,775
--------------
296,313
--------------
TOTAL TECHNOLOGY (1.4%) .................. 3,479,163
--------------
TOTAL LONG-TERM DEBT SECURITIES (46.9%)
(Amortized Cost $110,232,563)............ 114,106,615
--------------
PARTICIPATION IN SEPARATE ACCOUNT NO. 2A,
at amortized cost, which approximates
market value, equivalent to 38,544 units
at $270.27 each (4.3%) .................. 10,417,265
--------------
TOTAL INVESTMENTS (103.7%)
(Cost/Amortized Cost $232,151,989) ...... 252,220,985
OTHER ASSETS LESS LIABILITIES (-3.7%) ... (8,965,066)
--------------
NET ASSETS (100.0%) ...................... $243,255,919
==============
</TABLE>
* Non-income producing
See Notes to Financial Statements.
SAI-50
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Equitable Life Assurance Society of the United States
and Contractowners of Separate Account No. 51
of The Equitable Life Assurance Society of the United States
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and changes in net assets and the selected
per unit data (included under Condensed Financial Information in the
Prospectus of the Members Retirement Program) present fairly, in all material
respects, the financial position of the Alliance Global Fund, Alliance
Conservative Investors Fund and Alliance Growth Investors Fund, separate
investment funds of The Equitable Life Assurance Society of the United States
("Equitable Life") Separate Account No. 51 at December 31, 1997 and the
results of each of their operations and changes in each of their net assets
for the periods indicated and for the per unit data for the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and the selected per unit data (hereafter referred to as
"financial statements") are the responsibility of Equitable Life's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of shares owned in The Hudson River Trust at
December 31, 1997 with the transfer agent, provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
New York, New York
February 10, 1998
SAI-51
<PAGE>
SEPARATE ACCOUNT NO. 51 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Assets and Liabilities
December 31, 1997
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE
ALLIANCE CONSERVATIVE GROWTH
GLOBAL INVESTORS INVESTORS
FUND FUND FUND
- -------------------------------------------------------------------------- ------------- -------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments in shares of The Hudson River Trust, at value (Cost: Alliance
Global Portfolio--$42,992,687; Alliance Conservative Investors
Portfolio--$11,011,168; Alliance Growth Investors
Portfolio--$54,535,579)(Note 1) .......................................... $45,811,460 $11,457,159 $57,895,040
Receivable for The Hudson River Trust shares sold ......................... 1,036,088 48,647 432,589
- -------------------------------------------------------------------------- ------------- -------------- -------------
Total assets ............................................................ 46,847,548 11,505,806 58,327,629
- -------------------------------------------------------------------------- ------------- -------------- -------------
LIABILITIES:
Due to Equitable Life's General Account ................................... 1,018,843 47,280 410,787
Accrued expenses .......................................................... 20,778 5,723 23,602
- -------------------------------------------------------------------------- ------------- -------------- -------------
Total liabilities ....................................................... 1,039,621 53,003 434,389
- -------------------------------------------------------------------------- ------------- -------------- -------------
NET ASSETS ................................................................ $45,807,927 $11,452,803 $57,893,240
========================================================================== ============= ============== =============
</TABLE>
See Notes to Financial Statements.
SAI-52
<PAGE>
SEPARATE ACCOUNT NO. 51 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Operations and Changes in Net Assets
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALLIANCE ALLIANCE ALLIANCE
GLOBAL FUND CONSERVATIVE INVESTORS FUND GROWTH INVESTORS FUND
- ------------------------------------------------ ------------------------ --------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
INVESTMENT INCOME (NOTE 2)--Dividends from The
Hudson River Trust ............................. $ 928,674 $ 697,045 $ 480,979 $ 662,083 $ 1,344,234 $ 988,398
EXPENSES (NOTE 4) ............................... (450,382) (375,304) (156,313) (188,556) (391,031) (300,959)
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
NET INVESTMENT INCOME ........................... 478,292 321,741 324,666 473,527 953,203 687,439
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 2):
Realized gain from share transactions ........... 2,804,530 571,515 55,228 115,805 1,579,084 361,719
Realized gain distribution from
The Hudson River Trust ......................... 2,994,309 1,889,554 346,019 348,297 3,055,814 4,768,387
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
NET REALIZED GAIN ............................... 5,798,839 2,461,069 401,247 464,102 4,634,898 5,130,106
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
Unrealized appreciation (depreciation) of
investments:
Beginning of year .............................. 4,189,776 2,311,157 (138,527) 304,939 1,130,615 2,480,800
End of year .................................... 2,818,773 4,189,776 445,991 (138,527) 3,359,461 1,130,615
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
Change in unrealized appreciation/depreciation . (1,371,003) 1,878,619 584,518 (443,466) 2,228,846 (1,350,185)
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 4,427,836 4,339,688 985,765 20,636 6,863,744 3,779,921
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
Increase in net assets attributable to
operations...................................... 4,906,128 4,661,429 1,310,431 494,163 7,816,947 4,467,360
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
FROM C0NTRIBUTIONS AND WITHDRAWALS:
Contributions ................................... 17,302,173 22,444,295 2,492,189 14,885,027 16,373,146 22,344,425
Withdrawals ..................................... (20,267,132) (11,827,050) (5,233,231) (7,693,055) (12,914,616) (7,615,781)
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
Increase (decrease) in net assets attributable
to contributions and withdrawals ............... (2,964,959) 10,617,245 (2,741,042) 7,191,972 3,458,530 14,728,644
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
INCREASE (DECREASE) IN NET ASSETS ............... 1,941,169 15,278,674 (1,430,611) 7,686,135 11,275,477 19,196,004
NET ASSETS--BEGINNING OF YEAR ................... 43,866,758 28,588,084 12,883,414 5,197,279 46,617,763 27,421,759
- ------------------------------------------------ ------------- ------------ ------------ ----------- ------------- -----------
NET ASSETS--END OF YEAR ......................... $ 45,807,927 $ 43,866,758 $11,452,803 $12,883,414 $ 57,893,240 $46,617,763
================================================ ============= ============ ============ =========== ============= ===========
</TABLE>
See Notes to Financial Statements.
SAI-53
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Equitable Life Assurance Society of the United States
and Contractowners of Separate Account No. 66
of The Equitable Life Assurance Society of the United States
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and changes in net assets and the selected
per unit data (included under Condensed Financial Information in the
Prospectus of the Members Retirement Program) present fairly, in all material
respects, the financial position of the the MFS Research Fund, Warburg Pincus
Small Company Value Fund, T. Rowe Price Equity Income Fund and Merrill Lynch
World Strategy Fund, separate investment funds of The Equitable Life
Assurance Society of the United States ("Equitable Life") Separate Account
No. 66 at December 31, 1997 and the results of each of their operations and
changes in each of their net assets for the periods indicated and for the per
unit data for the periods presented, in conformity with generally accepted
accounting principles. These financial statements and the selected per unit
data (hereafter referred to as "financial statements") are the responsibility
of Equitable Life's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of shares owned in The EQ Advisors
Trust at December 31, 1997 with the transfer agent, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
New York, New York
February 10, 1998
SAI-54
<PAGE>
SEPARATE ACCOUNT NO. 66 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Assets and Liabilities
December 31, 1997
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
WARBURG
MFS PINCUS SMALL T. ROWE PRICE MERRILL LYNCH
RESEARCH COMPANY VALUE EQUITY INCOME WORLD STRATEGY
FUND FUND FUND FUND
- ------------------------------------------------------------------ ---------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in shares of The EQ Advisors Trust, at value (Cost:
MFS Research Fund--$783,410; Warburg Pincus Small Company Value
Fund--$1,931,238; T. Rowe Price Equity Income Fund-- $2,106,036;
Merrill Lynch World Strategy Fund--$383,367)(Note 1) ............ $770,719 $1,863,735 $2,187,783 $361,183
Receivable for The EQ Advisors Trust shares sold .................. -- 43,783 30 48
- ------------------------------------------------------------------ ---------- --------------- --------------- --------------
Total assets .................................................... 770,719 1,907,518 2,187,813 361,231
- ------------------------------------------------------------------ ---------- --------------- --------------- --------------
LIABILITIES:
Due to Equitable Life's General Account ........................... -- 43,779 30 48
- ------------------------------------------------------------------ ---------- --------------- --------------- --------------
Total liabilities ............................................... -- 43,779 30 48
- ------------------------------------------------------------------ ---------- --------------- --------------- --------------
NET ASSETS ........................................................ $770,719 $1,863,739 $2,187,783 $361,183
================================================================== ========== =============== =============== ==============
</TABLE>
See Notes to Financial Statements.
SAI-55
<PAGE>
SEPARATE ACCOUNT NO. 66 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Operations and Changes in Net Assets
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
WARBURG
MFS PINCUS SMALL T. ROWE PRICE MERRILL LYNCH
RESEARCH COMPANY VALUE EQUITY INCOME WORLD STRATEGY
FUND* FUND* FUND* FUND*
- -------------------------------------------------------------------- ----------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
INVESTMENT INCOME (NOTE 2)--Dividends from The EQ Advisors Trust ... $ 8,097 $ 10,134 $ 22,858 $ 5,419
EXPENSES (NOTE 4) ................................................... (2,181) (4,266) (4,613) (846)
- -------------------------------------------------------------------- ----------- --------------- --------------- --------------
NET INVESTMENT INCOME ............................................... 5,916 5,868 18,245 4,573
- -------------------------------------------------------------------- ----------- --------------- --------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2):
Realized gain (loss) from share transactions ........................ 2,181 (579) 1,154 (53)
- -------------------------------------------------------------------- ----------- --------------- --------------- --------------
Unrealized appreciation (depreciation) of investments:
Beginning of year .................................................. -- -- -- --
End of year ........................................................ (12,691) (67,503) 81,747 (22,184)
- -------------------------------------------------------------------- ----------- --------------- --------------- --------------
Change in unrealized appreciation/depreciation ...................... (12,691) (67,503) 81,747 (22,184)
- -------------------------------------------------------------------- ----------- --------------- --------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS............... (10,510) (68,082) 82,901 (22,237)
- -------------------------------------------------------------------- ----------- --------------- --------------- --------------
Increase (decrease) in net assets attributable to operations ........ (4,594) (62,214) 101,146 (17,664)
- -------------------------------------------------------------------- ----------- --------------- --------------- --------------
FROM C0NTRIBUTIONS AND WITHDRAWALS:
Contributions ....................................................... 946,609 2,097,710 2,203,291 391,483
Withdrawals ......................................................... (171,296) (171,757) (116,654) (12,637)
- -------------------------------------------------------------------- ----------- --------------- --------------- --------------
Increase in net assets attributable to contributions and withdrawals 775,313 1,925,953 2,086,637 378,846
- -------------------------------------------------------------------- ----------- --------------- --------------- --------------
INCREASE IN NET ASSETS .............................................. 770,719 1,863,739 2,187,783 361,182
NET ASSETS--BEGINNING OF YEAR ....................................... -- -- -- --
- -------------------------------------------------------------------- ----------- --------------- --------------- --------------
NET ASSETS--END OF YEAR ............................................. $ 770,719 $1,863,739 $2,187,783 $361,182
==================================================================== =========== =============== =============== ==============
</TABLE>
* For the period from August 1, 1997 (commencement of operations) to December
31,1997.
See Notes to Financial Statements.
SAI-56
<PAGE>
SEPARATE ACCOUNT NOS. 3 (POOLED), 4 (POOLED), 10 (POOLED), 51 (POOLED) AND 66
(POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements
1. Separate Account Nos. 3 (Pooled) (the Alliance Aggressive Equity Fund),
4 (Pooled) (the Alliance Growth Equity Fund), 10 (Pooled) (the Alliance
Balanced Fund), 51 (Pooled) (the Alliance Global, Conservative Investors and
Growth Investors Funds) and 66 (Pooled) (the MFS Research Fund, Warburg
Pincus Small Company Value Fund, T. Rowe Price Equity Income Fund, Merrill
Lynch World Strategy Fund) (the Funds) of The Equitable Life Assurance
Society of the United States (Equitable Life), a wholly-owned subsidiary of
The Equitable Companies Incorporated, were established in conformity with the
New York State Insurance Law. Pursuant to such law, to the extent provided in
the applicable contracts, the net assets in the Funds are not chargeable with
liabilities arising out of any other business of Equitable Life. The excess
of assets over reserves and other contract liabilities amounting to
$1,095,138 as shown in the Statement of Assets and Liabilities in Separate
Account No. 4 may be transferred to Equitable Life's general account.
Separate Account No. 51 was established as of the opening of business on
July 1, 1993 and Separate Account No. 66 was established as of the opening of
business on August 1, 1997, to fund the Association Members Retirement Plan
and Trusts.
Interests of retirement and investment plans for Equitable Life employees,
managers, and agents in Separate Account Nos. 3 (Pooled), 4 (Pooled) and 10
(Pooled) aggregated $124,230,736 (29.7%), $384,471,790 (14.5%) and
$26,718,437 (11.0%), respectively, at December 31, 1997 and $99,049,571
(22.3%), $288,921,270 (11.8%) and $25,996,744 (8.3%), respectively, at
December 31, 1996, of the net assets in these Funds.
Equitable Life is the investment manager for the Funds. Alliance Capital
Management L.P. (Alliance) serves as the investment adviser to Equitable Life
with respect to the management of Separate Account Nos. 3, 4 and 10 (the
Equitable Funds). Alliance is a publicly-traded limited partnership which is
indirectly majority-owned by Equitable Life.
Separate Account No. 51 has eleven investment funds which invest in Class
IA shares of corresponding portfolios of The Hudson River Trust (HR Trust).
Alliance is the investment adviser to the HR Trust. The Association Members
Retirement Plan and Trusts invest in the following funds of the account:
Alliance Global, Alliance Conservative Investors and Alliance Growth
Investors. Separate Account No. 66 has four investment funds which invest in
Class IB shares of corresponding portfolios of EQ Advisors Trust (EQ Trust).
EQ Financial Consultants, Inc. is the investment manager for each portfolio.
The Association Members Retirement Plan and Trusts invest in the following
funds of the account: MFS Research Fund, Warburg Pincus Small Company Value
Fund, T. Rowe Price Equity Income Fund, Merrill Lynch World Strategy Fund.
Class IB shares are offered at net asset values and are subject to
distribution fees imposed under a distribution plan adopted pursuant to Rule
12b-1 under the 1940 Act. EQ and HR Trusts (Trusts) are open-end, diversified
investment management companies that invests separate account assets of
insurance companies.
Equitable Life, Alliance and EQ Financial Consultants seek to obtain the
best price and execution of all orders placed for the portfolios of the
Equitable Funds considering all circumstances. In addition to using brokers
and dealers to execute portfolio security transactions for accounts under
their management, Equitable Life, Alliance and EQ Financial Consultants may
also enter into other types of business and securities transactions with
brokers and dealers, which will be unrelated to allocation of the Equitable
Funds' portfolio transactions.
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
SAI-57
<PAGE>
SEPARATE ACCOUNT NOS. 3 (POOLED), 4 (POOLED), 10 (POOLED), 51 (POOLED) AND 66
(POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements (Continued)
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.
2. Security transactions are recorded on the trade date. Amortized cost of
debt securities consists of cost adjusted, where applicable, for amortization
of premium or accretion of discount. Dividend income is recorded on the
ex-dividend date; interest income (including amortization of premium and
discount on securities using the effective yield method) is accrued daily.
Realized gains and losses on the sale of investments are computed on the
basis of the identified cost of the related investments sold. Separate
Account No. 51 invests in shares of HR Trust and are valued at the net asset
value per share of the respective funds. Separate Account No. 66 invests in
the shares of EQ and are valued at the net asset value per share of the
respective funds. The net asset value is determined by the Trust using the
market or fair value of the underlying assets of the Portfolios. For Separate
Account Nos. 51 and 66, realized gains and losses on investments include
gains and losses on redemptions of the Trust's shares (determined on the
identified cost basis) and capital gain distribution from the Trust.
Dividends are recorded by HR Trust at the end of each quarter and by EQ Trust
in the fourth quarter on the ex-dividend date. Capital gains are distributed
by the Trusts at the end of each year.
Transactions denominated in foreign currencies are recorded at the rate
prevailing at the date of such transactions. Asset and liability accounts
that are denominated in a foreign currency are adjusted to reflect the
current exchange rate at the end of period. Transaction gains or losses
resulting from changes in the exchange rate during the reporting period or
upon settlement of the foreign currency transactions are reflected under
"Realized and Unrealized Gain (Loss) on Investments" in the Statements of
Operations and Changes in Net Assets.
Futures and forward contracts are agreements to buy or sell a security for
a set price in the future. Initial margin deposits are made upon entering
into futures contracts and can be either in cash or treasury securities.
Separate Accounts (Accounts) may buy or sell futures contracts for the
purpose of protecting their Accounts' securities against anticipated future
changes in interest rates that might adversely affect the value of an
Accounts' securities or the price of securities that an Account intends to
purchase at a later date. During the period the futures and forward contracts
are open, changes in the value of the contract are recognized as unrealized
gains or losses by "marking-to-market" on a daily basis to reflect the market
value of the contract at the end of each trading day. Variation margin
payments for futures contracts are received or made, depending upon whether
unrealized gains or losses are incurred. When the contract is closed, the
Accounts record a realized gain or loss equal to the difference between the
proceeds from (or cost of) the closing transactions and the Accounts' basis
in the contract. Should interest rates move unexpectedly, the Accounts may
not achieve the anticipated benefits of the financial futures contracts and
may incur a loss. The use of futures and forward transactions involves the
risk of imperfect correlation in movements in the price of futures and
forward contracts, interest rates and the underlying hedged assets.
Futures and forward contracts involve elements of both market and credit
risk in excess of the amounts reflected in the Statement of Net Assets. The
contract amounts of these futures and forward contracts reflect the extent of
the Accounts' exposure to off-balance sheet risk. The Accounts bear the
market risk which arises from any changes in security values. The credit risk
for futures contracts is limited to failure of the exchange or board of trade
that acts
SAI-58
<PAGE>
SEPARATE ACCOUNT NOS. 3 (POOLED), 4 (POOLED), 10 (POOLED), 51 (POOLED) AND 66
(POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements (Continued)
as the counterparty of the Accounts' futures transactions. Forward contracts
are done directly with the counterparty and not through an exchange and can
be terminated only by agreement of both parties to the contract. There is no
daily margin settlement and the portfolio is exposed to the risk of default
by the counterparty.
Separate Account No. 10 may enter into forward currency contracts in order
to hedge its exposure to changes in foreign currency exchange rates on its
foreign security holdings. A forward contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The
gain or loss arising from the difference between the original contracts and
the closing of such contracts is included in realized gains or losses from
foreign currency transactions. At December 31, 1997, Separate Account No. 10
had outstanding forward currency contracts to buy/sell foreign currencies as
follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACT COST ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000'S) DATE VALUE (DEPRECIATION)
- ------------------------------- ---------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
SEPARATE ACCOUNT NO. 10
FOREIGN CURRENCY BUY CONTRACTS:
Deutsche Marks, settling
01/02/98...................... 2,460 $1,412,413 $1,367,426 $(44,987)
French Franc, settling
01/23/98...................... 14,000 2,357,518 2,326,161 (31,357)
Japaneses Yen, settling
02/27/98-04/14/98............. 120,000 934,258 918,836 (15,422)
Netherland Guilders, settling
01/02/98...................... 2,400 1,224,221 1,183,582 (40,639)
Norwegian Krone, settling
01/23/98...................... 4,500 625,142 610,169 (14,973)
Spanish Peseta, settling
01/23/98...................... 120,000 800,267 787,344 (12,923)
Swedish Krona, settling
01/02/98-01/23/98............. 2,989 391,221 376,753 (14,468)
FOREIGN CURRENCY SALE
CONTRACTS:
Deutsche Marks, settling
01/02/98...................... 2,460 1,378,731 1,367,427 11,304
French Franc, settling
01/23/98...................... 14,000 2,366,844 2,326,161 40,683
Japanese Yen, settling
01/06/98-04/14/98............. 613,786 5,066,700 4,699,740 366,960
Netherland Guilders, settling
01/02/98...................... 2,400 1,193,703 1,183,582 10,121
Norwegian Krone, settling
01/23/98...................... 4,500 626,505 610,169 16,336
Spanish Peseta, settling
01/23/98...................... 120,000 802,944 787,343 15,601
Swedish Krone, settling
01/23/98...................... 2,500 330,029 315,152 14,877
------------------------------ ---------- ------------- ------------ --------------
$301,113
============================== ========== ============= ============ ==============
</TABLE>
Equitable Life's internal short-term investment account, Separate Account
No. 2A, was established to provide a more flexible and efficient vehicle to
combine and invest temporary cash positions of certain eligible accounts
SAI-59
<PAGE>
SEPARATE ACCOUNT NOS. 3 (POOLED), 4 (POOLED), 10 (POOLED), 51 (POOLED) AND 66
(POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements (Continued)
(Participating Funds) under Equitable Life's management. Separate Account No.
