Rule 497(d)
File Number 33-83948
PROSPECTUS
Incentive Life Plus(TM)
SEPTEMBER 15, 1995
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
<PAGE>
INCENTIVE LIFE
PLUS(TM)
Prospectus Dated September 15, 1995
Incentive Life Plus is a flexible premium variable life insurance policy issued
by Equitable Variable Life Insurance Company (Equitable Variable), a
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States (Equitable).
The policy offers flexible premium payments, a choice of two death benefit
options, increases and decreases to the policy's Face Amount of insurance and a
choice of funding options, including a guaranteed interest option and the
following thirteen investment portfolios:
<TABLE>
<C> <C> <C>
o Money Market o Equity Index Asset Allocation Series:
o Intermediate Government Securities o Common Stock o Conservative Investors
o Quality Bond o Global o Balanced
o High Yield o International o Growth Investors
o Growth & Income o Aggressive Stock
</TABLE>
We do not guarantee the investment performance of these investment portfolios,
which involve varying degrees of risk.
Although premiums are flexible, additional premiums may be required to keep the
policy in effect. The policy may terminate if its value (net of any policy loan
and surrender charge) is too small to pay the policy's monthly charges. The
policy can be guaranteed to stay in force regardless of investment performance
through the death benefit guarantee provision (if available in your state).
You can borrow against or withdraw money from the policy, within limits. Loans
and withdrawals will reduce the policy's death benefit and cash surrender value.
You can also surrender the policy. A surrender charge will apply if you
surrender the policy during the first fifteen policy years or within fifteen
years after certain Face Amount increases. This charge may also apply if you
reduce the Face Amount or if the policy terminates.
Your Equitable agent can provide you with information about all forms of life
insurance available from us and Equitable and help you decide which may best
meet your needs. Replacing existing insurance with an Incentive Life Plus or
other policy may not be to your advantage.
You may examine the policy for a limited period and cancel it for a full refund
of premiums paid.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS CONTAINS INFORMATION THAT SHOULD BE KNOWN BEFORE INVESTING IN
INCENTIVE LIFE PLUS. THIS PROSPECTUS IS NOT VALID UNLESS IT IS ATTACHED TO A
CURRENT PROSPECTUS FOR THE HUDSON RIVER TRUST.
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.
Copyright 1995 Equitable Variable Life Insurance Company. All rights reserved.
VM 511
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF INCENTIVE LIFE PLUS FEATURES................................1
PART 1 -- DETAILED INFORMATION ABOUT EQUITABLE VARIABLE AND
INCENTIVE LIFE PLUS INVESTMENT CHOICES.......................5
THE COMPANY THAT ISSUES INCENTIVE LIFE PLUS..................5
Equitable Variable.........................................5
Our Parent, Equitable......................................5
THE SEPARATE ACCOUNT AND THE TRUST...........................5
The Separate Account.......................................5
The Trust..................................................5
The Trust's Investment Adviser.............................5
Investment Policies Of The Trust's Portfolios..............6
THE GUARANTEED INTEREST ACCOUNT..............................7
Adding Interest In The Guaranteed Interest Account ........7
Transfers Out Of The Guaranteed Interest Account...........8
PART 2 -- DETAILED INFORMATION ABOUT INCENTIVE LIFE PLUS...............8
FLEXIBLE PREMIUMS............................................8
Planned Periodic Premiums And Specified Premiums...........8
Premium And Monthly Charge Allocations.....................8
DEATH BENEFITS...............................................9
Guaranteeing The Death Benefit.............................9
CHANGES IN INSURANCE PROTECTION..............................9
Changing The Face Amount...................................9
Changing The Death Benefit Option.........................10
Substitution Of Insured Person............................10
When Policy Changes Go Into Effect........................11
MATURITY BENEFIT............................................11
LIVING BENEFIT OPTION.......................................11
ADDITIONAL BENEFITS MAY BE AVAILABLE........................11
YOUR POLICY ACCOUNT VALUE...................................11
Amounts In The Separate Account...........................12
How We Determine The Unit Value...........................12
Transfers Of Policy Account Value.........................12
Automatic Transfer Service................................12
Telephone Transfers.......................................12
Charge For Transfers......................................13
BORROWING FROM YOUR POLICY ACCOUNT..........................13
How To Request A Loan.....................................13