2A invests in debt securities maturing in sixty days or less from the date of
acquisition. At December 31, 1997, the amortized cost of investments held in
Separate Account No. 2A consists of the following:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED COST %
- ----------------------------------------------------------- -------------- --------
<S> <C> <C>
Commercial Paper, 5.70%-6.75% due 1/2/98 through 2/12/98 ... $210,793,367 94.7%
Bankers' Acceptances, 5.65%-5.73% due 1/16/98 through
1/26/98.................................................... 9,474,385 4.3
- ----------------------------------------------------------- -------------- --------
Total Investments........................................... 220,267,752 99.0
Other Assets Less Liabilities............................... 2,244,569 1.0
- ----------------------------------------------------------- -------------- --------
Net Assets of Separate Account No. 2A....................... $222,512,321 100.0%
=========================================================== ============== ========
Units Outstanding........................................... 823,297
Unit Value.................................................. $270.27
- ----------------------------------------------------------- --------------
</TABLE>
Participating Funds purchase or redeem units depending on each
participating account's excess cash availability or cash needs to meet its
liabilities. Separate Account No. 2A is not subject to investment management
fees. Short-term debt securities may also be purchased directly by the
Equitable Funds.
For 1997 and 1996, investment security transactions, excluding short-term
debt securities, were as follows:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------------ --------------------------------
U.S. U.S.
STOCKS AND GOVERNMENT STOCKS AND GOVERNMENT
DEBT SECURITIES AND AGENCIES DEBT SECURITIES AND AGENCIES
- --------------------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Fund
- ----
Alliance Aggressive Equity:
1997...................... $ 780,418,511 $ -- $ 850,626,915 $ --
1996 ..................... 450,676,363 -- 434,241,789 --
Alliance Growth Equity:
1997...................... 1,569,991,103 -- 1,988,739,298 --
1996 ..................... 2,439,864,229 -- 2,487,456,851 --
Alliance Balanced:
1997...................... 224,848,109 215,172,356 290,379,457 228,848,176
1996...................... 337,043,222 226,791,922 416,837,259 234,990,432
</TABLE>
No activity is shown for Separate Account No. 51 and No. 66 since they
trade exclusively in shares of corresponding portfolios of The HR Trust and
EQ Trust.
3. Investment securities for the Equitable Funds are valued as follows:
Stocks listed on national securities exchanges and certain
over-the-counter issues traded on the National Association of Securities
Dealers, Inc. Automated Quotation (NASDAQ) national market system are valued
at the last sale price, or, if no sale, at the latest available bid price.
Foreign securities not traded directly, or in American Depository Receipt
(ADR) form in the United States are valued at the last sale price in the
local currency on an exchange in the country of origin. Foreign currency is
converted
SAI-60
<PAGE>
SEPARATE ACCOUNT NOS. 3 (POOLED), 4 (POOLED), 10 (POOLED), 51 (POOLED) AND 66
(POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements (Continued)
into its U.S. dollar equivalent at current exchange rates. Certain Separate
Accounts enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. The effect on earnings
of valuing the contracts is recorded from the date the Separate Accounts
enter into such contracts. Futures and forward contracts are valued at their
last sale price or, if there is no sale, at the latest available bid price.
United States Treasury securities and other obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities
are valued at representative quoted prices.
Long-term publicly traded corporate bonds are valued at prices obtained
from a bond pricing service of a major dealer in bonds when such prices are
available; however, in circumstances where Equitable Life and Alliance deem
it appropriate to do so, an over-the-counter or exchange quotation may be
used.
Convertible preferred stocks listed on national securities exchanges are
valued at their last sale price or, if there is no sale, at the latest
available bid price.
Convertible bonds and unlisted convertible preferred stocks are valued at
bid prices obtained from one or more major dealers in such securities; where
there is a discrepancy between dealers, values may be adjusted based on
recent premium spreads to the underlying common stock.
Other assets that do not have a readily available market price, are valued
at fair value as determined in good faith by Equitable Life's investment
officers.
The value of the investments of the Alliance Global, Alliance Conservative
Investors and Alliance Growth Investors Funds in the corresponding Hudson
River Trust Portfolios is calculated by multiplying the number of shares held
by Separate Account No. 51 in each Portfolio by the net asset value per share
of that Portfolio determined as of the close of business on the same day as
the respective unit values of the Alliance Global, Alliance Conservative
Investors and Alliance Growth Investors Funds are determined.
The value of the investments of the MFS Research Fund, Warburg Pincus
Small Company Value Fund, T. Rowe Price Equity Income Fund, Merrill Lynch
World Strategy Fund in the corresponding EQ Trust Portfolios is calculated by
multiplying the number of shares held by Separate Account No. 66 in each
Portfolio by the net asset value per share of that Portfolio determined as of
the close of business the same day as the respective unit values of the MFS
Research Fund, Warburg Pincus Small Company Value Fund, T. Rowe Price Equity
Income Fund, Merrill Lynch World Strategy Funds are determined.
Separate Account No. 2A is valued daily at amortized cost, which
approximates market value. Short-term debt securities purchased directly by
the Equitable Funds which mature in 60 days or less are valued at amortized
cost. Short-term debt securities which mature in more than 60 days are valued
at representative quoted prices.
4. Charges and fees relating to the Funds are deducted in accordance with
the terms of the various contracts which participate in the Funds. With
respect to the Members Retirement Plan and Trusts, these expenses consist of
investment management and accounting fees, program expense charge, direct
expenses and record maintenance and report fees. These charges and fees are
paid to Equitable Life and are recorded as expenses in the accompanying
Statements of Operations and Changes in Net Assets.
SAI-61
<PAGE>
SEPARATE ACCOUNT NOS. 3 (POOLED), 4 (POOLED), 10 (POOLED), 51 (POOLED) AND 66
(POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements (Continued)
Shares held by Separate Account No. 66 in the portfolios of the MFS
Research Fund, Warburg Pincus Small Company Value Fund, T. Rowe Price Equity
Income Fund, Merrill Lynch World Strategy Fund are valued at their net asset
value including investment management and 12b-1 fees.
5. No Federal income tax based on net income or realized and unrealized
capital gains was applicable to contracts participating in the Funds by
reason of applicable provisions of the Internal Revenue Code and no Federal
income tax payable by Equitable Life will affect such contracts. Accordingly,
no provision for Federal income tax is required.
SAI-62
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
The Equitable Life Assurance Society of the United States
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholder's equity and of cash
flows present fairly, in all material respects, the financial position of The
Equitable Life Assurance Society of the United States and its subsidiaries
("Equitable Life") at December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of Equitable
Life's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, Equitable
Life changed its methods of accounting for long-duration participating life
insurance contracts and long-lived assets in 1996 and for loan impairments in
1995.
Price Waterhouse LLP
New York, New York
February 10, 1998
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
(In Millions)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value............................. $ 19,630.9 $ 18,077.0
Mortgage loans on real estate............................................. 2,611.4 3,133.0
Equity real estate........................................................ 2,749.2 3,297.5
Policy loans.............................................................. 2,422.9 2,196.1
Other equity investments.................................................. 951.5 860.6
Investment in and loans to affiliates..................................... 731.1 685.0
Other invested assets..................................................... 624.7 25.4
----------------- -----------------
Total investments..................................................... 29,721.7 28,274.6
Cash and cash equivalents................................................... 300.5 538.8
Deferred policy acquisition costs........................................... 3,236.6 3,104.9
Amounts due from discontinued operations.................................... 572.8 996.2
Other assets................................................................ 2,685.2 2,552.2
Closed Block assets......................................................... 8,566.6 8,495.0
Separate Accounts assets.................................................... 36,538.7 29,646.1
----------------- -----------------
Total Assets................................................................ $ 81,622.1 $ 73,607.8
================= =================
LIABILITIES
Policyholders' account balances............................................. $ 21,579.5 $ 21,865.6
Future policy benefits and other policyholder's liabilities................. 4,553.8 4,416.6
Short-term and long-term debt............................................... 1,991.2 1,766.9
Other liabilities........................................................... 3,257.1 2,785.1
Closed Block liabilities.................................................... 9,073.7 9,091.3
Separate Accounts liabilities............................................... 36,306.3 29,598.3
----------------- -----------------
Total liabilities..................................................... 76,761.6 69,523.8
----------------- -----------------
Commitments and contingencies (Notes 10, 12, 13, 14 and 15)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value 2.0 million shares authorized, issued
and outstanding........................................................... 2.5 2.5
Capital in excess of par value.............................................. 3,105.8 3,105.8
Retained earnings........................................................... 1,235.9 798.7
Net unrealized investment gains............................................. 533.6 189.9
Minimum pension liability................................................... (17.3) (12.9)
----------------- -----------------
Total shareholder's equity............................................ 4,860.5 4,084.0
----------------- -----------------
Total Liabilities and Shareholder's Equity.................................. $ 81,622.1 $ 73,607.8
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-64
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
REVENUES
Universal life and investment-type product policy fee
income...................................................... $ 950.6 $ 874.0 $ 788.2
Premiums...................................................... 601.5 597.6 606.8
Net investment income......................................... 2,282.8 2,203.6 2,088.2
Investment (losses) gains, net................................ (45.2) (9.8) 5.3
Commissions, fees and other income............................ 1,227.2 1,081.8 897.1
Contribution from the Closed Block............................ 102.5 125.0 143.2
----------------- ----------------- -----------------
Total revenues.......................................... 5,119.4 4,872.2 4,528.8
----------------- ----------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances.......... 1,266.2 1,270.2 1,248.3
Policyholders' benefits....................................... 978.6 1,317.7 1,008.6
Other operating costs and expenses............................ 2,203.9 2,075.7 1,775.8
----------------- ----------------- -----------------
Total benefits and other deductions..................... 4,448.7 4,663.6 4,032.7
----------------- ----------------- -----------------
Earnings from continuing operations before Federal
income taxes, minority interest and cumulative
effect of accounting change................................. 670.7 208.6 496.1
Federal income taxes.......................................... 91.5 9.7 120.5
Minority interest in net income of consolidated subsidiaries.. 54.8 81.7 62.8
----------------- ----------------- -----------------
Earnings from continuing operations before cumulative
effect of accounting change................................. 524.4 117.2 312.8
Discontinued operations, net of Federal income taxes.......... (87.2) (83.8) -
Cumulative effect of accounting change, net of Federal
income taxes................................................ - (23.1) -
----------------- ----------------- -----------------
Net Earnings.................................................. $ 437.2 $ 10.3 $ 312.8
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-65
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
Common stock, at par value, beginning and end of year......... $ 2.5 $ 2.5 $ 2.5
----------------- ----------------- -----------------
Capital in excess of par value, beginning and end of year..... 3,105.8 3,105.8 3,105.8
----------------- ----------------- -----------------
Retained earnings, beginning of year.......................... 798.7 788.4 475.6
Net earnings.................................................. 437.2 10.3 312.8
----------------- ----------------- -----------------
Retained earnings, end of year................................ 1,235.9 798.7 788.4
----------------- ----------------- -----------------
Net unrealized investment gains (losses), beginning of year... 189.9 396.5 (220.5)
Change in unrealized investment gains (losses)................ 343.7 (206.6) 617.0
----------------- ----------------- -----------------
Net unrealized investment gains, end of year.................. 533.6 189.9 396.5
----------------- ----------------- -----------------
Minimum pension liability, beginning of year.................. (12.9) (35.1) (2.7)
Change in minimum pension liability........................... (4.4) 22.2 (32.4)
-----------------
----------------- -----------------
Minimum pension liability, end of year........................ (17.3) (12.9) (35.1)
----------------- ----------------- -----------------
Total Shareholder's Equity, End of Year....................... $ 4,860.5 $ 4,084.0 $ 4,258.1
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-66
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -----------------
(In Millions)
<S> <C> <C> <C>
Net earnings.................................................. $ 437.2 $ 10.3 $ 312.8
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Interest credited to policyholders' account balances........ 1,266.2 1,270.2 1,248.3
Universal life and investment-type product
policy fee income......................................... (950.6) (874.0) (788.2)
Investment losses (gains)................................... 45.2 9.8 (5.3)
Change in Federal income tax payable........................ (74.4) (197.1) 221.6
Other, net.................................................. 169.4 330.2 80.5
----------------- ----------------- -----------------
Net cash provided by operating activities..................... 893.0 549.4 1,069.7
----------------- ----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................... 2,702.9 2,275.1 1,897.4
Sales....................................................... 10,385.9 8,964.3 8,867.1
Purchases................................................... (13,205.4) (12,559.6) (11,675.5)
(Increase) decrease in short-term investments............... (555.0) 450.3 (99.3)
Decrease in loans to discontinued operations................ 420.1 1,017.0 1,226.9
Sale of subsidiaries........................................ 261.0 - -
Other, net.................................................. (612.6) (281.0) (413.4)
----------------- ----------------- -----------------
Net cash used by investing activities......................... (603.1) (133.9) (196.8)
----------------- ----------------- -----------------
Cash flows from financing activities: Policyholders' account balances:
Deposits.................................................. 1,281.7 1,925.4 2,586.5
Withdrawals............................................... (1,886.8) (2,385.2) (2,657.1)
Net increase (decrease) in short-term financings............ 419.9 (.3) (16.4)
Additions to long-term debt................................. 32.0 - 599.7
Repayments of long-term debt................................ (196.4) (124.8) (40.7)
Payment of obligation to fund accumulated deficit of
discontinued operations................................... (83.9) - (1,215.4)
Other, net.................................................. (94.7) (66.5) (48.4)
----------------- ----------------- -----------------
Net cash used by financing activities......................... (528.2) (651.4) (791.8)
----------------- ----------------- -----------------
Change in cash and cash equivalents........................... (238.3) (235.9) 81.1
Cash and cash equivalents, beginning of year.................. 538.8 774.7 693.6
----------------- ----------------- -----------------
Cash and Cash Equivalents, End of Year........................ $ 300.5 $ 538.8 $ 774.7
================= ================= =================
Supplemental cash flow information
Interest Paid............................................... $ 217.1 $ 109.9 $ 89.6
================= ================= =================
Income Taxes Paid (Refunded)................................ $ 170.0 $ (10.0) $ (82.7)
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
SAI-67
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) ORGANIZATION
The Equitable Life Assurance Society of the United States ("Equitable
Life") is a wholly owned subsidiary of The Equitable Companies
Incorporated (the "Holding Company"). Equitable Life's insurance
business is conducted principally by Equitable Life and, prior to
December 31, 1996, its wholly owned life insurance subsidiary, Equitable
Variable Life Insurance Company ("EVLICO"). Effective January 1, 1997,
EVLICO was merged into Equitable Life, which continues to conduct the
Company's insurance business. Equitable Life's investment management
business, which comprises the Investment Services segment, is conducted
principally by Alliance Capital Management L.P. ("Alliance") and
Donaldson, Lufkin & Jenrette, Inc. ("DLJ"), an investment banking and
brokerage affiliate. AXA-UAP ("AXA"), a French holding company for an
international group of insurance and related financial services
companies, is the Holding Company's largest shareholder, owning
approximately 58.7% at December 31, 1997 (54.3% if all securities
convertible into, and options on, common stock were to be converted or
exercised).
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles ("GAAP") which
require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The accompanying consolidated financial statements include the accounts
of Equitable Life and its wholly owned life insurance subsidiary
(collectively, the "Insurance Group"); non-insurance subsidiaries,
principally Alliance, an investment advisory subsidiary, and, through
June 10, 1997, Equitable Real Estate Investment Management, Inc.
("EREIM"), a real estate investment management subsidiary which was sold
(see Note 5); and those partnerships and joint ventures in which
Equitable Life or its subsidiaries has control and a majority economic
interest (collectively, including its consolidated subsidiaries, the
"Company"). The Company's investment in DLJ is reported on the equity
basis of accounting. Closed Block assets and liabilities and results of
operations are presented in the consolidated financial statements as
single line items (see Note 6). Unless specifically stated, all
disclosures contained herein supporting the consolidated financial
statements exclude the Closed Block related amounts.
All significant intercompany transactions and balances have been
eliminated in consolidation other than intercompany transactions and
balances with the Closed Block and the discontinued operations (see Note
7).
The years "1997," "1996" and "1995" refer to the years ended December
31, 1997, 1996 and 1995, respectively.
Certain reclassifications have been made in the amounts presented for
prior periods to conform these periods with the 1997 presentation.
SAI-68
<PAGE>
Closed Block
As of July 22, 1992, Equitable Life established the Closed Block for the
benefit of certain classes of individual participating policies for
which Equitable Life had a dividend scale payable in 1991 and which were
in force on that date. Assets were allocated to the Closed Block in an
amount which, together with anticipated revenues from policies included
in the Closed Block, was reasonably expected to be sufficient to support
such business, including provision for payment of claims, certain
expenses and taxes, and for continuation of dividend scales payable in
1991, assuming the experience underlying such scales continues.
Assets allocated to the Closed Block inure solely to the benefit of the
holders of policies included in the Closed Block and will not revert to
the benefit of the Holding Company. No reallocation, transfer, borrowing
or lending of assets can be made between the Closed Block and other
portions of Equitable Life's General Account, any of its Separate
Accounts or any affiliate of Equitable Life without the approval of the
New York Superintendent of Insurance (the "Superintendent"). Closed
Block assets and liabilities are carried on the same basis as similar
assets and liabilities held in the General Account. The excess of Closed
Block liabilities over Closed Block assets represents the expected
future post-tax contribution from the Closed Block which would be
recognized in income over the period the policies and contracts in the
Closed Block remain in force.
Discontinued Operations
Discontinued operations consist of the business of the former Guaranteed
Interest Contract ("GIC") segment which includes the Group
Non-Participating Wind-Up Annuities ("Wind-Up Annuities") and the GIC
lines of business. An allowance was established for the premium
deficiency reserve for Wind-Up Annuities and estimated future losses of
the GIC line of business. Management reviews the adequacy of the
allowance each quarter and, during the 1997 and 1996 fourth quarter
reviews, the allowance for future losses was increased. Management
believes the allowance for future losses at December 31, 1997 is
adequate to provide for all future losses; however, the determination of
the allowance continues to involve numerous estimates and subjective
judgments regarding the expected performance of Discontinued Operations
Investment Assets. There can be no assurance the losses provided for
will not differ from the losses ultimately realized. To the extent
actual results or future projections of the discontinued operations
differ from management's current best estimates and assumptions
underlying the allowance for future losses, the difference would be
reflected in the consolidated statements of earnings in discontinued
operations. In particular, to the extent income, sales proceeds and
holding periods for equity real estate differ from management's previous
assumptions, periodic adjustments to the allowance are likely to result
(see Note 7).
Accounting Changes
In 1996, the Company changed its method of accounting for long-duration
participating life insurance contracts, primarily within the Closed
Block, in accordance with the provisions prescribed by SFAS No. 120,
"Accounting and Reporting by Mutual Life Insurance Enterprises and by
Insurance Enterprises for Certain Long-Duration Participating
Contracts". (See "Deferred Policy Acquisition Costs," "Policyholders'
Account Balances and Future Policy Benefits" and Note 6.)
The Company implemented SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of
January 1, 1996. SFAS No. 121 requires long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate the carrying value of such assets may
not be recoverable. Effective with SFAS No. 121's adoption, impaired
real estate is written down to fair value with the impairment loss being
included in investment gains
SAI-69
<PAGE>
(losses), net. Before implementing SFAS No. 121, valuation allowances on
real estate held for the production of income were computed using the
forecasted cash flows of the respective properties discounted at a rate
equal to The Equitable's cost of funds. The adoption of the statement
resulted in the release of valuation allowances of $152.4 million and
recognition of impairment losses of $144.0 million on real estate held
for production of income. Real estate which management has committed to
disposing of by sale or abandonment is classified as real estate held
for sale. Valuation allowances on real estate held for sale continue to
be computed using the lower of depreciated cost or estimated fair value,
net of disposition costs. Implementation of the SFAS No. 121 impairment
requirements relative to other assets to be disposed of resulted in a
charge for the cumulative effect of an accounting change of $23.1
million, net of a Federal income tax benefit of $12.4 million, due to
the writedown to fair value of building improvements relating to
facilities vacated in 1996.
In the first quarter of 1995, the Company adopted SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan". Impaired loans
within SFAS No. 114's scope are to be measured based on the present
value of expected future cash flows discounted at the loan's effective
interest rate, at the loan's observable market price or the fair value
of the collateral if the loan is collateral dependent. The adoption of
this statement did not have a material effect on the level of the
allowances for possible losses or on the Company's consolidated
statements of earnings and shareholder's equity.
New Accounting Pronouncements
In January 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 132, "Employers' Disclosures about Pension and Other
Postretirement Benefits," which revises current note disclosure
requirements for employers' pension and other retiree benefits. SFAS No.
132 is effective for fiscal years beginning after December 15, 1997. The
Company will adopt the provisions of SFAS No. 132 in the 1998
consolidated financial statements.
In December 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments". SOP
97-3 provides guidance for assessments related to insurance activities
and requirements for disclosure of certain information. SOP 97-3 is
effective for financial statements issued for periods beginning after
December 31, 1998. Restatement of previously issued financial statements
is not required. SOP 97-3 is not expected to have a material impact on
the Company's consolidated financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information". SFAS No. 131 establishes
standards for the way public business enterprises report information
about operating segments in annual and interim financial statements
issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major
customers. Generally, financial information will be required to be
reported on the basis used by management for evaluating segment
performance and for deciding how to allocate resources to segments. This
statement is effective for fiscal years beginning after December 15,
1997 and need not be applied to interim reporting in the initial year of
adoption. Restatement of comparative information for earlier periods is
required. Management is currently reviewing its definition of business
segments in light of the requirements of SFAS No. 131.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". SFAS No. 130 establishes standards for reporting and displaying
comprehensive income and its components in a full set of general purpose
financial statements. SFAS No. 130 requires an enterprise to classify
items of other
SAI-70
<PAGE>
comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. This statement is
effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided
for comparative purposes is required. The Company will adopt the
provisions of SFAS No. 130 in its 1998 consolidated financial
statements.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities".
SFAS No. 125 specifies the accounting and reporting requirements for
transfers of financial assets, the recognition and measurement of
servicing assets and liabilities and extinguishments of liabilities.
SFAS No. 125 is effective for transactions occurring after December 31,
1996 and is to be applied prospectively. In December 1996, the FASB
issued SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125," which defers for one year the
effective date of provisions relating to secured borrowings and
collateral and transfers of financial assets that are part of repurchase
agreements, dollar-roll, securities lending and similar transactions.
Implementation of SFAS No. 125 did not have nor is SFAS No. 127 expected
to have a material impact on the Company's consolidated financial
statements.
Valuation of Investments
Fixed maturities identified as available for sale are reported at
estimated fair value. The amortized cost of fixed maturities is adjusted
for impairments in value deemed to be other than temporary.
Valuation allowances are netted against the asset categories to which
they apply.
Mortgage loans on real estate are stated at unpaid principal balances,
net of unamortized discounts and valuation allowances. Valuation
allowances are based on the present value of expected future cash flows
discounted at the loan's original effective interest rate or the
collateral value if the loan is collateral dependent. However, if
foreclosure is or becomes probable, the measurement method used is
collateral value.
Real estate, including real estate acquired in satisfaction of debt, is
stated at depreciated cost less valuation allowances. At the date of
foreclosure (including in-substance foreclosure), real estate acquired
in satisfaction of debt is valued at estimated fair value. Impaired real
estate is written down to fair value with the impairment loss being
included in investment gains (losses), net. Valuation allowances on real
estate held for sale are computed using the lower of depreciated cost or
current estimated fair value, net of disposition costs. Depreciation is
discontinued on real estate held for sale. Prior to the adoption of SFAS
No. 121, valuation allowances on real estate held for production of
income were computed using the forecasted cash flows of the respective
properties discounted at a rate equal to the Company's cost of funds.
Policy loans are stated at unpaid principal balances.
Partnerships and joint venture interests in which the Company does not
have control or a majority economic interest are reported on the equity
basis of accounting and are included either with equity real estate or
other equity investments, as appropriate.
Common stocks are carried at estimated fair value and are included in
other equity investments.
Short-term investments are stated at amortized cost which approximates
fair value and are included with other invested assets.
SAI-71
<PAGE>
Cash and cash equivalents includes cash on hand, amounts due from banks
and highly liquid debt instruments purchased with an original maturity
of three months or less.
All securities are recorded in the consolidated financial statements on
a trade date basis.
Net Investment Income, Investment Gains, Net and Unrealized Investment
Gains (Losses)
Net investment income and realized investment gains (losses)
(collectively, "investment results") related to certain participating
group annuity contracts which are passed through to the contractholders
are reflected as interest credited to policyholders' account balances.
Realized investment gains (losses) are determined by specific
identification and are presented as a component of revenue. Changes in
valuation allowances are included in investment gains or losses.
Unrealized investment gains and losses on fixed maturities available for
sale and equity securities held by the Company are accounted for as a
separate component of shareholder's equity, net of related deferred
Federal income taxes, amounts attributable to discontinued operations,
participating group annuity contracts and deferred policy acquisition
costs ("DAC") related to universal life and investment-type products and
participating traditional life contracts.
Recognition of Insurance Income and Related Expenses
Premiums from universal life and investment-type contracts are reported
as deposits to policyholders' account balances. Revenues from these
contracts consist of amounts assessed during the period against
policyholders' account balances for mortality charges, policy
administration charges and surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the
period in excess of related policyholders' account balances.
Premiums from participating and non-participating traditional life and
annuity policies with life contingencies generally are recognized as
income when due. Benefits and expenses are matched with such income so
as to result in the recognition of profits over the life of the
contracts. This match is accomplished by means of the provision for
liabilities for future policy benefits and the deferral and subsequent
amortization of policy acquisition costs.
For contracts with a single premium or a limited number of premium
payments due over a significantly shorter period than the total period
over which benefits are provided, premiums are recorded as income when
due with any excess profit deferred and recognized in income in a
constant relationship to insurance in force or, for annuities, the
amount of expected future benefit payments.
Premiums from individual health contracts are recognized as income over
the period to which the premiums relate in proportion to the amount of
insurance protection provided.
Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
underwriting, agency and policy issue expenses, all of which vary with
and are primarily related to the production of new business, are
deferred. DAC is subject to recoverability testing at the time of policy
issue and loss recognition testing at the end of each accounting period.
SAI-72
<PAGE>
For universal life products and investment-type products, DAC is
amortized over the expected total life of the contract group (periods
ranging from 15 to 35 years and 5 to 17 years, respectively) as a
constant percentage of estimated gross profits arising principally from
investment results, mortality and expense margins and surrender charges
based on historical and anticipated future experience, updated at the
end of each accounting period. The effect on the amortization of DAC of
revisions to estimated gross profits is reflected in earnings in the
period such estimated gross profits are revised. The effect on the DAC
asset that would result from realization of unrealized gains (losses) is
recognized with an offset to unrealized gains (losses) in consolidated
shareholder's equity as of the balance sheet date.
For participating traditional life policies (substantially all of which
are in the Closed Block), DAC is amortized over the expected total life
of the contract group (40 years) as a constant percentage based on the
present value of the estimated gross margin amounts expected to be
realized over the life of the contracts using the expected investment
yield. At December 31, 1997, the expected investment yield, excluding
policy loans, generally ranged from 7.53% grading to 7.92% over a 20
year period. Estimated gross margin includes anticipated premiums and
investment results less claims and administrative expenses, changes in
the net level premium reserve and expected annual policyholder
dividends. The effect on the amortization of DAC of revisions to
estimated gross margins is reflected in earnings in the period such
estimated gross margins are revised. The effect on the DAC asset that
would result from realization of unrealized gains (losses) is recognized
with an offset to unrealized gains (losses) in consolidated
shareholder's equity as of the balance sheet date.
For non-participating traditional life and annuity policies with life
contingencies, DAC is amortized in proportion to anticipated premiums.
Assumptions as to anticipated premiums are estimated at the date of
policy issue and are consistently applied during the life of the
contracts. Deviations from estimated experience are reflected in
earnings in the period such deviations occur. For these contracts, the
amortization periods generally are for the total life of the policy.
For individual health benefit insurance, DAC is amortized over the
expected average life of the contracts (10 years for major medical
policies and 20 years for disability income ("DI") products) in
proportion to anticipated premium revenue at time of issue.
Policyholders' Account Balances and Future Policy Benefits
Policyholders' account balances for universal life and investment-type
contracts are equal to the policy account values. The policy account
values represents an accumulation of gross premium payments plus
credited interest less expense and mortality charges and withdrawals.
For participating traditional life policies, future policy benefit
liabilities are calculated using a net level premium method on the basis
of actuarial assumptions equal to guaranteed mortality and dividend fund
interest rates. The liability for annual dividends represents the
accrual of annual dividends earned. Terminal dividends are accrued in
proportion to gross margins over the life of the contract.
For non-participating traditional life insurance policies, future policy
benefit liabilities are estimated using a net level premium method on
the basis of actuarial assumptions as to mortality, persistency and
interest established at policy issue. Assumptions established at policy
issue as to mortality and persistency are based on the Insurance Group's
experience which, together with interest and expense assumptions,
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
SAI-73
<PAGE>
that product, DAC is written off and thereafter, if required, a premium
deficiency reserve is established by a charge to earnings. Benefit
liabilities for traditional annuities during the accumulation period are
equal to accumulated contractholders' fund balances and after
annuitization are equal to the present value of expected future
payments. Interest rates used in establishing such liabilities range
from 2.25% to 11.5% for life insurance liabilities and from 2.25% to
13.5% for annuity liabilities.
During the fourth quarter of 1996, a loss recognition study of
participating group annuity contracts and conversion annuities ("Pension
Par") was completed which included management's revised estimate of
assumptions, such as expected mortality and future investment returns.
The study's results prompted management to establish a premium
deficiency reserve which decreased earnings from continuing operations
and net earnings by $47.5 million ($73.0 million pre-tax).
Individual health benefit liabilities for active lives are estimated
using the net level premium method and assumptions as to future
morbidity, withdrawals and interest. Benefit liabilities for disabled
lives are estimated using the present value of benefits method and
experience assumptions as to claim terminations, expenses and interest.
During the fourth quarter of 1996, the Company completed a loss
recognition study of the DI business which incorporated management's
revised estimates of future experience with regard to morbidity,
investment returns, claims and administration expenses and other
factors. The study indicated DAC was not recoverable and the reserves
were not sufficient. Earnings from continuing operations and net
earnings decreased by $208.0 million ($320.0 million pre-tax) as a
result of strengthening DI reserves by $175.0 million and writing off
unamortized DAC of $145.0 million related to DI products issued prior to
July 1993. The determination of DI reserves requires making assumptions
and estimates relating to a variety of factors, including morbidity and
interest rates, claims experience and lapse rates based on then known
facts and circumstances. Such factors as claim incidence and termination
rates can be affected by changes in the economic, legal and regulatory
environments and work ethic. While management believes its DI reserves
have been calculated on a reasonable basis and are adequate, there can
be no assurance reserves will be sufficient to provide for future
liabilities.
Claim reserves and associated liabilities for individual DI and major
medical policies were $886.7 million and $869.4 million at December 31,
1997 and 1996, respectively. Incurred benefits (benefits paid plus
changes in claim reserves) and benefits paid for individual DI and major
medical policies (excluding reserve strengthening in 1996) are
summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Incurred benefits related to current year.......... $ 190.2 $ 189.0 $ 176.0
Incurred benefits related to prior years........... 2.1 69.1 67.8
----------------- ---------------- -----------------
Total Incurred Benefits............................ $ 192.3 $ 258.1 $ 243.8
================= ================ =================
Benefits paid related to current year.............. $ 28.8 $ 32.6 $ 37.0
Benefits paid related to prior years............... 146.2 153.3 137.8
----------------- ---------------- -----------------
Total Benefits Paid................................ $ 175.0 $ 185.9 $ 174.8
================= ================ =================
</TABLE>
SAI-74
<PAGE>
Policyholders' Dividends
The amount of policyholders' dividends to be paid (including those on
policies included in the Closed Block) is determined annually by
Equitable Life's board of directors. The aggregate amount of
policyholders' dividends is related to actual interest, mortality,
morbidity and expense experience for the year and judgment as to the
appropriate level of statutory surplus to be retained by Equitable Life.
At December 31, 1997, participating policies, including those in the
Closed Block, represent approximately 21.2% ($50.2 billion) of directly
written life insurance in force, net of amounts ceded.
Federal Income Taxes
The Company files a consolidated Federal income tax return with the
Holding Company and its consolidated subsidiaries. Current Federal
income taxes are charged or credited to operations based upon amounts
estimated to be payable or recoverable as a result of taxable operations
for the current year. Deferred income tax assets and liabilities are
recognized based on the difference between financial statement carrying
amounts and income tax bases of assets and liabilities using enacted
income tax rates and laws.
Separate Accounts
Separate Accounts are established in conformity with the New York State
Insurance Law and generally are not chargeable with liabilities that
arise from any other business of the Insurance Group. Separate Accounts
assets are subject to General Account claims only to the extent the
value of such assets exceeds Separate Accounts liabilities.
Assets and liabilities of the Separate Accounts, representing net
deposits and accumulated net investment earnings less fees, held
primarily for the benefit of contractholders, and for which the
Insurance Group does not bear the investment risk, are shown as separate
captions in the consolidated balance sheets. The Insurance Group bears
the investment risk on assets held in one Separate Account, therefore,
such assets are carried on the same basis as similar assets held in the
General Account portfolio. Assets held in the other Separate Accounts
are carried at quoted market values or, where quoted values are not
available, at estimated fair values as determined by the Insurance
Group.
The investment results of Separate Accounts on which the Insurance Group
does not bear the investment risk are reflected directly in Separate
Accounts liabilities. For 1997, 1996 and 1995, investment results of
such Separate Accounts were $3,411.1 million, $2,970.6 million and
$1,963.2 million, respectively.
Deposits to Separate Accounts are reported as increases in Separate
Accounts liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges on all Separate Accounts are
included in revenues.
Employee Stock Option Plan
The Company accounts for stock option plans sponsored by the Holding
Company, DLJ and Alliance in accordance with the provisions of
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. In accordance
with the opinion, compensation expense is recorded on the date of grant
only if the current market price of the underlying stock exceeds the
SAI-75
<PAGE>
exercise price. See Note 21 for the pro forma disclosures for the
Holding Company, DLJ and Alliance required by SFAS No. 123, "Accounting
for Stock-Based Compensation".
3) INVESTMENTS
The following tables provide additional information relating to fixed
maturities and equity securities:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------------- ----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C> <C>
December 31, 1997
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 14,230.3 $ 785.0 $ 74.5 $ 14,940.8
Mortgage-backed.................... 1,702.8 23.5 1.3 1,725.0
U.S. Treasury securities and
U.S. government and
agency securities................ 1,583.2 83.9 .6 1,666.5
States and political subdivisions.. 673.0 6.8 .1 679.7
Foreign governments................ 442.4 44.8 2.0 485.2
Redeemable preferred stock......... 128.0 6.7 1.0 133.7
----------------- ----------------- ---------------- -----------------
Total Available for Sale............... $ 18,759.7 $ 950.7 $ 79.5 $ 19,630.9
================= ================= ================ =================
Equity Securities:
Common stock......................... $ 408.4 $ 48.7 $ 15.0 $ 442.1
================= ================= ================ =================
December 31, 1996
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 13,645.2 $ 451.5 $ 121.0 $ 13,975.7
Mortgage-backed.................... 2,015.9 11.2 20.3 2,006.8
U.S. Treasury securities and
U.S. government and
agency securities................ 1,539.4 39.2 19.3 1,559.3
States and political subdivisions.. 77.0 4.5 - 81.5
Foreign governments................ 302.6 18.0 2.2 318.4
Redeemable preferred stock......... 139.1 3.3 7.1 135.3
----------------- ----------------- ---------------- -----------------
Total Available for Sale............... $ 17,719.2 $ 527.7 $ 169.9 $ 18,077.0
================= ================= ================ =================
Equity Securities:
Common stock......................... $ 362.0 $ 49.3 $ 17.7 $ 393.6
================= ================= ================ =================
</TABLE>
SAI-76
<PAGE>
For publicly traded fixed maturities and equity securities, estimated
fair value is determined using quoted market prices. For fixed
maturities without a readily ascertainable market value, the Company 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. Estimated fair
values for equity securities, substantially all of which do not have a
readily ascertainable market value, have been determined by the Company.
Such estimated fair values do not necessarily represent the values for
which these securities could have been sold at the dates of the
consolidated balance sheets. At December 31, 1997 and 1996, securities
without a readily ascertainable market value having an amortized cost of
$3,759.2 million and $3,915.7 million, respectively, had estimated fair
values of $3,903.9 million and $4,024.6 million, respectively.
The contractual maturity of bonds at December 31, 1997 is shown below:
<TABLE>
<CAPTION>
Available for Sale
------------------------------------
Amortized Estimated
Cost Fair Value
---------------- -----------------
(In Millions)
<S> <C> <C>
Due in one year or less................................................ $ 149.9 $ 151.3
Due in years two through five.......................................... 2,962.8 3,025.2
Due in years six through ten........................................... 6,863.9 7,093.0
Due after ten years.................................................... 6,952.3 7,502.7
Mortgage-backed securities............................................. 1,702.8 1,725.0
---------------- -----------------
Total.................................................................. $ 18,631.7 $ 19,497.2
================ =================
</TABLE>
Bonds not due at a single maturity date have been included in the above
table in the year of final maturity. Actual maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
The Insurance Group's fixed maturity investment portfolio includes
corporate high yield securities consisting of public high yield bonds,
redeemable preferred stocks and directly negotiated debt in leveraged
buyout transactions. The Insurance Group seeks to minimize the higher
than normal credit risks associated with such securities by monitoring
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,
1997, approximately 17.85% of the $18,610.6 million aggregate amortized
cost of bonds held by the Insurance Group were considered to be other
than investment grade.
In addition to its holdings of corporate high yield securities, the
Insurance Group is an equity investor in limited partnership interests
which primarily invest in securities considered to be other than
investment grade.
Fixed maturity investments with restructured or modified terms are not
material.
SAI-77
<PAGE>
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Balances, beginning of year........................ $ 137.1 $ 325.3 $ 284.9
SFAS No. 121 release............................... - (152.4) -
Additions charged to income........................ 334.6 125.0 136.0
Deductions for writedowns and
asset dispositions............................... (87.2) (160.8) (95.6)
----------------- ---------------- -----------------
Balances, End of Year.............................. $ 384.5 $ 137.1 $ 325.3
================= ================ =================
Balances, end of year comprise:
Mortgage loans on real estate.................... $ 55.8 $ 50.4 $ 65.5
Equity real estate............................... 328.7 86.7 259.8
----------------- ---------------- -----------------
Total.............................................. $ 384.5 $ 137.1 $ 325.3
================= ================ =================
</TABLE>
At December 31, 1997, the carrying values of investments held for the
production of income which were non-income producing for the twelve
months preceding the consolidated balance sheet date were $12.6 million
of fixed maturities and $.9 million of mortgage loans on real estate.
At December 31, 1997 and 1996, mortgage loans on real estate with
scheduled payments 60 days (90 days for agricultural mortgages) or more
past due or in foreclosure (collectively, "problem mortgage loans on
real estate") had an amortized cost of $23.4 million (0.9% of total
mortgage loans on real estate) and $12.4 million (0.4% of total mortgage
loans on real estate), respectively.
The payment terms of mortgage loans on real estate may from time to time
be restructured or modified. The investment in restructured mortgage
loans on real estate, based on amortized cost, amounted to $183.4
million and $388.3 million at December 31, 1997 and 1996, respectively.
Gross interest income on restructured mortgage loans on real estate that
would have been recorded in accordance with the original terms of such
loans amounted to $17.2 million, $35.5 million and $52.1 million in
1997, 1996 and 1995, respectively. Gross interest income on these loans
included in net investment income aggregated $12.7 million, $28.2
million and $37.4 million in 1997, 1996 and 1995, respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1997 1996
------------------- -------------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses.................. $ 196.7 $ 340.0
Impaired mortgage loans without provision for losses............... 3.6 122.3
------------------- -------------------
Recorded investment in impaired mortgage loans..................... 200.3 462.3
Provision for losses............................................... (51.8) (46.4)
------------------- -------------------
Net Impaired Mortgage Loans........................................ $ 148.5 $ 415.9
=================== ===================
</TABLE>
SAI-78
<PAGE>
Impaired mortgage loans without provision for losses are loans where the
fair value of the collateral or the net present value of the expected
future cash flows related to the loan equals or exceeds the recorded
investment. Interest income earned on loans where the collateral value
is used to measure impairment is recorded on a cash basis. Interest
income on loans where the present value method is used to measure
impairment is accrued on the net carrying value amount of the loan at
the interest rate used to discount the cash flows. Changes in the
present value attributable to changes in the amount or timing of
expected cash flows are reported as investment gains or losses.
During 1997, 1996 and 1995, respectively, the Company's average recorded
investment in impaired mortgage loans was $246.9 million, $552.1 million
and $429.0 million. Interest income recognized on these impaired
mortgage loans totaled $15.2 million, $38.8 million and $27.9 million
($2.3 million, $17.9 million and $13.4 million recognized on a cash
basis) for 1997, 1996 and 1995, respectively.
The Insurance Group's investment in equity real estate is through direct
ownership and through investments in real estate joint ventures. At
December 31, 1997 and 1996, the carrying value of equity real estate
held for sale amounted to $1,023.5 million and $345.6 million,
respectively. For 1997, 1996 and 1995, respectively, real estate of
$152.0 million, $58.7 million and $35.3 million was acquired in
satisfaction of debt. At December 31, 1997 and 1996, the Company owned
$693.3 million and $771.7 million, respectively, of real estate acquired
in satisfaction of debt.
Depreciation of real estate is computed using the straight-line method
over the estimated useful lives of the properties, which generally range
from 40 to 50 years. Accumulated depreciation on real estate was $541.1
million and $587.5 million at December 31, 1997 and 1996, respectively.
Depreciation expense on real estate totaled $74.9 million, $91.8 million
and $121.7 million for 1997, 1996 and 1995, respectively.
4) JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information for real estate joint ventures
(29 and 34 individual ventures as of December 31, 1997 and 1996,
respectively) and for limited partnership interests accounted for under
the equity method, in which the Company has an investment of $10.0
million or greater and an equity interest of 10% or greater is as
follows:
SAI-79
<PAGE>
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996
---------------- -----------------
(In Millions)
<S> <C> <C>
BALANCE SHEETS
Investments in real estate, at depreciated cost........................ $ 1,700.9 $ 1,883.7
Investments in securities, generally at estimated fair value........... 1,374.8 2,430.6
Cash and cash equivalents.............................................. 105.4 98.0
Other assets........................................................... 584.9 427.0
---------------- -----------------
Total Assets........................................................... $ 3,766.0 $ 4,839.3
================ =================
Borrowed funds - third party........................................... $ 493.4 $ 1,574.3
Borrowed funds - the Company........................................... 31.2 137.9
Other liabilities...................................................... 284.0 415.8
---------------- -----------------
Total liabilities...................................................... 808.6 2,128.0
---------------- -----------------
Partners' capital...................................................... 2,957.4 2,711.3
---------------- -----------------
Total Liabilities and Partners' Capital................................ $ 3,766.0 $ 4,839.3
================ =================
Equity in partners' capital included above............................. $ 568.5 $ 806.8
Equity in limited partnership interests not included above............. 331.8 201.8
Other.................................................................. 4.3 9.8
---------------- -----------------
Carrying Value......................................................... $ 904.6 $ 1,018.4
================ =================
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures............. $ 310.5 $ 348.9 $ 463.5
Revenues of other limited partnership interests.... 506.3 386.1 242.3
Interest expense - third party..................... (91.8) (111.0) (135.3)
Interest expense - the Company..................... (7.2) (30.0) (41.0)
Other expenses..................................... (263.6) (282.5) (397.7)
----------------- ---------------- -----------------
Net Earnings....................................... $ 454.2 $ 311.5 $ 131.8
================= ================ =================
Equity in net earnings included above.............. $ 76.7 $ 73.9 $ 49.1
Equity in net earnings of limited partnerships
interests not included above..................... 69.5 35.8 44.8
Other.............................................. (.9) .9 1.0
-----------------
----------------- ---------------- -----------------
Total Equity in Net Earnings....................... $ 145.3 $ 110.6 $ 94.9
================= ================ =================
</TABLE>
SAI-80
<PAGE>
5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Fixed maturities................................... $ 1,459.4 $ 1,307.4 $ 1,151.1
Mortgage loans on real estate...................... 260.8 303.0 329.0
Equity real estate................................. 390.4 442.4 560.4
Other equity investments........................... 156.9 122.0 76.9
Policy loans....................................... 177.0 160.3 144.4
Other investment income............................ 181.7 217.4 273.0
----------------- ---------------- -----------------
Gross investment income.......................... 2,626.2 2,552.5 2,534.8
----------------- ---------------- -----------------
Investment expenses.............................. 343.4 348.9 446.6
----------------- ---------------- -----------------
Net Investment Income.............................. $ 2,282.8 $ 2,203.6 $ 2,088.2
================= ================ =================
</TABLE>
Investment gains (losses), net, including changes in the valuation
allowances, are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Fixed maturities................................... $ 88.1 $ 60.5 $ 119.9
Mortgage loans on real estate...................... (11.2) (27.3) (40.2)
Equity real estate................................. (391.3) (79.7) (86.6)
Other equity investments........................... 14.1 18.9 12.8
Sale of subsidiaries............................... 252.1 - -
Issuance and sales of Alliance Units............... - 20.6 -
Other.............................................. 3.0 (2.8) (.6)
----------------- ---------------- -----------------
Investment (Losses) Gains, Net..................... $ (45.2) $ (9.8) $ 5.3
================= ================ =================
</TABLE>
Writedowns of fixed maturities amounted to $11.7 million, $29.9 million
and $46.7 million for 1997, 1996 and 1995, respectively, and writedowns
of equity real estate subsequent to the adoption of SFAS No. 121
amounted to $136.4 million and $23.7 million for 1997 and 1996,
respectively. In the fourth quarter of 1997, the Company reclassified
$1,095.4 million depreciated cost of equity real estate from real estate
held for the production of income to real estate held for sale.
Additions to valuation allowances of $227.6 million were recorded upon
these transfers. Additionally in the fourth quarter, $132.3 million of
writedowns on real estate held for production of income were recorded.
For 1997, 1996 and 1995, respectively, proceeds received on sales of
fixed maturities classified as available for sale amounted to $9,789.7
million, $8,353.5 million and $8,206.0 million. Gross gains of $166.0
million, $154.2 million and $211.4 million and gross losses of $108.8
million, $92.7 million and $64.2 million, respectively, were realized on
these sales. The change in unrealized investment gains (losses) related
to fixed
SAI-81
<PAGE>
maturities classified as available for sale for 1997, 1996 and 1995
amounted to $513.4 million, $(258.0) million and $1,077.2 million,
respectively.
For 1997, 1996 and 1995, investment results passed through to certain
participating group annuity contracts as interest credited to
policyholders' account balances amounted to $137.5 million, $136.7
million and $131.2 million, respectively.
On June 10, 1997, Equitable Life sold EREIM (other than its interest in
Column Financial, Inc.) ("ERE") to Lend Lease Corporation Limited ("Lend
Lease"), a publicly traded, international property and financial
services company based in Sydney, Australia. The total purchase price
was $400.0 million and consisted of $300.0 million in cash and a $100.0
million note maturing in eight years and bearing interest at the rate of
7.4%, subject to certain adjustments. Equitable Life recognized an
investment gain of $162.4 million, net of Federal income tax of $87.4
million as a result of this transaction. Equitable Life entered into
long-term advisory agreements whereby ERE will continue to provide
substantially the same services to Equitable Life's General Account and
Separate Accounts, for substantially the same fees, as provided prior to
the sale.
Through June 10, 1997 and the years ended December 31, 1996 and 1995,
respectively, the businesses sold reported combined revenues of $91.6
million, $226.1 million and $245.6 million and combined net earnings of
$10.7 million, $30.7 million and $27.9 million. Total combined assets
and liabilities as reported at December 31, 1996 were $171.8 million and
$130.1 million, respectively.
In 1996, Alliance acquired the business of Cursitor-Eaton Asset
Management Company and Cursitor Holdings Limited (collectively,
"Cursitor") for approximately $159.0 million. The purchase price
consisted of $94.3 million in cash, 1.8 million of Alliance's publicly
traded units ("Alliance Units"), 6% notes aggregating $21.5 million
payable ratably over four years, and substantial additional
consideration to be determined at a later date. The excess of the
purchase price, including acquisition costs and minority interest, over
the fair value of Cursitor's net assets acquired resulted in the
recognition of intangible assets consisting of costs assigned to
contracts acquired and goodwill of approximately $122.8 million and
$38.3 million, respectively. The Company recognized an investment gain
of $20.6 million as a result of the issuance of Alliance Units in this
transaction. On June 30, 1997, Alliance reduced the recorded value of
goodwill and contracts associated with Alliance's acquisition of
Cursitor by $120.9 million. This charge reflected Alliance's view that
Cursitor's continuing decline in assets under management and its reduced
profitability, resulting from relative investment underperformance, no
longer supported the carrying value of its investment. As a result, the
Company's earnings from continuing operations before cumulative effect
of accounting change for 1997 included a charge of $59.5 million, net of
a Federal income tax benefit of $10.0 million and minority interest of
$51.4 million. The remaining balance of intangible assets is being
amortized over its estimated useful life of 20 years. At December 31,
1997, the Company's ownership of Alliance Units was approximately 56.9%.
SAI-82
<PAGE>
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of equity and the changes for the
corresponding years, are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Balance, beginning of year......................... $ 189.9 $ 396.5 $ (220.5)
Changes in unrealized investment gains (losses).... 543.3 (297.6) 1,198.9
Changes in unrealized investment losses
(gains) attributable to:
Participating group annuity contracts.......... 53.2 - (78.1)
DAC............................................ (89.0) 42.3 (216.8)
Deferred Federal income taxes.................. (163.8) 48.7 (287.0)
----------------- ---------------- -----------------
Balance, End of Year............................... $ 533.6 $ 189.9 $ 396.5
================= ================ =================
Balance, end of year comprises:
Unrealized investment gains on:
Fixed maturities............................... $ 871.2 $ 357.8 $ 615.9
Other equity investments....................... 33.7 31.6 31.1
Other, principally Closed Block................ 80.9 53.1 93.1
----------------- ---------------- -----------------
Total........................................ 985.8 442.5 740.1
Amounts of unrealized investment gains
attributable to:
Participating group annuity contracts........ (19.0) (72.2) (72.2)
DAC.......................................... (141.0) (52.0) (94.3)
Deferred Federal income taxes................ (292.2) (128.4) (177.1)
----------------- ---------------- -----------------
Total.............................................. $ 533.6 $ 189.9 $ 396.5
================= ================ =================
</TABLE>
SAI-83
<PAGE>
6) CLOSED BLOCK
Summarized financial information for the Closed Block follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996
----------------- -----------------
(In Millions)
<S> <C> <C>
Assets
Fixed Maturities:
Available for sale, at estimated fair value (amortized cost,
$4,059.4 and $3,820.7)........................................... $ 4,231.0 $ 3,889.5
Mortgage loans on real estate........................................ 1,341.6 1,380.7
Policy loans......................................................... 1,700.2 1,765.9
Cash and other invested assets....................................... 282.7 336.1
DAC.................................................................. 775.2 876.5
Other assets......................................................... 235.9 246.3
----------------- -----------------
Total Assets......................................................... $ 8,566.6 $ 8,495.0
================= =================
Liabilities
Future policy benefits and policyholders' account balances........... $ 8,993.2 $ 8,999.7
Other liabilities.................................................... 80.5 91.6
----------------- -----------------
Total Liabilities.................................................... $ 9,073.7 $ 9,091.3
================= =================
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Revenues
Premiums and other revenue......................... $ 687.1 $ 724.8 $ 753.4
Investment income (net of investment
expenses of $27.0, $27.3 and $26.7).............. 574.9 546.6 538.9
Investment losses, net............................. (42.4) (5.5) (20.2)
----------------- ---------------- -----------------
Total revenues............................... 1,219.6 1,265.9 1,272.1
----------------- ---------------- -----------------
Benefits and Other Deductions
Policyholders' benefits and dividends.............. 1,066.7 1,106.3 1,077.6
Other operating costs and expenses................. 50.4 34.6 51.3
----------------- ---------------- -----------------
Total benefits and other deductions.......... 1,117.1 1,140.9 1,128.9
----------------- ---------------- -----------------
Contribution from the Closed Block................. $ 102.5 $ 125.0 $ 143.2
================= ================ =================
</TABLE>
At December 31, 1997 and 1996, problem mortgage loans on real estate had
an amortized cost of $8.1 million and $4.3 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had an amortized cost of $70.5 million and $114.2 million,
respectively. At December 31, 1996, the restructured mortgage loans on
real estate amount included $.7 million of problem mortgage loans on
real estate.
SAI-84
<PAGE>
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996
---------------- -----------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses...................... $ 109.1 $ 128.1
Impaired mortgage loans without provision for losses................... .6 .6
---------------- -----------------
Recorded investment in impaired mortgages.............................. 109.7 128.7
Provision for losses................................................... (17.4) (12.9)
---------------- -----------------
Net Impaired Mortgage Loans............................................ $ 92.3 $ 115.8
================ =================
</TABLE>
During 1997, 1996 and 1995, the Closed Block's average recorded
investment in impaired mortgage loans was $110.2 million, $153.8 million
and $146.9 million, respectively. Interest income recognized on these
impaired mortgage loans totaled $9.4 million, $10.9 million and $5.9
million ($4.1 million, $4.7 million and $1.3 million recognized on a
cash basis) for 1997, 1996 and 1995, respectively.
Valuation allowances amounted to $18.5 million and $13.8 million on
mortgage loans on real estate and $16.8 million and $3.7 million on
equity real estate at December 31, 1997 and 1996, respectively. As of
January 1, 1996, the adoption of SFAS No. 121 resulted in the
recognition of impairment losses of $5.6 million on real estate held for
production of income. Writedowns of fixed maturities amounted to $3.5
million, $12.8 million and $16.8 million for 1997, 1996 and 1995,
respectively and writedowns of equity real estate subsequent to the
adoption of SFAS No. 121 amounted to $28.8 million for 1997.
In the fourth quarter of 1997, $72.9 million depreciated cost of equity
real estate held for production of income was reclassified to equity
real estate held for sale. Additions to valuation allowances of $15.4
million were recorded upon these transfers. Additionally, in the fourth
quarter, $28.8 million of writedowns on real estate held for production
of income were recorded.
Many expenses related to Closed Block operations are charged to
operations outside of the Closed Block; accordingly, the contribution
from the Closed Block does not represent the actual profitability of the
Closed Block operations. Operating costs and expenses outside of the
Closed Block are, therefore, disproportionate to the business outside of
the Closed Block.
SAI-85
<PAGE>
7) DISCONTINUED OPERATIONS
Summarized financial information for discontinued operations follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996
----------------- -----------------
(In Millions)
<S> <C> <C>
Assets
Mortgage loans on real estate........................................ $ 655.5 $ 1,111.1
Equity real estate................................................... 655.6 925.6
Other equity investments............................................. 209.3 300.5
Short-term investments............................................... 102.0 63.2
Other invested assets................................................ 41.9 50.9
----------------- -----------------
Total investments.................................................. 1,664.3 2,451.3
Cash and cash equivalents............................................ 106.8 42.6
Other assets......................................................... 253.9 242.9
----------------- -----------------
Total Assets......................................................... $ 2,025.0 $ 2,736.8
================= =================
Liabilities
Policyholders' liabilities........................................... $ 1,048.3 $ 1,335.9
Allowance for future losses.......................................... 259.2 262.0
Amounts due to continuing operations................................. 572.8 996.2
Other liabilities.................................................... 144.7 142.7
----------------- -----------------
Total Liabilities.................................................... $ 2,025.0 $ 2,736.8
================= =================
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Revenues
Investment income (net of investment
expenses of $97.3, $127.5 and $153.1)............ $ 188.6 $ 245.4 $ 323.6
Investment losses, net............................. (173.7) (18.9) (22.9)
Policy fees, premiums and other income............. .2 .2 .7
----------------- ---------------- -----------------
Total revenues..................................... 15.1 226.7 301.4
Benefits and other deductions...................... 169.5 250.4 326.5
Losses charged to allowance for future losses...... (154.4) (23.7) (25.1)
----------------- ---------------- -----------------
Pre-tax loss from operations....................... - - -
Pre-tax loss from strengthening of the
allowance for future losses...................... (134.1) (129.0) -
Federal income tax benefit......................... 46.9 45.2 -
----------------- ---------------- -----------------
Loss from Discontinued Operations.................. $ (87.2) $ (83.8) $ -
================= ================ =================
</TABLE>
SAI-86
<PAGE>
The Company's quarterly process for evaluating the allowance for future
losses applies the current period's results of the discontinued
operations against the allowance, re-estimates future losses, and
adjusts the allowance, if appropriate. Additionally, as part of the
Company's annual planning process which takes place in the fourth
quarter of each year, investment and benefit cash flow projections are
prepared. These updated assumptions and estimates resulted in the need
to strengthen the allowance in 1997 and 1996, respectively.
In the fourth quarter of 1997, $329.9 million depreciated cost of equity
real estate was reclassified from equity real estate held for production
of income to real estate held for sale. Additions to valuation
allowances of $79.8 million were recognized upon these transfers.
Additionally, in the fourth quarter, $92.5 million of writedown on real
estate held for production of income were recognized.
Benefits and other deductions includes $53.3 million, $114.3 million and
$154.6 million of interest expense related to amounts borrowed from
continuing operations in 1997, 1996 and 1995, respectively.
Valuation allowances amounted to $28.4 million and $9.0 million on
mortgage loans on real estate and $88.4 million and $20.4 million on
equity real estate at December 31, 1997 and 1996, respectively. As of
January 1, 1996, the adoption of SFAS No. 121 resulted in a release of
existing valuation allowances of $71.9 million on equity real estate and
recognition of impairment losses of $69.8 million on real estate held
for production of income. Writedowns of equity real estate subsequent to
the adoption of SFAS No. 121 amounted to $95.7 million and $12.3 million
for 1997 and 1996, respectively.
At December 31, 1997 and 1996, problem mortgage loans on real estate had
amortized costs of $11.0 million and $7.9 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had amortized costs of $109.4 million and $208.1 million,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996
---------------- -----------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses...................... $ 101.8 $ 83.5
Impaired mortgage loans without provision for losses................... .2 15.0
---------------- -----------------
Recorded investment in impaired mortgages.............................. 102.0 98.5
Provision for losses................................................... (27.3) (8.8)
---------------- -----------------
Net Impaired Mortgage Loans............................................ $ 74.7 $ 89.7
================ =================
</TABLE>
During 1997, 1996 and 1995, the discontinued operations' average
recorded investment in impaired mortgage loans was $89.2 million, $134.8
million and $177.4 million, respectively. Interest income recognized on
these impaired mortgage loans totaled $6.6 million, $10.1 million and
$4.5 million ($5.3 million, $7.5 million and $.4 million recognized on a
cash basis) for 1997, 1996 and 1995, respectively.
At December 31, 1997 and 1996, discontinued operations had carrying
values of $156.2 million and $263.0 million, respectively, of real
estate acquired in satisfaction of debt.
SAI-87
<PAGE>
8) SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996
----------------- -----------------
(In Millions)
<S> <C> <C>
Short-term debt...................................................... $ 422.2 $ 174.1
----------------- -----------------
Long-term debt:
Equitable Life:
6.95% surplus notes scheduled to mature 2005....................... 399.4 399.4
7.70% surplus notes scheduled to mature 2015....................... 199.7 199.6
Other.............................................................. .3 .5
----------------- -----------------
Total Equitable Life........................................... 599.4 599.5
----------------- -----------------
Wholly Owned and Joint Venture Real Estate:
Mortgage notes, 5.87% - 12.00% due through 2006.................... 951.1 968.6
----------------- -----------------
Alliance:
Other.............................................................. 18.5 24.7
----------------- -----------------
Total long-term debt................................................. 1,569.0 1,592.8
----------------- -----------------
Total Short-term and Long-term Debt.................................. $ 1,991.2 $ 1,766.9
================= =================
</TABLE>
Short-term Debt
Equitable Life has a $350.0 million bank credit facility available to
fund short-term working capital needs and to facilitate the securities
settlement process. The credit facility consists of two types of
borrowing options with varying interest rates and expires in June 2000.
The interest rates are based on external indices dependent on the type
of borrowing and at December 31, 1997 range from 5.88% to 8.50%. There
were no borrowings outstanding under this bank credit facility at
December 31, 1997.
Equitable Life has a commercial paper program with an issue limit of
$500.0 million. This program is available for general corporate purposes
used to support Equitable Life's liquidity needs and is supported by
Equitable Life's existing $350.0 million bank credit facility. At
December 31, 1997, $50.0 million was outstanding under this program.
During 1996, Alliance entered into a $250.0 million five-year revolving
credit facility with a group of banks. Under the facility, the interest
rate, at the option of Alliance, is a floating rate generally based upon
a defined prime rate, a rate related to the London Interbank Offered
Rate ("LIBOR") or the Federal funds rate. A facility fee is payable on
the total facility. The revolving credit facility will be used to
provide back-up liquidity for Alliance's $250.0 million commercial paper
program, to fund commission payments to financial intermediaries for the
sale of Class B and C shares under Alliance's mutual fund distribution
system, and for general working capital purposes. At December 31, 1997,
Alliance had $72.0 million in commercial paper outstanding and there
were no borrowings under the revolving credit facility.
SAI-88
<PAGE>
Long-term Debt
Several of the long-term debt agreements have restrictive covenants
related to the total amount of debt, net tangible assets and other
matters. The Company is in compliance with all debt covenants.
On December 18, 1995, Equitable Life issued, in accordance with Section
1307 of the New York Insurance Law, $400.0 million of surplus notes
having an interest rate of 6.95% scheduled to mature in 2005 and $200.0
million of surplus notes having an interest rate of 7.70% scheduled to
mature in 2015 (together, the "Surplus Notes"). Proceeds from the
issuance of the Surplus Notes were $596.6 million, net of related
issuance costs. Payments of interest on, or principal of, the Surplus
Notes are subject to prior approval by the Superintendent.
The Company has pledged real estate, mortgage loans, cash and securities
amounting to $1,164.0 million and $1,406.4 million at December 31, 1997
and 1996, respectively, as collateral for certain long-term debt.
At December 31, 1997, aggregate maturities of the long-term debt based
on required principal payments at maturity for 1998 and the succeeding
four years are $565.8 million, $201.4 million, $8.6 million, $1.7
million and $1.8 million, respectively, and $790.6 million thereafter.
9) FEDERAL INCOME TAXES
A summary of the Federal income tax expense in the consolidated
statements of earnings is shown below:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current.......................................... $ 186.5 $ 97.9 $ (11.7)
Deferred......................................... (95.0) (88.2) 132.2
----------------- ---------------- -----------------
Total.............................................. $ 91.5 $ 9.7 $ 120.5
================= ================ =================
</TABLE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings before
Federal income taxes and minority interest by the expected Federal
income tax rate of 35%. The sources of the difference and the tax
effects of each are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Expected Federal income tax expense................ $ 234.7 $ 73.0 $ 173.7
Non-taxable minority interest...................... (38.0) (28.6) (22.0)
Adjustment of tax audit reserves................... (81.7) 6.9 4.1
Equity in unconsolidated subsidiaries.............. (45.1) (32.3) (19.4)
Other.............................................. 21.6 (9.3) (15.9)
----------------- ---------------- -----------------
Federal Income Tax Expense......................... $ 91.5 $ 9.7 $ 120.5
================= ================ =================
</TABLE>
SAI-89
<PAGE>
The components of the net deferred Federal income taxes are as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
--------------------------------- ---------------------------------
Assets Liabilities Assets Liabilities
--------------- ---------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
Compensation and related benefits...... $ 257.9 $ - $ 259.2 $ -
Other.................................. 30.7 - - 1.8
DAC, reserves and reinsurance.......... - 222.8 - 166.0
Investments............................ - 405.7 - 328.6
--------------- ---------------- --------------- ---------------
Total.................................. $ 288.6 $ 628.5 $ 259.2 $ 496.4
=============== ================ =============== ===============
</TABLE>
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>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
DAC, reserves and reinsurance...................... $ 46.2 $ (156.2) $ 63.3
Investments........................................ (113.8) 78.6 13.0
Compensation and related benefits.................. 3.7 22.3 30.8
Other.............................................. (31.1) (32.9) 25.1
----------------- ---------------- -----------------
Deferred Federal Income Tax
(Benefit) Expense................................ $ (95.0) $ (88.2) $ 132.2
================= ================ =================
</TABLE>
The Internal Revenue Service (the "IRS") is in the process of examining
the Company's consolidated Federal income tax returns for the years 1989
through 1991. Management believes these audits will have no material
adverse effect on the Company's results of operations.