Policy Loan Interest......................................13
When Interest Is Due......................................13
Repaying The Loan.........................................13
The Effects Of A Policy Loan..............................14
PARTIAL WITHDRAWALS AND SURRENDER...........................14
Partial Withdrawals.......................................14
Surrender For Net Cash Surrender Value....................14
DEDUCTIONS AND CHARGES......................................14
Deductions From Premiums..................................14
Deductions From Your Policy Account.......................15
Charges Against The Separate Account......................16
Trust Charges.............................................16
Surrender Charges.........................................16
ADDITIONAL INFORMATION ABOUT INCENTIVE LIFE PLUS............18
Your Policy Can Terminate.................................18
You May Restore A Policy After It Terminates..............18
Policy Periods, Anniversaries, Dates And Ages.............18
TAX EFFECTS.................................................19
Policy Proceeds...........................................19
Diversification...........................................20
Policy Changes............................................20
Tax Changes...............................................20
Estate And Generation Skipping Taxes......................20
Pension And Profit-Sharing Plans..........................21
Other Employee Benefit Programs...........................21
Our Taxes.................................................21
When We Withhold Income Taxes.............................21
PART 3 -- ADDITIONAL INFORMATION......................................21
YOUR VOTING PRIVILEGES......................................21
Trust Voting Privileges...................................21
How We Determine Your Voting Shares.......................21
Separate Account Voting Rights............................22
OUR RIGHT TO CHANGE HOW WE OPERATE..........................22
OUR REPORTS TO POLICYOWNERS.................................22
LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY.................22
YOUR PAYMENT OPTIONS........................................22
YOUR BENEFICIARY............................................23
ASSIGNING YOUR POLICY.......................................23
WHEN WE PAY POLICY PROCEEDS.................................23
DIVIDENDS...................................................23
REGULATION..................................................23
SPECIAL CIRCUMSTANCES.......................................23
DISTRIBUTION................................................24
LEGAL PROCEEDINGS...........................................24
ACCOUNTING AND ACTUARIAL EXPERTS............................24
ADDITIONAL INFORMATION......................................24
MANAGEMENT..................................................25
PART 4 -- ILLUSTRATIONS OF POLICY BENEFITS............................27
SEPARATE ACCOUNT FP FINANCIAL STATEMENTS...........................FSA-1
EQUITABLE VARIABLE FINANCIAL STATEMENTS..............................F-1
APPENDIX A -- COMMUNICATING PERFORMANCE DATA.........................A-1
LONG-TERM MARKET TRENDS................................A-1
--------------------------------------------------------------------------------
In this prospectus "we," "our" and "us" mean Equitable Variable, a New York
stock life insurance company. "You" and "your" mean the owner of the policy. We
refer to the person who is covered by the policy as the "insured person" because
the insured person and the policyowner may not be the same. Unless indicated
otherwise, the discussion in this prospectus assumes that there is no policy
loan outstanding and that the policy is not in a grace period.
THE POLICY IS NOT AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. EQUITABLE VARIABLE DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN
AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED SUPPLEMENT THERETO OR IN ANY
SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY EQUITABLE VARIABLE.
<PAGE>
WHAT IS VARIABLE LIFE INSURANCE?
Variable life insurance is one kind of permanent cash value life insurance. Like
other kinds of permanent cash value life insurance, such as whole life and
universal life insurance, variable life insurance generally provides two
benefits: an income tax-free death benefit and a cash value that grows
tax-deferred.
What sets variable life insurance apart from universal life and whole life is
that variable life insurance allows the policyowner to direct premiums to
different mutual fund options. This enables a policyowner to harness the growth
potential of, for example, the equity markets, but the policyowner also bears
the risk of investment losses. In contrast, whole life insurance provides a
minimum guaranteed cash value and universal life applies a minimum guaranteed
interest rate to premiums.