SAI-90
<PAGE>
10) REINSURANCE AGREEMENTS
The Insurance Group assumes and cedes reinsurance with other insurance
companies. The Insurance Group evaluates the financial condition of its
reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies. Ceded reinsurance does not relieve the originating insurer
of liability. The effect of reinsurance (excluding group life and
health) is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Direct premiums.................................... $ 448.6 $ 461.4 $ 474.2
Reinsurance assumed................................ 198.3 177.5 171.3
Reinsurance ceded.................................. (45.4) (41.3) (38.7)
----------------- ---------------- -----------------
Premiums........................................... $ 601.5 $ 597.6 $ 606.8
================= ================ =================
Universal Life and Investment-type Product
Policy Fee Income Ceded.......................... $ 61.0 $ 48.2 $ 44.0
================= ================ =================
Policyholders' Benefits Ceded...................... $ 70.6 $ 54.1 $ 48.9
================= ================ =================
Interest Credited to Policyholders' Account
Balances Ceded................................... $ 36.4 $ 32.3 $ 28.5
================= ================ =================
</TABLE>
Effective January 1, 1994, all in force business above $5.0 million was
reinsured. During 1996, the Company's retention limit on joint
survivorship policies was increased to $15.0 million. The Insurance
Group also reinsures the entire risk on certain substandard underwriting
risks as well as in certain other cases.
The Insurance Group cedes 100% of its group life and health business to
a third party insurance company. Premiums ceded totaled $1.6 million,
$2.4 million and $260.6 million for 1997, 1996 and 1995, respectively.
Ceded death and disability benefits totaled $4.3 million, $21.2 million
and $188.1 million for 1997, 1996 and 1995, respectively. Insurance
liabilities ceded totaled $593.8 million and $652.4 million at December
31, 1997 and 1996, respectively.
SAI-91
<PAGE>
11) EMPLOYEE BENEFIT PLANS
The Company sponsors qualified and non-qualified defined benefit plans
covering substantially all employees (including certain qualified
part-time employees), managers and certain agents. The pension plans are
non-contributory. Equitable Life's benefits are based on a cash balance
formula or years of service and final average earnings, if greater,
under certain grandfathering rules in the plans. Alliance's benefits are
based on years of credited service, average final base salary and
primary social security benefits. The Company's funding policy is to
make the minimum contribution required by the Employee Retirement Income
Security Act of 1974 ("ERISA").
Components of net periodic pension cost (credit) for the qualified and
non-qualified plans are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Service cost....................................... $ 32.5 $ 33.8 $ 30.0
Interest cost on projected benefit obligations..... 128.2 120.8 122.0
Actual return on assets............................ (307.6) (181.4) (309.2)
Net amortization and deferrals..................... 166.6 43.4 155.6
----------------- ---------------- -----------------
Net Periodic Pension Cost (Credit)................. $ 19.7 $ 16.6 $ (1.6)
================= ================ =================
</TABLE>
The funded status of the qualified and non-qualified pension plans is as
follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996
---------------- -----------------
(In Millions)
<S> <C> <C>
Actuarial present value of obligations:
Vested............................................................... $ 1,702.6 $ 1,672.2
Non-vested........................................................... 3.9 10.1
---------------- -----------------
Accumulated Benefit Obligation......................................... $ 1,706.5 $ 1,682.3
================ =================
Plan assets at fair value.............................................. $ 1,867.4 $ 1,626.0
Projected benefit obligations.......................................... 1,801.3 1,765.5
---------------- -----------------
Projected benefit obligations (in excess of) or less than plan assets.. 66.1 (139.5)
Unrecognized prior service cost........................................ (9.9) (17.9)
Unrecognized net loss from past experience different
from that assumed.................................................... 95.0 280.0
Unrecognized net asset at transition................................... 3.1 4.7
Additional minimum liability........................................... - (19.3)
---------------- -----------------
Prepaid Pension Cost.................................................. $ 154.3 $ 108.0
================ =================
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of projected benefit
obligations were 7.25% and 4.07%, respectively, at December 31, 1997 and
7.5% and 4.25%, respectively, at December 31, 1996. As of January 1,
1997 and 1996, the expected long-term rate of return on assets for the
retirement plan was 10.25%.
SAI-92
<PAGE>
The Company recorded, as a reduction of shareholders' equity, an
additional minimum pension liability of $17.3 million and $12.9 million,
net of Federal income taxes, at December 31, 1997 and 1996,
respectively, primarily representing the excess of the accumulated
benefit obligation of the qualified pension plan over the accrued
liability.
The pension plan's assets include corporate and government debt
securities, equity securities, equity real estate and shares of group
trusts managed by Alliance.
Prior to 1987, the qualified plan funded participants' benefits through
the purchase of non-participating annuity contracts from Equitable Life.
Benefit payments under these contracts were approximately $33.2 million,
$34.7 million and $36.4 million for 1997, 1996 and 1995, respectively.
The Company provides certain medical and life insurance benefits
(collectively, "postretirement benefits") for qualifying employees,
managers and agents retiring from the Company (i) on or after attaining
age 55 who have at least 10 years of service or (ii) on or after
attaining age 65 or (iii) whose jobs have been abolished and who have
attained age 50 with 20 years of service. The life insurance benefits
are related to age and salary at retirement. The costs of postretirement
benefits are recognized in accordance with the provisions of SFAS No.
106. The Company continues to fund postretirement benefits costs on a
pay-as-you-go basis and, for 1997, 1996 and 1995, the Company made
estimated postretirement benefits payments of $18.7 million, $18.9
million and $31.1 million, respectively.
The following table sets forth the postretirement benefits plan's
status, reconciled to amounts recognized in the Company's consolidated
financial statements:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Service cost....................................... $ 4.5 $ 5.3 $ 4.0
Interest cost on accumulated postretirement
benefits obligation.............................. 34.7 34.6 34.7
Net amortization and deferrals..................... 1.9 2.4 (2.3)
----------------- ---------------- -----------------
Net Periodic Postretirement Benefits Costs......... $ 41.1 $ 42.3 $ 36.4
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996
---------------- -----------------
(In Millions)
<S> <C> <C>
Accumulated postretirement benefits obligation:
Retirees............................................................. $ 388.5 $ 381.8
Fully eligible active plan participants.............................. 45.7 50.7
Other active plan participants....................................... 56.6 60.7
---------------- -----------------
490.8 493.2
Unrecognized prior service cost........................................ 40.3 50.5
Unrecognized net loss from past experience different
from that assumed and from changes in assumptions.................... (140.6) (150.5)
---------------- -----------------
Accrued Postretirement Benefits Cost................................... $ 390.5 $ 393.2
================ =================
</TABLE>
SAI-93
<PAGE>
Since January 1, 1994, costs to the Company for providing these medical
benefits available to retirees under age 65 are the same as those
offered to active employees and costs to the Company of providing these
medical benefits will be limited to 200% of 1993 costs for all
participants.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefits obligation was 8.75% in 1997,
gradually declining to 2.75% in the year 2009 and in 1996 was 9.5%,
gradually declining to 3.5% in the year 2009. The discount rate used in
determining the accumulated postretirement benefits obligation was 7.25%
and 7.50% at December 31, 1997 and 1996, respectively.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefits obligation as of December 31, 1997
would be increased 7%. The effect of this change on the sum of the
service cost and interest cost would be an increase of 8%.
12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives
The Insurance Group primarily uses derivatives for asset/liability risk
management and for hedging individual securities. Derivatives mainly are
utilized to reduce the Insurance Group's exposure to interest rate
fluctuations. Accounting for interest rate swap transactions is on an
accrual basis. Gains and losses related to interest rate swap
transactions are amortized as yield adjustments over the remaining life
of the underlying hedged security. Income and expense resulting from
interest rate swap activities are reflected in net investment income.
The notional amount of matched interest rate swaps outstanding at
December 31, 1997 and 1996, respectively, was $1,353.4 million and
$649.9 million. The average unexpired terms at December 31, 1997 ranged
from 1.5 to 3.8 years. At December 31, 1997, the cost of terminating
outstanding matched swaps in a loss position was $10.9 million and the
unrealized gain on outstanding matched swaps in a gain position was
$38.9 million. The Company has no intention of terminating these
contracts prior to maturity. During 1996 and 1995, net gains of $.2
million and $1.4 million, respectively, were recorded in connection with
interest rate swap activity. Equitable Life has implemented an interest
rate cap program designed to hedge crediting rates on interest-sensitive
individual annuities contracts. The outstanding notional amounts at
December 31, 1997 of contracts purchased and sold were $7,250.0 million
and $875.0 million, respectively. The net premium paid by Equitable Life
on these contracts was $48.5 million and is being amortized ratably over
the contract periods ranging from 1 to 5 years. Income and expense
resulting from this program are reflected as an adjustment to interest
credited to policyholders' account balances.
Substantially all of DLJ's activities related to derivatives are, by
their nature trading activities which are primarily for the purpose of
customer accommodations. DLJ enters into certain contractual agreements
referred to as derivatives or off-balance-sheet financial instruments
involving futures, forwards and options. DLJ's derivative activities
consist of writing over-the-counter ("OTC") options to accommodate its
customer needs, trading in forward contracts in U.S. government and
agency issued or guaranteed securities and in futures contracts on
equity-based indices, interest rate instruments and currencies and
issuing structured products based on emerging market financial
instruments and indices. DLJ's involvement in swap contracts and
commodity derivative instruments is not significant.
SAI-94
<PAGE>
Fair Value of Financial Instruments
The Company defines fair value as the quoted market prices for those
instruments that are actively traded in financial markets. In cases
where quoted market prices are not available, fair values are estimated
using present value or other valuation techniques. The fair value
estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument,
including estimates of the timing and amount of expected future cash
flows and the credit standing of counterparties. Such estimates do not
reflect any premium or discount that could result from offering for sale
at one time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of
unrealized gains or losses. In many cases, the fair value estimates
cannot be substantiated by comparison to independent markets, nor can
the disclosed value be realized in immediate settlement of the
instrument.
Certain financial instruments are excluded, particularly insurance
liabilities other than financial guarantees and investment contracts.
Fair market value of off-balance-sheet financial instruments of the
Insurance Group was not material at December 31, 1997 and 1996.
Fair values for mortgage loans on real estate are estimated by
discounting future contractual cash flows using interest rates at which
loans with similar characteristics and credit quality would be made.
Fair values for foreclosed mortgage loans and problem mortgage loans are
limited to the estimated fair value of the underlying collateral if
lower.
Fair values of policy loans are estimated by discounting the face value
of the loans from the time of the next interest rate review to the
present, at a rate equal to the excess of the current estimated market
rates over the current interest rate charged on the loan.
The estimated fair values for the Company's association plan contracts,
supplementary contracts not involving life contingencies ("SCNILC") and
annuities certain, which are included in policyholders' account
balances, and guaranteed interest contracts are estimated using
projected cash flows discounted at rates reflecting expected current
offering rates.
The estimated fair values for variable deferred annuities and single
premium deferred annuities ("SPDA"), which are included in
policyholders' account balances, are estimated by discounting the
account value back from the time of the next crediting rate review to
the present, at a rate equal to the excess of current estimated market
rates offered on new policies over the current crediting rates.
Fair values for long-term debt is determined using published market
values, where available, or contractual cash flows discounted at market
interest rates. The estimated fair values for non-recourse mortgage debt
are determined by discounting contractual cash flows at a rate which
takes into account the level of current market interest rates and
collateral risk. The estimated fair values for recourse mortgage debt
are determined by discounting contractual cash flows at a rate based
upon current interest rates of other companies with credit ratings
similar to the Company. The Company's carrying value of short-term
borrowings approximates their estimated fair value.
SAI-95
<PAGE>
The following table discloses carrying value and estimated fair value
for financial instruments not otherwise disclosed in Notes 3, 6 and 7:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1997 1996
--------------------------------- ---------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
--------------- ---------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
Consolidated Financial Instruments:
Mortgage loans on real estate.......... $ 2,611.4 $ 2,822.8 $ 3,133.0 $ 3,394.6
Other limited partnership interests.... 509.4 509.4 467.0 467.0
Policy loans........................... 2,422.9 2,493.9 2,196.1 2,221.6
Policyholders' account balances -
investment contracts................. 12,611.0 12,714.0 12,908.7 12,992.2
Long-term debt......................... 1,569.0 1,531.5 1,592.8 1,557.7
Closed Block Financial Instruments:
Mortgage loans on real estate.......... 1,341.6 1,420.7 1,380.7 1,425.6
Other equity investments............... 86.3 86.3 105.0 105.0
Policy loans........................... 1,700.2 1,784.2 1,765.9 1,798.0
SCNILC liability....................... 27.6 30.3 30.6 34.9
Discontinued Operations Financial
Instruments:
Mortgage loans on real estate.......... 655.5 779.9 1,111.1 1,220.3
Fixed maturities....................... 38.7 38.7 42.5 42.5
Other equity investments............... 209.3 209.3 300.5 300.5
Guaranteed interest contracts.......... 37.0 34.0 290.7 300.5
Long-term debt......................... 102.0 102.1 102.1 102.2
</TABLE>
13) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has provided, from time to time, certain guarantees or
commitments to affiliates, investors and others. These arrangements
include commitments by the Company, under certain conditions: to make
capital contributions of up to $202.6 million to affiliated real estate
joint ventures; and to provide equity financing to certain limited
partnerships of $362.1 million at December 31, 1997, under existing loan
or loan commitment agreements.
Equitable Life is the obligor under certain structured settlement
agreements which it had entered into with unaffiliated insurance
companies and beneficiaries. To satisfy its obligations under these
agreements, Equitable Life owns single premium annuities issued by
previously wholly owned life insurance subsidiaries. Equitable Life has
directed payment under these annuities to be made directly to the
beneficiaries under the structured settlement agreements. A contingent
liability exists with respect to these agreements should the previously
wholly owned subsidiaries be unable to meet their obligations.
Management believes the satisfaction of those obligations by Equitable
Life is remote.
The Insurance Group had $47.4 million of letters of credit outstanding
at December 31, 1997.
SAI-96
<PAGE>
14) LITIGATION
Equitable Life recently agreed to settle, subject to court approval,
previously disclosed cases brought by persons insured under Lifetime
Guaranteed Renewable Major Medical Insurance Policies issued by
Equitable Life (the "Policies") in New York (Golomb et al. v. The
Equitable Life Assurance Society of the United States), Pennsylvania
(Malvin et al. v. The Equitable Life Assurance Society of the United
States), Texas (Bowler et al. v. The Equitable Life Assurance Society of
the United States), Florida (Bachman v. The Equitable Life Assurance
Society of the United States) and California (Fletcher v. The Equitable
Life Assurance Society of the United States). Plaintiffs in these cases
claimed that Equitable Life's method for determining premium increases
breached the terms of certain forms of the Policies and was
misrepresented. Plaintiffs in Bowler and Fletcher also claimed that
Equitable Life misrepresented to policyholders in Texas and California,
respectively, that premium increases had been approved by insurance
departments in those states and determined annual rate increases in a
manner that discriminated against policyholders in those states in
violation of the terms of the Policies, representations to policyholders
and/or state law. The New York trial court dismissed the Golomb action
with prejudice and plaintiffs appealed. In Bowler and Fletcher,
Equitable Life denied the material allegations of the complaints and
filed motions for summary judgment which have been fully briefed. The
Malvin action was stayed indefinitely pending the outcome of proceedings
in Golomb and in Fletcher the magistrate concluded that the case should
be remanded to California state court and Equitable Life appealed that
determination to the district judge. On December 23, 1997, Equitable
Life entered into a settlement agreement, subject to court approval,
which would result in the dismissal with prejudice of each of the five
pending actions and the resolution of all similar claims on a nationwide
basis.
The settlement agreement provides for the creation of a nationwide class
consisting of all persons holding, and paying premiums on, the Policies
at any time since January 1, 1988. An amended complaint will be filed in
the federal district court in Tampa, Florida (where the Florida action
is pending), that would assert claims of the kind previously made in the
cases described above on a nationwide basis, on behalf of policyholders
in the nationwide class, which consists of approximately 127,000 former
and current policyholders. If the settlement is approved, Equitable Life
would pay $14,166,000 in exchange for release of all claims for past
damages on claims of the type described in the five pending actions and
the amended complaint. Costs of administering the settlement and any
attorneys' fees awarded by the court to plaintiffs' counsel would be
deducted from this fund before distribution of the balance to the class.
In addition to this payment, Equitable Life will provide future relief
to current holders of certain forms of the Policies in the form of an
agreement to be embodied in the court's judgment, restricting the
premium increases Equitable Life can seek on these Policies in the
future. The parties estimate the present value of these restrictions at
$23,333,000, before deduction of any attorneys' fees that may be awarded
by the court. The estimate is based on assumptions about future events
that cannot be predicted with certainty and accordingly the actual value
of the future relief may differ. The parties to the settlement shortly
will be asking the court to approve preliminarily the settlement and
settlement class and to permit distribution of notice of the settlement
to policyholders, establish procedures for objections, an opportunity to
opt out of the settlements as it affects past damages, and a court
hearing on whether the settlement should be finally approved. Equitable
Life cannot predict whether the settlement will be approved or, if it is
not approved, the outcome of the pending litigations. As noted,
proceedings in Malvin were stayed indefinitely; proceedings in the other
actions have been stayed or deferred to accommodate the settlement
approval process.
A number of lawsuits have been filed against life and health insurers in
the jurisdictions in which Equitable Life and its subsidiaries do
business involving insurers' sales practices, alleged agent misconduct,
alleged failure to properly supervise agents, and other matters. Some of
the lawsuits have resulted in the award of
SAI-97
<PAGE>
substantial judgments against other insurers, including material amounts
of punitive damages, or in substantial settlements. In some states,
juries have substantial discretion in awarding punitive damages.
Equitable Life, Equitable Variable Life Insurance Company ("EVLICO,"
which was merged into Equitable Life effective January 1, 1997, but
whose existence continues for certain limited purposes, including the
defense of litigation) and The Equitable of Colorado, Inc. ("EOC"), like
other life and health insurers, from time to time are involved in such
litigation. Among litigations pending against Equitable Life, EVLICO and
EOC of the type referred to in this paragraph are the litigations
described in the following seven paragraphs.
An action was instituted on April 6, 1995 against Equitable Life and its
wholly owned subsidiary, EOC, 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 April 1997, plaintiffs noticed an
appeal from the court's June 1996 order. Subsequently, Equitable Life
and EOC noticed a cross-appeal from so much of the June 1996 order that
denied their motion to dismiss. Briefing on the appeals is scheduled to
begin on February 23, 1998. In June 1997, plaintiffs filed their
memorandum of law and affidavits in support of their motion for class
certification. That memorandum states that plaintiffs seek to certify a
class solely on their breach of contract claims, and not on their
negligent misrepresentation claim. Plaintiffs' class certification
motion has been fully briefed by the parties and is sub judice. In
August 1997, Equitable Life and EOC moved for summary judgment
dismissing plaintiffs' remaining claims of breach of contract and
negligent misrepresentation. Defendants' summary judgment motion has
been fully briefed by the parties. On January 5, 1998, plaintiffs filed
a note of issue (placing the case on the trial calendar).
On May 21, 1996, an action entitled Elton F. Duncan, III v. The
Equitable Life Assurance Society of the United States was commenced
against Equitable Life in the Civil District Court for the Parish of
Orleans, State of Louisiana. The action originally was brought by an
individual who purchased a whole life policy from Equitable Life in
1989. In September 1997, with leave of the court, plaintiff filed a
second amended petition naming six additional policyholder plaintiffs
and three new sales agent defendants. The sole named individual
defendant in the original petition is also named as a defendant in the
second amended petition. Plaintiffs purport to represent a class
consisting of all persons who purchased whole life or universal life
insurance policies from Equitable Life from January 1, 1981 through July
22, 1992. Plaintiffs allege improper sales practices based on
allegations of misrepresentations concerning one or more of the
following: the number of years that premiums would need to be paid; a
policy's suitability as an investment vehicle; and the extent to which a
policy was a proper replacement policy. Plaintiffs seek damages,
including punitive damages, in an unspecified amount. In October 1997,
Equitable Life filed (i) exceptions to the second amended petition,
asserting deficiencies in pleading of venue and vagueness; and (ii) a
motion to strike certain allegations. On January 23, 1998, the court
heard argument on Equitable Life's exceptions and motion to strike.
Those motions are sub judice. Motion practice regarding discovery
continues.
SAI-98
<PAGE>
On July 26, 1996, an action entitled Michael Bradley v. Equitable
Variable Life Insurance Company was commenced in New York state court,
Kings County. The action is brought by the holder of a variable life
insurance policy issued by EVLICO. The plaintiff purports to represent a
class consisting of all persons or entities who purchased one or more
life insurance policies issued by EVLICO from January 1, 1980. The
complaint puts at issue various alleged sales practices and alleges
misrepresentations concerning the extent to which the policy was a
proper replacement policy and the number of years that the annual
premium would need to be paid. Plaintiff seeks damages, including
punitive damages, in an unspecified amount and also seeks injunctive
relief prohibiting EVLICO from canceling policies for failure to make
premium payments beyond the alleged stated number of years that the
annual premium would need to be paid. EVLICO answered the complaint,
denying the material allegations. In September 1996, Equitable Life,
EVLICO and EOC made a motion to have this proceeding moved from Kings
County Supreme Court to New York County for joint trial or consolidation
with the Cole action. The motion was denied by the Court in Cole in
January 1997. Plaintiff then moved for certification of a nationwide
class consisting of all persons or entities who, since January 1, 1980,
were sold one or more life insurance products based on
misrepresentations as to the number of years that the annual premium
would need to be paid, and/or who were allegedly induced to purchase
additional policies from EVLICO using the cash value accumulated in
existing policies. Defendants have opposed this motion. Discovery and
briefing regarding plaintiff's motion for class certification are
ongoing.