Some variable life insurance policies offer some of the other features of
universal or whole life such as premium flexibility (universal life), face
amount increases (universal life) or death benefit guarantees (whole life).
Equitable Variable and its parent, Equitable, offer an array of permanent cash
value insurance products and your Equitable agent can help you determine which
product best suits your insurance needs.
SUMMARY OF INCENTIVE LIFE PLUS FEATURES
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE TERMS OF THE POLICY
WHEN ISSUED AND THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS (SEE TABLE OF CONTENTS ON OPPOSITE PAGE).
PUTTING MONEY INTO THE POLICY
FLEXIBLE PREMIUMS
o Premiums may be invested whenever and in whatever amount you determine,
within limits. Other than the initial premium, there are no scheduled or
required premium payments (however, under certain conditions, additional
premiums may be needed to keep a policy in effect). See FLEXIBLE PREMIUMS on
page 8.
POLICY ACCOUNT
o Net premiums are put in your Policy Account and can be allocated to a
Guaranteed Interest Account and to one or more funds of Equitable Variable's
Separate Account FP (each a Fund, and together, the Funds or the Separate
Account). The Funds invest in corresponding portfolios of The Hudson River
Trust (Trust), a mutual fund. See THE SEPARATE ACCOUNT and THE TRUST, both on
page 5.
o Transfers can be made among the various funding options, BUT TRANSFERS OUT OF
THE GUARANTEED INTEREST ACCOUNT CAN ONLY BE MADE DURING A LIMITED TIME AND IN
LIMITED AMOUNTS. See TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT on page
8 for a description of these limitations. Transfers into the Guaranteed
Interest Account and among the Funds may generally be made at any time and
are subject to certain minimum transfer amounts. See TRANSFERS OF POLICY
ACCOUNT VALUE on page 12.
o There is no minimum guaranteed cash value for amounts allocated to the Funds.
The value of amounts allocated to the Guaranteed Interest Account will depend
on the interest rates declared and guaranteed each year by Equitable Variable
(4% minimum). See THE GUARANTEED INTEREST ACCOUNT on page 7.
TAKING MONEY OUT OF THE POLICY
o Loans may be taken against 90% of a policy's Cash Surrender Value (Policy
Account value less any applicable surrender charge) subject to certain
conditions. Loan interest accrues daily at a rate determined annually.
Currently, amounts set aside to secure the loan earn interest at a rate 1%
lower than the rate charged for policy loan interest. See BORROWING FROM YOUR
POLICY ACCOUNT on page 13.
o Partial Withdrawals of Net Cash Surrender Value (Cash Surrender Value less
any loan and accrued loan interest) may be taken after the first policy year,
subject to our approval and certain conditions. See PARTIAL WITHDRAWALS on
page 14.
o The policy may be surrendered for its Net Cash Surrender Value, less any lien
securing a Living Benefit payment, at which time insurance coverage will end.
See SURRENDER FOR NET CASH SURRENDER VALUE on page 14.
INSURANCE PROTECTION FEATURES
DEATH BENEFITS
o Option A, a fixed benefit equal to the policy's Face Amount.
o Option B, a variable benefit equal to the Face Amount plus the Policy Account
value.
o In some cases a higher death benefit may apply in order to meet Federal
income tax law requirements. See DEATH BENEFITS on page 9.
o After the first policy year, you can increase the Face Amount. After the
second policy year, you can decrease the Face Amount or change your death
benefit option. Conditions apply to Face Amount and death benefit option
changes. The minimum Face Amount is generally $50,000. See CHANGES IN
INSURANCE PROTECTION on page 9.
o After the second policy year, you may be able to substitute the insured
person. See SUBSTITUTION OF INSURED PERSON on page 10.
DEATH BENEFIT GUARANTEE
o The death benefit guarantee provision guarantees that, under certain
conditions, the policy will remain in force even if the Net Cash Surrender
Value is too small to pay the monthly policy charges. The death benefit
guarantee provision is not available in some states, including New York. In
those states a 3-Year no lapse guarantee provision will apply. See
GUARANTEEING THE DEATH BENEFIT on page 9 for a description of these
provisions and the conditions that apply.
MATURITY BENEFIT
o A maturity benefit equal to the amount in your Policy Account, less any
policy loan, any lien securing a Living Benefit payment and accrued interest,
is payable on the policy anniversary nearest the insured person's 100th
birthday (Final Policy Date), if the insured person is still living on that
date. See MATURITY BENEFIT on page 11.
1
<PAGE>
LIVING BENEFIT
o The Living Benefit rider enables the policyowner to receive a portion of the
policy's death benefit (excluding death benefits payable under certain
riders) if the insured person has a terminal illness. The Living Benefit
rider will be added to most policies at issue for no additional cost. See
LIVING BENEFIT OPTION on page 11.
ADDITIONAL BENEFITS
o Disability waiver; accidental death; term insurance, including term insurance
on an additional insured person, children's term insurance, and first-to-die
term insurance; option to purchase additional insurance; and designated
insured option riders are available. See ADDITIONAL BENEFITS MAY BE AVAILABLE
on page 11.
DEDUCTIONS AND CHARGES
FROM PREMIUMS (See DEDUCTIONS FROM PREMIUMS on page 14.)
o Applicable charges for taxes imposed by states and other jurisdictions. Such
taxes currently range from .75% to 5% (Virgin Islands).
o Premium Sales Charge ranging from 3% to 6% of premiums paid, depending upon
the Face Amount. Equitable Variable currently intends to stop deducting this
charge once premiums paid equal a specified amount.
FROM THE POLICY ACCOUNT (See DEDUCTIONS FROM YOUR POLICY ACCOUNT on page 15.)
o Administrative charge during the first or first and second policy years
ranging from $20 per month to $55 per month depending upon the initial Face
Amount and the insured person's age. During subsequent years, the monthly
administrative charge ranges from $6 to $8 (subject to $10 per month
maximum).
o Monthly cost of insurance charge and monthly charge for any additional
benefits.
o Transaction charges (for partial withdrawals, Face Amount increases,
substitution of insured person and certain transfers).
o Monthly death benefit guarantee charge equal to $.01 per $1,000 of Face
Amount including the face amount of any yearly renewable term rider on the
insured person. This charge will not apply under certain circumstances.
FROM THE SEPARATE ACCOUNT
o Current charge for certain mortality and expense risks equal to .60% per
annum (guaranteed not to exceed .90% per annum).
SURRENDER CHARGES (See SURRENDER CHARGES on page 16.)
o An Administrative Surrender Charge will apply during the first eight policy
years if you surrender the policy, reduce its Face Amount, or it terminates.
The Administrative Surrender Charge varies by issue age of the insured person
and the Face Amount, and will never be more than $3,000.
o A Premium Surrender Charge applies if the policy terminates, is surrendered
for its Net Cash Surrender Value or if the Face Amount is reduced during the
first fifteen policy years. The maximum charge is equal to 66% of one "target
premium." After the first nine policy years, the maximum charge declines on a
monthly basis until it reaches zero at the end of the fifteenth policy year.
o If you increase the policy's Face Amount, additional Surrender Charges will
generally apply to the amount of the increase for fifteen years beginning on
the effective date of increase.
FROM THE TRUST (See THE TRUST'S INVESTMENT ADVISER on page 5.)
o Trust shares are purchased by the Separate Account at net asset value which
reflects investment management fees and other direct expenses. Investment
management fees are charged at the maximum annual rates of .35% of net assets
for the Equity Index Portfolio, .40% for Common Stock, Money Market and
Balanced Portfolios; .50% for Aggressive Stock and Intermediate Government
Securities Portfolios; .55% for High Yield, Global, Conservative Investors,
Growth Investors, Quality Bond and the Growth & Income Portfolios; and .90%
for the International Portfolio.