On December 12, 1996, an action entitled Robert E. Dillon v. The
Equitable Life Assurance Society of the United States and The Equitable
of Colorado, was commenced in the United States District Court for the
Southern District of Florida. The action is brought by an individual who
purchased a joint whole life policy from EOC in 1988. The complaint puts
in issue various alleged sales practices and alleges misrepresentations
concerning the alleged impropriety of replacement policies issued by
Equitable Life and EOC and alleged misrepresentations regarding the
number of years premiums would have to be paid on the defendants'
policies. Plaintiff alleges claims for breach of contract, fraud,
negligent misrepresentation, money had and received, unjust enrichment
and imposition of a constructive trust. Plaintiff purports to represent
two classes of persons. The first is a "contract class," consisting of
all persons who purchased whole or universal life insurance policies
from Equitable Life and EOC and from whom Equitable Life and EOC have
sought additional payments beyond the number of years allegedly promised
by Equitable Life and EOC. The second is a "fraud class," consisting of
all persons with an interest in policies issued by Equitable Life and
EOC at any time since October 1, 1986. Plaintiff seeks damages in an
unspecified amount, and also seeks injunctive relief attaching Equitable
Life's and EOC's profits from their alleged sales practices. In May
1997, plaintiff served a motion for class certification. In July 1997,
the parties submitted to the Court a joint scheduling report, joint
scheduling order and a confidentiality stipulation and order. The Court
signed the latter stipulation, and the others remain sub judice. Further
briefing on plaintiff's class certification motion will await entry of a
scheduling order and further class certification discovery, which has
commenced and is on-going. In January 1998, the judge assigned to the
case recused himself, and the case was reassigned. Defendants are to
serve their answer in February 1998.
On January 3, 1996, an amended complaint was filed in an action entitled
Frank Franze Jr. and George Busher, individually and on behalf of all
others similarly situated v. The Equitable Life Assurance Society of the
United States, and Equitable Variable Life Insurance Company, No.
94-2036 in the United States District Court for the Southern District of
Florida. The action was brought by two individuals who purchased
variable life insurance policies. The plaintiffs purport to represent a
nationwide class consisting of all persons who purchased variable life
insurance policies from Equitable Life and EVLICO since September 30,
1991. The amended complaint alleges that Equitable Life's and EVLICO's
agents were trained not to disclose fully that the product being sold
was life insurance. Plaintiffs allege violations of the Federal
securities laws and seek rescission of the contracts or compensatory
damages and attorneys' fees and expenses. Equitable Life and
SAI-99
<PAGE>
EVLICO have answered the amended complaint, denying the material
allegations and asserting certain affirmative defenses. Motion practice
regarding discovery continues.
On January 9, 1997, an action entitled Rosemarie Chaviano, individually
and on behalf of all others similarly situated v. The Equitable Life
Assurance Society of the United States, and Equitable Variable Life
Insurance Company, was filed in Massachusetts state court making claims
similar to those in the Franze action and alleging violations of the
Massachusetts securities laws. The plaintiff purports to represent all
persons in Massachusetts who purchased variable life insurance contracts
from Equitable Life and EVLICO from January 9, 1993 to the present. The
Massachusetts action seeks rescission of the contracts or compensatory
damages, attorneys' fees, expenses and injunctive relief. Plaintiff
filed an amended complaint in April 1997. In July 1997, Equitable Life
served a motion to dismiss the amended complaint or, in the alternative,
for summary judgment. On September 12, 1997, plaintiff moved for class
certification. This motion is scheduled for hearing on February 18,
1998.
On September 11, 1997, an action entitled Pamela L. and James A. Luther,
individually and as representatives of all people similarly situated v.
The Equitable Life Assurance Society of the United States, The Equitable
Companies Incorporated, and Casey Cammack, individually and as agent for
The Equitable Life Assurance Society of the United States and The
Equitable Companies Incorporated, was filed in Texas state court. The
action was brought by holders of a whole life policy and the beneficiary
under that policy. Plaintiffs purport to represent a nationwide class of
persons having an ownership or beneficial interest in whole and
universal life policies issued by Equitable Life from January 1, 1982
through December 31, 1996. Also included in the purported class are
persons having an ownership interest in variable annuities purchased
from Equitable Life from January 1, 1992 to the present. The complaint
puts in issue the allegations that uniform sales presentations,
illustrations, and materials that Equitable Life agents used
misrepresented the stated number of years that premiums would need to be
paid and misrepresented the extent to which the policies at issue were
proper replacement policies. Plaintiffs seek compensatory damages,
attorneys' fees and expenses. In October 1997, Equitable Life served a
general denial of the allegations against it. The same day, the Holding
Company entered a special appearance contesting the court's jurisdiction
over it. In November 1997, Equitable Life filed a plea in abatement,
which, under Texas law, stayed further proceedings in the case because
plaintiffs had not served a demand letter. Plaintiffs served a demand
letter upon Equitable Life and the Holding Company, the response to
which is due 60 days thereafter. Although the outcome of litigation
cannot be predicted with certainty, particularly in the early stages of
an action, the Company's management believes that the ultimate
resolution of the Cole, Duncan, Bradley, Dillon, Franze, Chaviano and
Luther litigations should not have a material adverse effect on the
financial position of the Company. The Company's management cannot make
an estimate of loss, if any, or predict whether or not any such
litigation will have a material adverse effect on the Company's results
of operations in any particular period.
On September 12, 1997, the United States District Court for the Northern
District of Alabama, Southern Division, entered an order certifying
James Brown as the representative of a class consisting of "[a]ll
African-Americans who applied but were not hired for, were discouraged
from applying for, or would have applied for the position of Sales Agent
in the absence of the discriminatory practices, and/or procedures in the
[former] Southern Region of The Equitable from May 16, 1987 to the
present." The second amended complaint in James W. Brown, on behalf of
others similarly situated v. The Equitable Life Assurance Society of the
United States, alleges, among other things, that Equitable Life
discriminated on the basis of race against African-American applicants
and potential applicants in hiring individuals as sales agents.
Plaintiffs seek a declaratory judgment and affirmative and negative
injunctive relief, including the payment of back-pay, pension and other
compensation. Although the outcome of any litigation cannot be predicted
with certainty, the Company's management believes that the ultimate
resolution of this matter should not have a
SAI-100
<PAGE>
material adverse effect on the financial position of the Company. The
Company's management cannot make an estimate of loss, if any, or predict
whether or not such matter will have a material adverse effect on the
Company's results of operations in any particular period.
The U.S. Department of Labor ("DOL") is conducting an investigation of
Equitable Life's management of the Prime Property Fund ("PPF"). PPF is
an open-end, commingled real estate separate account of Equitable Life
for pension clients. Equitable Life serves as investment manager in PPF
and retains EREIM as advisor. Equitable Life agreed to indemnify the
purchaser of EREIM (which Equitable Life sold in June 1997) with respect
to any fines, penalties and rebates to clients in connection with this
investigation. In early 1995, the DOL commenced a national investigation
of commingled real estate funds with pension investors, including PPF.
The investigation appears to be focused principally on appraisal and
valuation procedures in respect of fund properties. The most recent
request from the DOL seems to reflect, at least in part, an interest in
the relationship between the valuations for those properties reflected
in appraisals prepared for local property tax proceedings and the
valuations used by PPF for other purposes. At no time has the DOL made
any specific allegation that Equitable Life or EREIM has acted
improperly and Equitable Life and EREIM believe that any such allegation
would be without foundation. While the outcome of this investigation
cannot be predicted with certainty, the Company's management believes
that the ultimate resolution of this matter should not have a material
adverse effect on the financial position of the Company. The Company's
management cannot make an estimate of loss, if any, or predict whether
or not this investigation will have a material adverse effect on the
Company's results of operations in any particular period.
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Complaint") was filed against Alliance North American Government
Income Trust, Inc. (the "Fund"), Alliance and certain other defendants
affiliated with Alliance, including the Holding Company, alleging
violations of Federal securities laws, fraud and breach of fiduciary
duty in connection with the Fund's investments in Mexican and Argentine
securities. The Complaint, which sought certification of a plaintiff
class of persons who purchased or owned Class A, B or C shares of the
Fund from March 27, 1992 through December 23, 1994, sought an
unspecified amount of damages, costs, attorneys' fees and punitive
damages. The principal allegations are that the Fund purchased debt
securities issued by the Mexican and Argentine governments in amounts
that were not permitted by the Fund's investment objective, and that
there was no shareholder vote to change the investment objective to
permit purchases in such amounts. The Complaint further alleged that the
decline in the value of the Mexican and Argentine securities held by the
Fund caused the Fund's net asset value to decline to the detriment of
the Fund's shareholders. On September 26, 1996, the United States
District Court for the Southern District of New York granted the
defendants' motion to dismiss all counts of the Complaint ("First
Decision"). On October 11, 1996, plaintiffs filed a motion for
reconsideration of the First Decision. On November 25, 1996, the court
denied plaintiffs' motion for reconsideration of the First Decision. On
October 29, 1997, the United States Court of Appeals for the Second
Circuit issued an order granting defendants' motion to strike and
dismissing plaintiffs' appeal of the First Decision. On October 29,
1996, plaintiffs filed a motion for leave to file an amended complaint.
The principal allegations of the proposed amended complaint are that (i)
the Fund failed to hedge against the risks of investing in foreign
securities despite representations that it would do so, (ii) the Fund
did not properly disclose that it planned to invest in mortgage-backed
derivative securities and (iii) two advertisements used by the Fund
misrepresented the risks of investing in the Fund. On July 15, 1997, the
District Court denied plaintiffs' motion for leave to file an amended
complaint and ordered that the case be dismissed ("Second Decision").
The plaintiffs have appealed the Second Decision to the United States
Court of Appeals for the Second Circuit. While the ultimate outcome of
this matter cannot be determined at this time, management of Alliance
does not expect that it will have a material adverse effect on
Alliance's results of operations or financial condition.
SAI-101
<PAGE>
On January 26, 1996, a purported purchaser of certain notes and warrants
to purchase shares of common stock of Rickel Home Centers, Inc.
("Rickel") filed a class action complaint against Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC") and certain other defendants
for unspecified compensatory and punitive damages in the U. S. District
Court for the Southern District of New York. The suit was brought on
behalf of the purchasers of 126,457 units consisting of $126,457,000
aggregate principal amount of 13 1/2% senior notes due 2001 and 126,457
warrants to purchase shares of common stock of Rickel issued by Rickel
in October 1994. The complaint alleges violations of federal securities
laws and common law fraud against DLJSC, as the underwriter of the units
and as an owner of 7.3% of the common stock of Rickel, Eos Partners,
L.P., and General Electric Capital Corporation, each as owners of 44.2%
of the common stock of Rickel, and members of the board of directors of
Rickel, including a DLJSC managing director. The complaint seeks to hold
DLJSC liable for alleged misstatements and omissions contained in the
prospectus and registration statement filed in connection with the
offering of the units, alleging that the defendants knew of financial
losses and a decline in value of Rickel in the months prior to the
offering and did not disclose such information. The complaint also
alleges that Rickel failed to pay its semi-annual interest payment due
on the units on December 15, 1995, and that Rickel filed a voluntary
petition for reorganization pursuant to Chapter 11 of the Bankruptcy
Code on January 10, 1996. DLJSC intends to defend itself vigorously
against all of the allegations contained in the complaint. Although
there can be no assurance, DLJ does not believe that the outcome of this
litigation will have a material adverse effect on its financial
condition. Due to the early stage of this litigation, based on the
information currently available to it, DLJ's management cannot make an
estimate of loss, if any, or predict whether or not such litigation will
have a material adverse effect on DLJ's results of operations in any
particular period.
In October 1995, DLJSC was named as a defendant in a purported class
action filed in a Texas State Court on behalf of the holders of $550.0
million principal amount of subordinated redeemable discount debentures
of National Gypsum Corporation ("NGC") canceled in connection with a
Chapter 11 plan of reorganization for NGC consummated in July 1993. The
named plaintiff in the State Court action also filed an adversary
proceeding in the U.S. Bankruptcy Court for the Northern District of
Texas seeking a declaratory judgment that the confirmed NGC plan of
reorganization does not bar the class action claims. Subsequent to the
consummation of NGC's plan of reorganization, NGC's shares traded for
values substantially in excess of, and in 1995 NGC was acquired for a
value substantially in excess of, the values upon which NGC's plan of
reorganization was based. The two actions arise out of DLJSC's
activities as financial advisor to NGC in the course of NGC's Chapter 11
reorganization proceedings. The class action complaint alleges that the
plan of reorganization submitted by NGC was based upon projections by
NGC and DLJSC which intentionally understated forecasts, and provided
misleading and incorrect information in order to hide NGC's true value
and that defendants breached their fiduciary duties by, among other
things, providing false, misleading or incomplete information to
deliberately understate the value of NGC. The class action complaint
seeks compensatory and punitive damages purportedly sustained by the
class. On October 10, 1997, DLJSC and others were named as defendants in
a new adversary proceeding in the Bankruptcy Court brought by the NGC
Settlement Trust, an entity created by the NGC plan of reorganization to
deal with asbestos-related claims. The Trust's allegations are
substantially similar to the claims in the State Court action. In court
papers dated October 16, 1997, the State Court plaintiff indicated that
he would intervene in the Trust's adversary proceeding. On January 21,
1998, the Bankruptcy Court ruled that the State Court plaintiff's claims
were not barred by the NGC plan of reorganization insofar as they
alleged nondisclosure of certain cost reductions announced by NGC in
October 1993. The Texas State Court action, which had been removed to
the Bankruptcy Court, has been remanded back to the state court, which
remand is being opposed by DLJSC. DLJSC intends to defend itself
vigorously against all of the allegations contained in the complaints.
Although there can be no assurance, DLJ does not believe that the
ultimate outcome of this litigation will have a material adverse effect
on its financial condition. Due to the early stage of such litigation,
based upon the
SAI-102
<PAGE>
information currently available to it, DLJ's management cannot make an
estimate of loss, if any, or predict whether or not such litigation will
have a material adverse effect on DLJ's results of operations in any
particular period.
In November and December 1995, DLJSC, along with various other parties,
was named as a defendant in a number of purported class actions filed in
the U.S. District Court for the Eastern District of Louisiana. The
complaints allege violations of the federal securities laws arising out
of a public offering in 1994 of $435.0 million of first mortgage notes
of Harrah's Jazz Company and Harrah's Jazz Finance Corp. The complaints
seek to hold DLJSC liable for various alleged misstatements and
omissions contained in the prospectus dated November 9, 1994. On
February 26, 1997, the parties agreed to a settlement of these actions,
subject to the District Court's approval, which was granted on July 31,
1997. The settlement is also subject to approval by the U.S. Bankruptcy
Court for the Eastern District of Louisiana of proposed modifications to
a confirmed plan of reorganization for Harrah's Jazz Company and
Harrah's Jazz Finance Corp., and the satisfaction or waiver of all
conditions to the effectiveness of the plan, as provided in the plan.
There can be no assurance of the Bankruptcy Court's approval of the
modifications to the plan of reorganization, or that the conditions to
the effectiveness of the plan will be satisfied or waived. In the
opinion of DLJ's management, the settlement, if approved, will not have
a material adverse effect on DLJ's results of operations or on its
consolidated financial condition.
In addition to the matters described above, Equitable Life and its
subsidiaries and DLJ and its subsidiaries are involved in various legal
actions and proceedings in connection with their businesses. Some of the
actions and proceedings have been brought on behalf of various alleged
classes of claimants and certain of these claimants seek damages of
unspecified amounts. While the ultimate outcome of such matters cannot
be predicted with certainty, in the opinion of management no such matter
is likely to have a material adverse effect on the Company's
consolidated financial position or results of operations.
15) LEASES
The Company has entered into operating leases for office space and
certain other assets, principally data processing equipment and office
furniture and equipment. Future minimum payments under noncancelable
leases for 1998 and the succeeding four years are $93.5 million, $84.4
million, $70.2 million, $56.4 million, $47.0 million and $489.3 million
thereafter. Minimum future sub-lease rental income on these
noncancelable leases for 1998 and the succeeding four years are $7.3
million, $5.9 million, $3.8 million, $2.4 million, $.8 million and $2.9
million thereafter.
At December 31, 1997, the minimum future rental income on noncancelable
operating leases for wholly owned investments in real estate for 1997
and the succeeding four years are $247.0 million, $238.1 million, $218.7
million, $197.9 million, $169.1 million and $813.0 million thereafter.
SAI-103
<PAGE>
16) OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Compensation costs................................. $ 721.5 $ 704.8 $ 628.4
Commissions........................................ 409.6 329.5 314.3
Short-term debt interest expense................... 31.7 8.0 11.4
Long-term debt interest expense.................... 121.2 137.3 108.1
Amortization of policy acquisition costs........... 287.3 405.2 317.8
Capitalization of policy acquisition costs......... (508.0) (391.9) (391.0)
Rent expense, net of sub-lease income.............. 101.8 113.7 109.3
Cursitor intangible assets writedown............... 120.9 - -
Other.............................................. 917.9 769.1 677.5
----------------- ---------------- -----------------
Total.............................................. $ 2,203.9 $ 2,075.7 $ 1,775.8
================= ================ =================
</TABLE>
During 1997, 1996 and 1995, the Company restructured certain operations
in connection with cost reduction programs and recorded pre-tax
provisions of $42.4 million, $24.4 million and $32.0 million,
respectively. The amounts paid during 1997, associated with cost
reduction programs, totaled $22.8 million. At December 31, 1997, the
liabilities associated with cost reduction programs amounted to $62.0
million. The 1997 cost reduction program include costs related to
employee termination and exit costs. The 1996 cost reduction program
included restructuring costs related to the consolidation of insurance
operations' service centers. The 1995 cost reduction program included
relocation expenses, including the accelerated amortization of building
improvements associated with the relocation of the home office.
Amortization of DAC in 1996 included a $145.0 million writeoff of DAC
related to DI contracts.
17) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION
Equitable Life is restricted as to the amounts it may pay as dividends
to the Holding Company. Under the New York Insurance Law, the
Superintendent has broad discretion to determine whether the financial
condition of a stock life insurance company would support the payment of
dividends to its shareholders. For 1997, 1996 and 1995, statutory net
loss totaled $351.7 million, $351.1 million and $352.4 million,
respectively. No amounts are expected to be available for dividends from
Equitable Life to the Holding Company in 1998.
At December 31, 1997, the Insurance Group, in accordance with various
government and state regulations, had $19.7 million of securities
deposited with such government or state agencies.
Accounting practices used to prepare statutory financial statements for
regulatory filings of stock life insurance companies differ in certain
instances from GAAP. The following reconciles the Insurance Group's
statutory change in surplus and capital stock and statutory surplus and
capital stock determined in accordance with accounting practices
prescribed by the New York Insurance Department with net earnings and
equity on a GAAP basis.
SAI-104
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Net change in statutory surplus and
capital stock.................................... $ 203.6 $ 56.0 $ 78.1
Change in asset valuation reserves................. 147.1 (48.4) 365.7
----------------- ---------------- -----------------
Net change in statutory surplus, capital stock
and asset valuation reserves..................... 350.7 7.6 443.8
Adjustments:
Future policy benefits and policyholders'
account balances............................... (31.1) (298.5) (66.0)
DAC.............................................. 220.7 (13.3) 73.2
Deferred Federal income taxes.................... 103.1 108.0 (158.1)
Valuation of investments......................... 46.8 289.8 189.1
Valuation of investment subsidiary............... (555.8) (117.7) (188.6)
Limited risk reinsurance......................... 82.3 92.5 416.9
Issuance of surplus notes........................ - - (538.9)
Postretirement benefits.......................... (3.1) 28.9 (26.7)
Other, net....................................... 30.3 12.4 115.1
GAAP adjustments of Closed Block................. 3.6 (9.8) 15.7
GAAP adjustments of discontinued operations...... 189.7 (89.6) 37.3
----------------- ---------------- -----------------
Net Earnings of the Insurance Group................ $ 437.2 $ 10.3 $ 312.8
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Statutory surplus and capital stock................ $ 2,462.5 $ 2,258.9 $ 2,202.9
Asset valuation reserves........................... 1,444.6 1,297.5 1,345.9
----------------- ---------------- -----------------
Statutory surplus, capital stock and asset
valuation reserves............................... 3,907.1 3,556.4 3,548.8
Adjustments:
Future policy benefits and policyholders'
account balances............................... (1,336.1) (1,305.0) (1,006.5)
DAC.............................................. 3,236.6 3,104.9 3,075.8
Deferred Federal income taxes.................... (370.8) (306.1) (452.0)
Valuation of investments......................... 783.5 286.8 417.7
Valuation of investment subsidiary............... (1,338.6) (782.8) (665.1)
Limited risk reinsurance......................... (254.2) (336.5) (429.0)
Issuance of surplus notes........................ (539.0) (539.0) (538.9)
Postretirement benefits.......................... (317.5) (314.4) (343.3)
Other, net....................................... 203.7 126.3 4.4
GAAP adjustments of Closed Block................. 814.3 783.7 830.8
GAAP adjustments of discontinued operations...... 71.5 (190.3) (184.6)
----------------- ---------------- -----------------
Equity of the Insurance Group...................... $ 4,860.5 $ 4,084.0 $ 4,258.1
================= ================ =================
</TABLE>
SAI-105
<PAGE>
18) BUSINESS SEGMENT INFORMATION
The Company has two major business segments: Insurance Operations and
Investment Services. Interest expense related to debt not specific to
either business segment is presented as Corporate interest expense.
Information for all periods is presented on a comparable basis.
Insurance Operations offers a variety of traditional, variable and
interest-sensitive life insurance products, disability income, annuity
products, mutual fund and other investment products to individuals and
small groups and administers traditional participating group annuity
contracts with conversion features, generally for corporate qualified
pension plans, and association plans which provide full service
retirement programs for individuals affiliated with professional and
trade associations. This segment includes Separate Accounts for
individual insurance and annuity products.
Investment Services provides investment fund management, primarily to
institutional clients. This segment includes the Company's equity
interest in DLJ and Separate Accounts which provide various investment
options for group clients through pooled or single group accounts.
Intersegment investment advisory and other fees of approximately $81.9
million, $127.5 million and $124.1 million for 1997, 1996 and 1995,
respectively, are included in total revenues of the Investment Services
segment. These fees, excluding amounts related to the GIC Segment of
$5.1 million, $15.7 million and $14.7 million for 1997, 1996 and 1995,
respectively, are eliminated in consolidation.
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ---------------- -----------------
(In Millions)
<S> <C> <C> <C>
Revenues
Insurance operations............................... $ 3,684.2 $ 3,770.6 $ 3,614.6
Investment services................................ 1,455.1 1,126.1 949.1
Consolidation/elimination.......................... (19.9) (24.5) (34.9)
----------------- ---------------- -----------------
Total.............................................. $ 5,119.4 $ 4,872.2 $ 4,528.8
================= ================ =================
Earnings (loss) from continuing operations before Federal income taxes,
minority interest and cumulative effect of accounting change
Insurance operations............................... $ 250.3 $ (36.6) $ 303.1
Investment services................................ 485.7 311.9 224.0
Consolidation/elimination.......................... - .2 (3.1)
----------------- ---------------- -----------------
Subtotal..................................... 736.0 275.5 524.0
Corporate interest expense......................... (65.3) (66.9) (27.9)
----------------- ---------------- -----------------
Total.............................................. $ 670.7 $ 208.6 $ 496.1
================= ================ =================
</TABLE>
SAI-106
<PAGE>
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996
---------------- -----------------
(In Millions)
<S> <C> <C>
Assets
Insurance operations................................................... $ 68,305.9 $ 60,464.9
Investment services.................................................... 13,719.8 13,542.5
Consolidation/elimination.............................................. (403.6) (399.6)
---------------- -----------------
Total.................................................................. $ 81,622.1 $ 73,607.8
================ =================
</TABLE>
19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations for 1997 and 1996, are summarized
below:
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- ----------------- ------------------ ------------------
(In Millions)
<S> <C> <C> <C> <C>
1997
Total Revenues................ $ 1,266.0 $ 1,552.8 $ 1,279.0 $ 1,021.6
================= ================= ================== ==================
Earnings from Continuing
Operations before
Cumulative Effect
of Accounting Change........ $ 117.4 $ 222.5 $ 145.1 $ 39.4
================= ================= ================== ==================
Net Earnings (Loss)........... $ 114.1 $ 223.1 $ 144.9 $ (44.9)
================= ================= ================== ==================
1996
Total Revenues................ $ 1,176.5 $ 1,199.4 $ 1,198.4 $ 1,297.9
================= ================= ================== ==================
Earnings (Loss) from
Continuing Operations
before Cumulative Effect
of Accounting Change........ $ 94.8 $ 87.1 $ 93.2 $ (157.9)
================= ================= ================== ==================
Net Earnings (Loss)........... $ 71.7 $ 87.1 $ 93.2 $ (241.7)
================= ================= ================== ==================
</TABLE>
Net earnings for the three months ended December 31, 1997 includes a
charge of $212.0 million related to additions to valuation allowances on
and writeoffs of real estate of $225.2 million, and reserve
strengthening on discontinued operations of $84.3 million offset by a
reversal of prior years tax reserves of $97.5 million. Net earnings for
the three months ended December 31, 1996 includes a charge of $339.3
million related to writeoffs of DAC on DI contracts of $94.3 million and
reserve strengthenings on DI business of $113.7 million, Pension Par of
$47.5 million and Discontinued Operations of $83.8 million.
SAI-107
<PAGE>
20) INVESTMENT IN DLJ
At December 31, 1997, the Company's ownership of DLJ interest was
approximately 34.4%. The Company's ownership interest will be further
reduced upon the issuance of common stock after the vesting of
forfeitable restricted stock units acquired by and/or the exercise of
options granted to certain DLJ employees. DLJ restricted stock units
represents forfeitable rights to receive approximately 5.2 million
shares of DLJ common stock through February 2000.
The results of operations of DLJ are accounted for on the equity basis
and are included in commissions, fees and other income in the
consolidated statements of earnings. The Company's carrying value of DLJ
is included in investment in and loans to affiliates in the consolidated
balance sheets.
Summarized balance sheets information for DLJ, reconciled to the
Company's carrying value of DLJ, are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996
---------------- -----------------
(In Millions)
<S> <C> <C>
Assets:
Trading account securities, at market value............................ $ 16,535.7 $ 15,728.1
Securities purchased under resale agreements........................... 22,628.8 20,598.7
Broker-dealer related receivables...................................... 28,159.3 16,858.8
Other assets........................................................... 3,182.0 2,318.1
---------------- -----------------
Total Assets........................................................... $ 70,505.8 $ 55,503.7
================ =================
Liabilities:
Securities sold under repurchase agreements............................ $ 36,006.7 $ 29,378.3
Broker-dealer related payables......................................... 25,706.1 19,409.7
Short-term and long-term debt.......................................... 3,670.6 2,704.5
Other liabilities...................................................... 2,860.9 2,164.0
---------------- -----------------
Total liabilities...................................................... 68,244.3 53,656.5
DLJ's company-obligated mandatorily redeemed preferred
securities of subsidiary trust holding solely debentures of DLJ...... 200.0 200.0
Total shareholders' equity............................................. 2,061.5 1,647.2
---------------- -----------------
Total Liabilities, Cumulative Exchangeable Preferred Stock and
Shareholders' Equity................................................. $ 70,505.8 $ 55,503.7
================ =================
DLJ's equity as reported............................................... $ 2,061.5 $ 1,647.2
Unamortized cost in excess of net assets acquired in 1985
and other adjustments................................................ 23.5 23.9
The Holding Company's equity ownership in DLJ.......................... (740.2) (590.2)
Minority interest in DLJ............................................... (729.3) (588.6)
---------------- -----------------
The Company's Carrying Value of DLJ.................................... $ 615.5 $ 492.3
================ =================
</TABLE>
SAI-108
<PAGE>
Summarized statements of earnings information for DLJ reconciled to the
Company's equity in earnings of DLJ is as follows:
<TABLE>
<CAPTION>
1997 1996
---------------- -----------------
(In Millions)
<S> <C> <C>
Commission, fees and other income...................................... $ 2,356.8 $ 1,818.2
Net investment income.................................................. 1,652.1 1,074.2
Dealer, trading and investment gains, net.............................. 631.6 598.4
---------------- -----------------
Total revenues......................................................... 4,640.5 3,490.8
Total expenses including income taxes.................................. 4,232.3 3,199.5
---------------- -----------------
Net earnings........................................................... 408.2 291.3
Dividends on preferred stock........................................... 12.1 18.7
---------------- -----------------
Earnings Applicable to Common Shares................................... $ 396.1 $ 272.6
================ =================
DLJ's earnings applicable to common shares as reported................. $ 396.1 $ 272.6
Amortization of cost in excess of net assets acquired in 1985.......... (1.3) (3.1)
The Holding Company's equity in DLJ's earnings......................... (156.8) (107.8)
Minority interest in DLJ............................................... (109.1) (73.4)
---------------- -----------------
The Company's Equity in DLJ's Earnings................................. $ 128.9 $ 88.3
================ =================
</TABLE>
21) ACCOUNTING FOR STOCK-BASED COMPENSATION
The Holding Company sponsors a stock option plan for employees of
Equitable Life. DLJ and Alliance each sponsor their own stock option
plans for certain employees. The Company has elected to continue to
account for stock-based compensation using the intrinsic value method
prescribed in APB No. 25. Had compensation expense for the Holding
Company, DLJ and Alliance Stock Option Incentive Plan options been
determined based on SFAS No. 123's fair value based method, the
Company's pro forma net earnings for 1997, 1996 and 1995 would have
been:
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C>
Net Earnings:
As Reported............................................. $ 437.2 $ 10.3 $ 312.8
Pro Forma............................................... $ 426.3 $ 3.3 $ 311.3
</TABLE>
SAI-109
<PAGE>
The fair value of options granted after December 31, 1994, used as a
basis for the above pro forma disclosures, was estimated as of the date
of grants using the Black-Scholes option pricing model. The option
pricing assumptions for 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Holding Company DLJ Alliance
------------------------------ ------------------------------- ----------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
-------------------- --------- ---------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend yield.... 0.48% 0.80% 0.96% 0.86% 1.54% 1.85% 8.00% 8.00% 8.00%
Expected volatility 20.00% 20.00% 20.00% 33.00% 25.00% 25.00% 26.00% 23.00% 23.00%
Risk-free interest
rate............ 5.99% 5.92% 6.83% 5.96% 6.07% 5.86% 5.70% 5.80% 6.00%
Expected life..... 5 years 5 years 5 years 5 years 5 years 5 years 7.6 years 7.43 years 7.43 years
Weighted average
grant-date fair
value per option $12.25 $6.94 $5.90 $22.45 $9.35 $7.36 $4.36 $2.69 $2.24
</TABLE>
A summary of the Holding Company, DLJ and Alliance's option plans is as
follows:
<TABLE>
<CAPTION>
Holding Company DLJ Alliance
----------------------------- ----------------------------- -----------------------------
Options Options Options
Outstanding Outstanding Outstanding
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Units Exercise
(In Millions) Price (In Millions) Price (In Millions) Price
--------------- ------------- --------------- ------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1995........ 6.8 $20.31 - 3.8 $15.46
Granted................ .4 $20.27 9.2 $27.00 1.8 $20.54
Exercised.............. (.1) $20.00 - (.5) $11.20
Expired................ (.1) $20.00 - -
Forfeited.............. (.3) $22.24 - (.3) $16.64
--------------- ------------- ---------------
Balance as of
December 31, 1995...... 6.7 $20.27 9.2 $27.00 4.8 $17.72
Granted................ .7 $24.94 2.1 $32.54 .7 $25.12
Exercised.............. (.1) $19.91 - (.4) $13.64
Expired................ - - -
Forfeited.............. (.6) $20.21 (.2) $27.00 (.1) $19.32
--------------- ------------- ---------------
</TABLE>
SAI-110
<PAGE>
<TABLE>
<CAPTION>
Holding Company DLJ Alliance
----------------------------- ----------------------------- -----------------------------
Options Options Options
Outstanding Outstanding Outstanding
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Units Exercise
(In Millions) Price (In Millions) Price (In Millions) Price
--------------- ------------- --------------- ------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of
December 31, 1996...... 6.7 $20.79 11.1 $28.06 5.0 $19.07
Granted................ 3.2 $41.85 3.2 $61.07 1.1 $36.56
Exercised.............. (1.6) $20.26 (.1) $32.03 (.6) $16.11
Forfeited.............. (.4) $23.43 (.1) $27.51 (.2) $21.28
--------------- ------------- ---------------
Balance as of
December 31, 1997...... 7.9 $29.05 14.1 $35.56 5.3 $22.82
=============== ============= ===============
</TABLE>
Information about options outstanding and exercisable at December 31,
1997 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- ------------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices (In Millions) Life (Years) Price (In Millions) Price
--------------------- ----------------- ----------------- --------------- ------------------- ----------------
Holding
Company
----------------------
<S> <C> <C> <C> <C> <C>
$18.125 -$27.75 4.8 5.84 $20.94 3.0 $20.41
$28.50 -$45.25 3.1 9.57 $41.84 - -
----------------- -------------------
$18.125 -$45.25 7.9 7.29 $29.05 3.0 $20.41
================= ================= =============== =================== ================
DLJ
----------------------
$27.00 -$35.99 10.9 8.0 $28.05 4.9 $27.58
$36.00 -$50.99 .8 9.3 $40.04 - -
$51.00 -$76.00 2.4 9.8 $67.77 - -
----------------- -------------------
$27.00 -$76.00 14.1 8.4 $35.56 4.9 $27.58
================= ================= ================ =================== =================
Alliance
----------------------
$ 6.0625 -$17.75 1.1 3.86 $13.20 1.0 $13.04
$19.375 -$19.75 .8 7.34 $19.39 .3 $19.39
$19.875 -$21.375 1.1 8.28 $20.13 .6 $20.19
$22.25 -$27.50 1.3 9.81 $23.81 .4 $23.29
$36.9375 -$37.5625 1.0 9.95 $36.95 - -
----------------- -------------------
$ 6.0625 -$37.5625 5.3 7.58 $22.82 2.3 $17.43
================= ================== ============== ====================== =============
</TABLE>
SAI-111
<PAGE>
Supplement dated May 1, 1998 to Prospectus dated May 1, 1998
------------------------------------------------------------------------
MEMBERS RETIREMENT PROGRAMS
funded under contracts with
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
1290 Avenue of the Americas, New York, New York 10104
Toll-Free Telephone 800-223-5790
----------------------------------
VARIABLE ANNUITY BENEFITS
----------------------------------
This Prospectus Supplement should be read and retained for
future reference by Participants in the Members Retirement
Programs who are considering variable
annuity payment benefits after retirement.
This Prospectus Supplement is not authorized for
distribution unless accompanied or preceded by
the Prospectus dated May 1, 1998 for the
appropriate Members Retirement Program.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS: ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
<PAGE>
RETIREMENT BENEFITS
When you become eligible to receive benefits under a Members
Retirement Program, you may select one or more of the following forms of
distribution, which are available in variable or fixed form. The law requires
that if the value of your Account Balance is more than $5,000, you must receive
a Qualified Joint and Survivor Annuity unless your Spouse consents to a
different election.
Life Annuity - annuity providing monthly payments for your life. No
payments will be made after your death, even if you have received only one
payment.
Life Annuity Period Certain - an annuity providing monthly payments
for your life or, if longer, a specified period of time. If you die before the
end of that specified period, payments will continue to your beneficiary until
the end of the period. Subject to legal limitations, you may specify a minimum
payment period of 5, 10, 15 or 20 years; the longer the specified period, the
smaller the monthly payments will be.
Joint and Survivor Annuity - Period Certain - an annuity providing
monthly payments for your life and that of your beneficiary or, if longer, a
specified period of time. If you and your beneficiary both die before the end
of the specified period, payments will continue to your contingent beneficiary
until the end of the period. Subject to legal limitations, you may specify a
minimum payment period of 5, 10, 15 or 20 years; the longer the specified
period, the smaller the monthly payments will be.
How Annuity Payments are Made
When your distribution of benefits under an annuity begins, your Units
in the Funds are redeemed. Part or all of the proceeds, plus part or all of
your Account Balance in the General Account Options, may be used to purchase an
annuity. The minimum amount that can be used to purchase any type of annuity is
$5,000. Usually, a $350 charge will be deducted from the amount used to
purchase the annuity to reimburse us for administrative expenses associated
with processing the application and with issuing each month's annuity payment.
Applicable premium taxes will also be deducted.
Annuity payments may be fixed or variable.
FIXED ANNUITY PAYMENTS. Fixed annuity payments are determined from our
annuity rate tables in effect at the time the first annuity payment is
made. The minimum amount of the fixed payments is determined from
tables in our contract with the Trustees, which show the amount of
proceeds necessary to purchase each $1 of monthly annuity payments
(after deduction of any applicable taxes and the annuity
administrative charge). These tables are designed to determine the
amounts required to pay for the annuity selected, taking into account
our administrative and investment expenses and mortality and expense
risks. The size of your payment will depend upon the form of annuity
chosen, your age and the
2
<PAGE>
age of your beneficiary if you select a joint and survivor annuity.
If our current group annuity rates for payment of proceeds would
produce a larger payment, those rates will apply instead of the
minimums in the contract tables. If we give any group pension client
with a qualified plan a better annuity rate than those currently
available for the Program, we will also make those rates available to
Program participants. The annuity administrative charge may be
greater than $350 in that case. Under our contract with the Trustees,
we may change the tables but not more frequently than once every five
years. Fixed annuity payments will not fluctuate during the payment
period.
VARIABLE ANNUITY PAYMENTS. Variable annuity payments are funded
through our Separate Account No. 4 (Pooled) (the "Fund"), through the
purchase of Annuity Units. The number of Annuity Units purchased is
equal to the amount o the first annuity payment divided by the Annuity
Unit Value for the due date of the first annuity payment. The amount
of the first annuity payment is determined in the same manner for a
variable annuity as it is for a fixed annuity. The number of Annuity
Units stays the same throughout the payment period for the variable
annuity but the Annuity Unit Value changes to reflect the investment
income and the realized and unrealized capital gains and losses of the
Fund, after adjustment for an assumed base rate of return of 5-3/4%,
described below.
The amounts of variable annuity payments are determined as follows:
Payments normally start as of the first day of the second calendar month
following our receipt of the proper forms. The first two monthly payments are
the same.
Payments after the first two will vary according to the investment
performance of the Fund. Each monthly payment will be calculated by multiplying
the number of Annuity Units credited to you by the Annuity Unit Value for the
first business day of the calendar month before the due date of the payment.
The Annuity Unit Value was set at $1.1553 as of July 1, 1969, the
first day that Separate Account No. 4 (Pooled) was operational. For any month
after that date, it is the Annuity Unit Value for the preceding month
multiplied by the change factor for the current month. The change factor gives
effect to the assumed annual base rate of return of 4-3/4% and to the actual
investment experience of the Fund.
Because of the adjustment for the assumed base rate of return, the
Annuity Unit Value rises and falls depending on whether the actual rate of
investment return is higher or lower than 5-3/4%.
Illustration of Changes in Annuity Payments. To show how we determine
variable annuity payments from month to month, assume that the amount you
applied to purchase an annuity is enough to fund an annuity with a monthly
payment of $363 and that the Annuity Unit Value for the due date of the first
annuity payment is $1.05. The number of annuity units credited under your
certificate would be 345.71 (363 divided by 1.05 = 345.71). If the
3
<PAGE>
third monthly payment is due on March 1, and the Annuity Unit Value for
February was $1.10, the annuity payment for March would be the number of units
(345.71) times the Annuity Unit Value ($1.10), or $380.28. If the Annuity Unit
Value was $1.00 on March 1, the annuity payment for April would be 345.71 times
$1.00 or $345.71.
Summary of Annuity Unit Values for the Fund
This table shows the Annuity Unit Values with an assumed based rate of
return of 5-3/4%.
First Business Day of Annuity Unit Value
--------------------- ------------------
October 1987 $4.3934
October 1988 $3.5444
October 1989 $4.8357
October 1990 $3.8569
October 1991 $5.4677
October 1992 $5.1818
October 1993 $6.3886
October 1994 $6.1563
October 1995 $7.4970
October 1996 $8.0828
October 1997 $11.0300
THE FUND
The Fund (Separate Account No. 4 (Pooled)) was established pursuant to
the Insurance law of the State of New York in 1969. It is an investment account
used to fund benefits under group annuity contracts and other agreements for
tax-deferred retirement programs administered by us.
For a full description of the fund, its investment policies, the risks
of an investment in the Fund and information relating to the valuation of Fund
assets, see the description of the Fund in our May 1, 1998 prospectus and the
Statement of Additional Information.
INVESTMENT MANAGER
The Manager
We, Equitable Life, act as Investment Manager to the Fund. As such, we
have complete discretion over Fund assets and we invest and reinvest these
assets in accordance with the investment policies described in our May 1, 1998
prospectus and Statement of Additional Information.
4
<PAGE>
We are a New York stock life insurance company with our Home Office at
1290 Avenue of the Americas, New York, New York 10104. Founded in 1859, we are
one of the largest insurance companies in the United States. Equitable Life,
our sole stockholder Equitable Companies, Inc., and their subsidiaries managed
assets of approximately $274.1 billion as of December 31, 1997, including third
party assets of $216.9 billion.
Investment Management
In providing investment management to the funds, we currently use the
personnel and facilities of our majority owned subsidiary, Alliance Capital
Management L.P. ("Alliance"), for portfolio selection and transaction services.
For a description of Alliance, see our May 1, 1998 Members Retirement Program
prospectus.
Fund Transactions
The Fund is charged for securities brokers commissions, transfer taxes
and other fees relating to securities transactions. Transactions in equity
securities for the Fund are executed primarily through brokers which are
selected by Alliance/Equitable Life and receive commissions paid by the Fund.
For 1997, 1996 and 1995, the Fund paid $3,698,148, $4,682,578 and $6,044,623,
respectively, in brokerage commissions. For a full description of our policies
relating to the selection of brokers, see the description of the fund in our
May 1, 1998 Statement of Additional Information.
5
<PAGE>
FINANCIAL STATEMENTS
The financial statements of the Fund reflect applicable fees,
charges and other expenses under the Members Programs as in effect during the
periods covered, as well as the charges against the account made in accordance
with the terms of all other contracts participating in the account.