VARIATIONS
o Equitable Variable is subject to the insurance laws and regulations in every
jurisdiction in which Incentive Life Plus is sold. As a result, various time
periods and other terms and conditions described in this prospectus may vary
from state to state. These variations will be reflected in the policy.
o The terms of Incentive Life Plus may also vary where special circumstances
result in a reduction in our costs.
o A modified version of Incentive Life Plus may be offered where certain
conditions are met.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
o You have a right to examine the policy. You may cancel the policy, within the
time limits described below, by sending it to our Administrative Office with
a written request to cancel. Insurance coverage ends when you send your
request.
o Your request to cancel the policy must be postmarked no later than the later
of: (i) 10 days after you receive the policy, (ii) 10 days after we mail a
written notice telling you about your rights to cancel, or (iii) 45 days
after you sign Part I of the policy application.
o If you cancel the policy, we will refund the premiums you paid. In certain
cases where the policy was purchased as a result of an exchange of one of our
life insurance policies, we may reinstate the prior policy.
2
<PAGE>
o There may be income tax and withholding implications if you cancel.
POLICY TERMINATION
o The policy will go into default if the Net Cash Surrender Value is
insufficient to cover monthly charges and the death benefit guarantee or the
3-Year no lapse guarantee provisions are not in effect. If this occurs, you
will be notified and given the opportunity to maintain the policy in force by
making additional payments. You may be able to restore a terminated policy
within a limited time period, but this will require additional evidence of
insurability. See YOUR POLICY CAN TERMINATE on page 18 and YOU MAY RESTORE A
POLICY AFTER IT TERMINATES on page 18.
TAX EFFECTS
o Generally, under current Federal income tax law, death benefits are not
subject to income tax and Policy Account earnings are not subject to income
tax as long as they remain in the Policy Account. Loans, partial withdrawals,
surrender, maturity, policy termination, or a substitution of insured may
result in recognition of income for tax purposes. See TAX EFFECTS on page 19.
HUDSON RIVER TRUST RATES OF RETURN
The rates of return shown below are based on the actual investment performance
of The Hudson River Trust portfolios, after deduction for investment management
fees and direct operating expenses of the Trust, for periods ending June 30,
1995. The historical performance of the Common Stock and Money Market Portfolios
for periods prior to March 22, 1985 has been adjusted to reflect current
investment management fees of .40% per annum and estimated direct operating
expenses of the Trust of .10% per annum. The Common Stock Portfolio and its
predecessors have been in existence since 1976. The yields shown below are
derived from the actual rate of return of the Trust portfolio for the period,
which is then adjusted to omit capital changes in the portfolio during the
period. We show the SEC standardized 7-day yield for the Money Market Portfolio
and 30-day yield for the Intermediate Government Securities, Quality Bond and
High Yield Portfolios.
These rates of return and yields are not illustrative of how actual investment
performance will affect the benefits under your policy. Moreover, these rates of
return and yields are not an estimate or guarantee of future performance.
THESE RATES OF RETURN AND YIELDS ARE FOR THE TRUST ONLY AND DO NOT REFLECT THE
ADMINISTRATIVE AND COST OF INSURANCE CHARGES, SALES CHARGES, PREMIUM TAX CHARGES
AND THE MORTALITY AND EXPENSE RISK CHARGE APPLICABLE UNDER AN INCENTIVE LIFE
PLUS POLICY. SUCH CHARGES WOULD REDUCE THE RETURNS AND YIELDS SHOWN. SEE
ILLUSTRATIONS OF INCENTIVE LIFE PLUS POLICY ACCOUNT AND CASH SURRENDER VALUES
BASED ON HISTORICAL INVESTMENT RESULTS BELOW.