Separate Account No. 4 (Pooled): Page
Report of Independent Accountants - Price Waterhouse LLP 7
Statement of Assets and Liabilities,
December 31, 1997 8
Statement of Operations and Changes in Net Assets
for the Years Ended December 31, 1997 and 1996 9
Portfolio of Investments
December 31, 1997 10
Notes to Financial Statements 15
6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Equitable Life Assurance Society of the United States
and the Contractowners of Separate Account No. 4
of The Equitable Life Assurance Society of the United States:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and changes in net assets and the selected per unit data (included
under Condensed Financial Information in the prospectus of Members Retirement
Program) present fairly, in all material respects, the financial position of
Separate Account No. 4 (Pooled) (The Growth Equity Fund) of The Equitable Life
Assurance Society of the United States ("Equitable Life") at December 31, 1997
and its results of operations, the changes in net assets for each of the two
years in the period then ended and the selected per unit data for the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and the selected per unit data (hereafter referred to as
"financial statements") are the responsibility of Equitable Life's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1997 by correspondence with the custodian and
brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 10, 1998
7
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED) (THE ALLIANCE GROWTH EQUITY FUND)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Assets and Liabilities
December 31, 1997
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments (Notes 2 and 3):
Common stocks--at market value (cost: $1,945,635,407)......................... $2,635,013,465
Preferred stocks--at market value (cost: $1,742,250).......................... 2,777,625
Long-Term debt securities--at value (amortized cost: $3,016,327) ............. 2,728,125
Participation in Separate Account No. 2A--at amortized cost, which
approximates market value, equivalent to 100,276 units at $270.27 .......... 27,101,569
Cash............................................................................ 64,818
Receivables:
Securities sold.............................................................. 15,688,292
Dividends.................................................................... 1,062,061
----------------------------------------------------------------------------------------------
Total assets................................................................ 2,684,435,955
----------------------------------------------------------------------------------------------
LIABILITIES:
Payables:
Securities purchased.......................................................... 6,071,076
Due to Equitable Life's General Account....................................... 32,755,106
Investment management fees payable............................................ 7,455
Accrued expenses................................................................ 525,753
Accrued retained by Equitable Life in Separate Account No. 4 (Note 1) .......... 1,095,138
- -----------------------------------------------------------------------------------------------
Total liabilities........................................................... 40,454,528
- -----------------------------------------------------------------------------------------------
NET ASSETS (NOTE 1):
Net assets attributable to participants' accumulations.......................... 2,611,671,263
Reserves and other liabilities attributable to annuity benefits................. 32,310,164
- -----------------------------------------------------------------------------------------------
NET ASSETS...................................................................... $2,643,981,427
===============================================================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS:
INVESTMENT INCOME (NOTE 2):
Dividends (net of foreign taxes withheld--1997: $2,138 and 1996: $62,998) ...... $ 13,385,197 $ 13,755,557
Interest........................................................................ 845,517 292,364
- ---------------------------------------------------------------------------------------------------------------
Total........................................................................... 14,230,714 14,047,921
EXPENSES (NOTE 4)............................................................... (19,783,932) (18,524,630)
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS............................................................. (5,553,218) (4,476,709)
- ---------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 2):
Realized gain from security and foreign currency transactions................... 372,430,956 218,176,662
- ---------------------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments and foreign currency
transactions:
Beginning of year............................................................. 448,580,808 290,870,386
End of year................................................................... 690,125,231 448,580,808
- ---------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation/depreciation.................................. 241,544,423 157,710,422
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................................. 613,975,379 375,887,084
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets attributable to operations............................... 608,422,161 371,410,375
- ---------------------------------------------------------------------------------------------------------------
FROM CONTRIBUTIONS AND WITHDRAWALS:
Contributions................................................................... 546,890,479 552,427,638
Withdrawals..................................................................... (969,496,108) (590,972,941)
- ---------------------------------------------------------------------------------------------------------------
Decrease in net assets attributable to contributions and withdrawals ........... (422,605,629) (38,545,303)
- ---------------------------------------------------------------------------------------------------------------
(Increase) Decrease in accumulated amount retained by Equitable Life in
Separate Account No. 4 (Note 1)............................................... (360,863) 536,145
- ---------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS.......................................................... 185,455,669 333,401,217
NET ASSETS--BEGINNING OF YEAR................................................... 2,458,525,758 2,125,124,541
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS--END OF YEAR......................................................... $2,643,981,427 $2,458,525,758
===============================================================================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- -------------------------------------------------------------------------------
COMMON STOCKS:
BUSINESS SERVICES:
ENVIRONMENTAL CONTROL (0.6%)
United States Filter Corp.* ......................... 554,700 $ 16,606,331
-------------
PROFESSIONAL SERVICES (0.3%)
Corrections Corp. of America*........................ 185,000 6,856,562
-------------
TRUCKING, SHIPPING (0.2%)
Knightsbridge Tankers, Ltd........................... 150,000 4,246,875
OMI Corp.*........................................... 264,000 2,425,500
-------------
6,672,375
-------------
TOTAL BUSINESS SERVICES (1.1%) ...................... 30,135,268
-------------
CONSUMER CYCLICALS
AIRLINES (9.0%)
America West Holdings Corp. (Class B)*............... 542,200 10,098,475
Continental Airlines, Inc. (Class B)*................ 2,600,000 125,125,000
KLM Dutch Airlines................................... 280,000 10,570,000
Northwest Airlines Corp. (Class A)*.................. 1,900,000 90,962,500
Southwest Airlines Co................................ 50,000 1,231,250
-------------
237,987,225
-------------
APPAREL, TEXTILE (0.2%)
Tommy Hilfiger Corp.*................................ 100,000 3,512,500
Wolverine World Wide, Inc............................ 91,000 2,058,875
-------------
5,571,375
-------------
AUTO-RELATED (6.3%)
Republic Industries, Inc.*........................... 7,100,000 165,518,750
-------------
FOOD SERVICES, LODGING (1.9%)
Extended Stay America, Inc.*......................... 1,400,000 17,412,500
Host Marriott Corp.*................................. 1,675,000 32,871,875
Suburban Lodges of America, Inc.*.................... 70,000 931,875
-------------
51,216,250
-------------
HOUSEHOLD FURNITURE, APPLIANCES (0.8%)
Industrie Natuzzi Spa (ADR).......................... 1,011,000 20,851,875
-------------
LEISURE-RELATED (1.3%)
Cendant Corporation.................................. 1,000,000 34,375,000
-------------
RETAIL--GENERAL (0.8%)
Circuit City Stores--Circuit City Group ............. 400,000 14,225,000
Limited, Inc......................................... 300,000 7,650,000
-------------
21,875,000
-------------
TOTAL CONSUMER CYCLICALS (20.3%) .................... 537,395,475
-------------
10
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- -------------------------------------------------------------------------------
CONSUMER NONCYCLICALS
DRUGS (3.6%)
Centocor, Inc.*...................................... 1,230,700 $ 40,920,775
Geltex Pharmaceuticals, Inc.*........................ 700,000 18,550,000
Genzyme Corporation*................................. 100,000 2,775,000
IDEC Pharmaceuticals Corp.*.......................... 75,600 2,598,750
MedImmune, Inc.*..................................... 736,800 31,590,300
--------------
96,434,825
--------------
FOODS (0.2%)
Tysons Foods, Inc.................................... 228,100 4,676,050
--------------
TOBACCO (4.4%)
Loews Corp........................................... 1,100,000 116,737,500
--------------
TOTAL CONSUMER NONCYCLICALS (8.2%) .................. 217,848,375
--------------
CREDIT-SENSITIVE
BANKS (0.2%)
Chase Manhattan Corp................................. 40,000 4,380,000
--------------
FINANCIAL SERVICES (15.0%)
A.G. Edwards, Inc. .................................. 700,000 27,825,000
Green Tree Financial Corp............................ 54,200 1,419,362
Legg Mason, Inc...................................... 1,200,031 67,126,734
MBNA Corp............................................ 4,800,000 131,100,000
Merrill Lynch & Co., Inc............................. 1,400,000 102,112,500
Morgan Stanley, Dean Witter, Discover & Co. ......... 1,000,000 59,125,000
PMI Group, Inc....................................... 100,000 7,231,250
--------------
395,939,846
--------------
INSURANCE (13.1%)
CNA Financial Corp.*................................. 1,700,000 217,175,000
IPC Holdings Ltd..................................... 207,400 6,675,687
Life Re Corporation.................................. 721,000 47,000,188
NAC Re Corp.......................................... 538,700 26,295,294
Travelers Group, Inc................................. 950,000 51,181,250
--------------
348,327,419
--------------
REAL ESTATE (0.4%)
Excel Realty Trust, Inc.............................. 140,000 4,410,000
Imperial Credit Commercial Mortgage Investment
Corp................................................. 25,000 365,625
Imperial Credit Mortgage Holdings.................... 187,500 3,351,562
Novastar Financial, Inc.............................. 75,000 1,185,938
--------------
9,313,125
--------------
11
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- -------------------------------------------------------------------------------
UTILITY--TELEPHONE (8.7%)
Telebras Sponsored (ADR)............................. 250,000 $ 29,109,375
Telephone & Data Systems, Inc........................ 4,000,000 186,250,000
Teleport Communications Group, Inc. (Class A)* ...... 300,000 16,462,500
--------------
231,821,875
--------------
TOTAL CREDIT-SENSITIVE (37.4%) ...................... 989,782,265
--------------
ENERGY
OIL--DOMESTIC (0.0%)
Apache Corp.......................................... 15,000 525,938
--------------
OIL--INTERNATIONAL (0.3%)
Gulf Canada Resources Ltd.*.......................... 750,000 5,250,000
IRI International Corporation*....................... 150,000 2,100,000
Petroleo Brasileiro S.A. (ADR)....................... 50,000 1,169,330
--------------
8,519,330
--------------
OIL--SUPPLIES & CONSTRUCTION (15.3%)
Baker Hughes, Inc. .................................. 555,000 24,211,875
BJ Services Co.*..................................... 15,000 1,079,063
Diamond Offshore Drilling, Inc. ..................... 860,000 41,387,500
Dresser Industries, Inc. ............................ 170,000 7,129,375
Halliburton Co. ..................................... 1,400,000 72,712,500
Lukoil Holdings--Spons (ADR)......................... 15,000 1,377,375
Lukoil Holdings--Spons (ADR)(Pref. Shares) .......... 40,000 1,241,576
Nabors Industries, Inc.*............................. 435,000 13,675,312
Noble Drilling Corp.*................................ 1,300,000 39,812,500
Oceaneering International, Inc.*..................... 300,000 5,925,000
Parker Drilling Co.*................................. 5,500,000 67,031,250
Rowan Cos., Inc.*.................................... 3,500,000 106,750,000
Schlumberger, Ltd.................................... 270,000 21,735,000
--------------
404,068,326
--------------
TOTAL ENERGY (15.6%) ................................ 413,113,594
--------------
TECHNOLOGY
ELECTRONICS (2.7%)
Altera Corp.*........................................ 100,000 3,312,500
DBT Online, Inc.*.................................... 160,000 3,990,000
Network Associates, Inc.*............................ 400,000 21,150,000
Sterling Commerce, Inc.* ............................ 650,000 24,984,375
Teradyne, Inc.*...................................... 290,000 9,280,000
U.S. Satellite Broadcasting Co., Inc.*............... 40,000 317,500
Xilinx, Inc.*........................................ 250,000 8,765,625
--------------
71,800,000
--------------
12
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
- -------------------------------------------------------------------------------
NUMBER OF VALUE
SHARES (NOTE 3)
- -------------------------------------------------------------------------------
OFFICE EQUIPMENT SERVICES (0.1%)
CheckFree Holdings Corp.*............................ 100,000 $ 2,700,000
------------
TELECOMMUNICATIONS (14.1%)
ADC Telecommunications, Inc.*........................ 860,000 35,905,000
American Satellite Network--Rights*.................. 70,000 0
Bell Canada International, Inc.*..................... 25,000 381,250
Core Communications, Inc.*........................... 504,000 5,103,000
DSC Communications Corp.*............................ 450,000 10,800,000
MCI Communications Corp.............................. 300,000 12,843,750
Millicom International Cellular S.A.*................ 1,515,000 57,001,875
Nextel Communications, Inc. (Class A)*............... 485,000 12,610,000
Nokia Corp.--Sponsored (A Shares)(ADR)............... 260,000 18,200,000
Powertel, Inc.*...................................... 73,300 1,227,775
Tellabs, Inc.*....................................... 100,000 5,287,500
United States Cellular Corp.*........................ 2,915,400 90,377,400
Vanguard Cellular Systems, Inc. (Class A)* .......... 2,200,000 28,050,000
WorldCom, Inc.*...................................... 3,100,000 93,775,000
------------
371,562,550
------------
TOTAL TECHNOLOGY (16.9%) ............................ 446,062,550
------------
DIVERSIFIED
MISCELLANEOUS (0.2%)
Viad Corp. .......................................... 35,000 675,938
------------
TOTAL DIVERSIFIED (0.2%) ............................ 675,938
------------
TOTAL COMMON STOCKS (99.7%)
(Cost $1,945,635,407) .............................. 2,635,013,465
------------
PREFERRED STOCKS:
CONSUMER CYCLICALS
AIRLINES (0.1%)
Continental Airlines Financial Trust 8.5% Conv. ..... 27,000 2,777,625
------------
TOTAL CONSUMER CYCLICALS (0.1%) ..................... 2,777,625
------------
TOTAL PREFERRED STOCKS (0.1%)
(Cost $1,742,250) .................................. 2,777,625
------------
13
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Portfolio of Investments (Continued)
December 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 3)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG-TERM DEBT SECURITIES:
TECHNOLOGY:
TELECOMMUNICATIONS (0.1%)
United States Cellular Corp.
Zero Coupon Conv., 2015 ................................................ $7,500,000 $ 2,728,125
--------------
TOTAL TECHNOLOGY (0.1%) ................................................. 2,728,125
--------------
TOTAL LONG-TERM DEBT SECURITIES (0.1%)
(Amortized Cost $3,016,327) ............................................ 2,728,125
--------------
PARTICIPATION IN SEPARATE ACCOUNT NO. 2A,
at amortized cost, which approximates
market value, equivalent to 100,276 units
at $270.27 each (1.0%) ................................................. 27,101,569
--------------
TOTAL INVESTMENTS (100.9%)
(Cost/Amortized Cost $1,977,495,553) ................................... 2,667,620,784
OTHER ASSETS LESS LIABILITIES (-0.9%) ................................... (22,544,219)
AMOUNT RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT NO. 4 (0.0%)(NOTE 1) .................................. (1,095,138)
--------------
NET ASSETS (100.0%) ..................................................... 2,643,981,427
--------------
Reserves attributable to participants' accumulations .................... 2,611,671,263
Reserves and other contract liabilities attributable to annuity benefits 32,310,164
--------------
NET ASSETS .............................................................. $2,643,981,427
==============
</TABLE>
* Non-income producing.
See Notes to Financial Statements.
14
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements
1. Separate Account No. 4 (Pooled) (the Growth Equity Fund) (the Fund) of
The Equitable Life Assurance Society of the United States (Equitable Life), a
wholly-owned subsidiary of The Equitable Companies Incorporated, was
established in conformity with the New York State Insurance Law. Pursuant to
such law, to the extent provided in the applicable contracts, the net assets
in the Fund are not chargeable with liabilities arising out of any other
business of Equitable Life. The excess of assets over reserves and other
contract liabilities amounting to $1,095,138 as shown in the Statements of
Assets and Liabilities in Separate Account No. 4 may be transferred to
Equitable Life's General Account.
Interests of retirement and investment plans for Equitable Life employees,
managers, and agents in Separate Account No. 4 aggregated $384,471,790.19
(14.5%), at December 31, 1997 and $288,921,270 (11.8%), at December 31, 1996,
of the net assets in the Fund.
Equitable Life is the investment manager for the Fund. Alliance Capital
Management L.P. (Alliance) serves as the investment adviser to Equitable Life
with respect to the management of the Fund. Alliance is a publicly-traded
limited partnership which is indirectly majority-owned by Equitable Life.
Equitable Life and Alliance seek to obtain the best price and execution of
all orders placed for the Fund considering all circumstances. In addition to
using brokers and dealers to execute portfolio security transactions for
accounts under their management, Equitable Life and Alliance may also enter
into other types of business and securities transactions with brokers and
dealers, which will be unrelated to allocation of the Fund's portfolio
transactions.
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Security transactions are recorded on the trade date. Amortized cost of
debt securities consists of cost adjusted, where applicable, for amortization
of premium or accretion of discount. Dividend income is recorded on the
ex-dividend date; interest income (including amortization of premium and
discount on securities using the effective yield method) is accrued daily.
Realized gains and losses on the sale of investments are computed on the
basis of the identified cost of the related investments sold.
Transactions denominated in foreign currencies are recorded at the rate
prevailing at the date of such transactions. Asset and liability accounts
that are denominated in a foreign currency are adjusted to reflect the
current exchange rate at the end of the period. Transaction gains or losses
resulting from changes in the exchange rate during the reporting period or
upon settlement of the foreign currency transactions are reflected under
"Realized and Unrealized Gain (Loss) on Investments" in the Statements of
Operations and Changes in Net Assets.
15
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements (Continued)
Equitable Life's internal short-term investment account, Separate Account
No. 2A, was established to provide a more flexible and efficient vehicle to
combine and invest temporary cash positions of certain eligible accounts
(Participating Funds) under Equitable Life's management. Separate Account No.
2A invests in debt securities maturing in sixty days or less from the date of
acquisition. At December 31, 1997, the amortized cost of investments held in
Separate Account No. 2A consists of the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
AMORTIZED COST %
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper, 5.70%-6.75%, due 01/02/98 through 02/12/98 .......... $210,793,367 94.7%
Bankers' Acceptances, 5.65%-5.73% due 01/16/98 through 01/26/98........ 9,474,385 4.3
- -------------------------------------------------------------------------------------------------
Total Investments...................................................... 220,267,752 99.0
Cash and Receivables Less Liabilities.................................. 2,244,569 1.0
- -------------------------------------------------------------------------------------------------
Net Assets of Separate Account No. 2A.................................. $222,512,321 100.0%
=================================================================================================
Units Outstanding...................................................... 823,297
Unit Value............................................................. $270.27
- -------------------------------------------------------------------------------------------------
</TABLE>
Participating Funds purchase or redeem units depending on each
participating account's excess cash availability or cash needs to meet its
liabilities. Separate Account No. 2A is not subject to investment management
fees. Separate Account No. 2A is valued daily at amortized cost, which
approximates market value.
For 1997 and 1996, investment security transactions, excluding short-term
debt securities, were as follows:
- -------------------------------------------------------------------------------
SEPARATE ACCOUNT NO. 4
------------------------------
COST OF NET PROCEEDS
PURCHASES OF SALES
- -------------------------------------------------------------------------------
Stocks and long-term corporate debt securities:
1997.......................................... $1,569,991,103 $1,988,739,298
1996.......................................... 2,439,864,229 2,487,456,851
U.S. Government obligations:
1997.......................................... -- --
1996.......................................... -- --
- -------------------------------------------------------------------------------
3. Investment securities are valued as follows:
Stocks listed on national securities exchanges and certain
over-the-counter issues traded on the National Association of Securities
Dealers, Inc. Automated Quotation (NASDAQ) national market system are valued
at the last sale price, or, if no sale, at the latest available bid price.
Foreign securities not traded directly, or in American Depository Receipt
(ADR) form in the United States, are valued at the last sale price in the
local currency on an exchange in the country of origin. Foreign currency is
converted into its U.S. dollar equivalent at current exchange rates.
United States Treasury securities and other obligations issued or
guaranteed by the United States Government, its agencies or instrumentalities
are valued at representative quoted prices.
16
<PAGE>
SEPARATE ACCOUNT NO. 4 (POOLED)
OF THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Notes to Financial Statements (Continued)
Long-term publicly traded corporate bonds are valued at prices obtained
from a bond pricing service of a major dealer in bonds when such prices are
available; however, in circumstances where Equitable Life and Alliance deem
it appropriate to do so, an over-the-counter or exchange quotation may be
used.
Convertible preferred stocks listed on national securities exchanges are
valued at their last sale price or, if there is no sale, at the latest
available bid price.
Convertible bonds and unlisted convertible preferred stocks are valued at
bid prices obtained from one or more major dealers in such securities; where
there is a discrepancy between dealers, values may be adjusted based on
recent premium spreads to the underlying common stock.
Other assets that do not have a readily available market price are valued
at fair value as determined in good faith by Equitable Life's investment
officers.
Separate Account No. 2A is valued daily at amortized cost, which
approximates market value. Short-term debt securities purchased directly by
the Funds which mature in 60 days or less are valued at amortized cost.
Short-term debt securities which mature in more than 60 days are valued at
representative quoted prices.
4. Charges and fees are deducted in accordance with the terms of the various
contracts which participate in the Fund. With respect to the Members Retirement
Program, these expenses consist of investment management and accounting fees,
program expense charge, direct expenses and record maintenance and report fee.
These charges and fees are paid to Equitable Life by the Fund and are recorded
as expenses in the accompanying Statements of Operations and Changes in Net
Assets.
5. No Federal income tax based on net income or realized and unrealized
capital gains was applicable to contracts participating in the Fund for the
two years ended December 31, 1997, by reason of applicable provisions of the
Internal Revenue Code and no Federal income tax payable by Equitable Life for
such years will affect such contracts. Accordingly, no Federal income tax
provision is required.
17