<TABLE>
<CAPTION>
RATES OF RETURN FOR PERIODS ENDING JUNE 30, 1995
-------------------------------------------------------------------
SINCE
PORTFOLIO YIELDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 15 YEARS INCEPTION(a)
--------- ------ ------ ------- ------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Money Market .......................... 5.64% 5.34% 3.83% 4.74% 6.14% --% 7.48%
Intermediate Government Securities .... 6.28 9.09 5.92 -- -- -- 7.39
Quality Bond .......................... 5.86 11.69 -- -- -- -- 2.33
High Yield ............................ 11.09 9.66 11.59 12.43 -- -- 9.81
Growth & Income ....................... 14.12 -- -- -- -- 6.05
Equity Index .......................... 25.21 -- -- -- -- 15.41
Common Stock .......................... 21.45 15.64 12.77 15.27 15.91 14.53
Global ................................ 7.53 14.68 11.50 -- -- 10.68
International(b) ...................... -- -- -- -- -- 1.47(b)
Aggressive Stock ...................... 26.22 12.17 16.90 -- -- 19.37
The Asset Allocation Series:
Conservative Investors ................ 12.84 7.95 9.39 -- -- 9.15
Balanced .............................. 10.36 7.09 8.96 -- -- 11.75
Growth Investors ...................... 15.31 12.12 14.66 -- -- 15.49
<FN>
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(a) The International Portfolio received its initial funding on April 3,
1995; the Equity Index Portfolio received its initial funding on March 1,
1994; the Growth & Income and Quality Bond Portfolios on October 1, 1993;
the Intermediate Government Securities Portfolio on April 1, 1991; the
Conservative Investors and the Growth Investors Portfolios on October 2,
1989; the Global Portfolio on August 27, 1987; the High Yield Portfolio
on January 2, 1987; the Aggressive Stock and Balanced Portfolios on
January 27, 1986; the predecessor of the Money Market Portfolio on July
13, 1981; and the predecessor of the Common Stock Portfolio on January
13, 1976.
(b) Unannualized.
</FN>
</TABLE>
Additional investment performance information appears in the attached Trust
prospectus.
ILLUSTRATIONS OF POLICY ACCOUNT AND CASH SURRENDER VALUES BASED ON HISTORICAL
INVESTMENT RESULTS. The table on the next page was developed to demonstrate how
the actual investment experience of the Trust and its predecessors would have
affected the Policy Account value and Cash Surrender Value of hypothetical
Incentive Life Plus policies held for specified periods of time. The table
illustrates premiums, Policy Account values and Cash Surrender Values of twelve
hypothetical Incentive Life Plus policies, each with a 100% premium allocation
to a different Fund. The illustration also assumes that, in each case, the
insured is a 40-year-old male, preferred non-tobacco user and that each policy
has a level death benefit, a $300,000 face amount and a $4,000 annual premium.
The table assumes that each policy was purchased on the first day of a calendar
year. For Trust portfolios whose inception dates fall before June 30, the policy
is assumed to have been purchased at the beginning of and earned the actual
return over that entire calendar year. For Trust portfolios whose inception
dates fall after June 30, the policy is assumed to have been purchased at the
beginning of the first full calendar year of that portfolio's operation. Policy
values in the "Since Inception" column are for periods ended June 30, 1995.
Policy values reflect all charges assessed under the policy and by the Trust.
Where applicable, current charges have been used to determine policy values; if
guaranteed charges were used, the results would be lower.
3
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ILLUSTRATIONS OF INCENTIVE LIFE PLUS POLICY ACCOUNT AND CASH SURRENDER VALUES
BASED ON HISTORICAL INVESTMENT RESULTS, $300,000 OF INITIAL INSURANCE
PROTECTION AND CURRENT CHARGES
<TABLE>
<CAPTION>
AT THE END OF THE FIRST YEAR AT THE END OF THE FIFTH YEAR
------------------------------- ----------------------------------
TOTAL POLICY CASH TOTAL POLICY CASH
PREMIUM ACCOUNT SURRENDER PREMIUM ACCOUNT SURRENDER
PORTFOLIO PAID VALUE VALUE PAID VALUE VALUE
--------- ------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Money Market ............... $4,000 $2,786 $ 884 $20,000 $17,869 $15,527
Int. Gov't Securities ...... 4,000 2,759 857
Quality Bond ............... 4,000 2,239 337
High Yield ................. 4,000 2,535 633 20,000 18,443 16,101
Growth & Income ............ 4,000 2,375 473
Equity Index ...............
Common Stock ............... 4,000 2,671 769 20,000 26,674 24,332
Global ..................... 4,000 2,722 820 20,000 18,736 16,394
International
Aggressive Stock ........... 4,000 3,487 1,585 20,000 22,815 20,473
THE ASSET ALLOCATION SERIES:
----------------------------
Conservative Investors ..... 4,000 2,583 681 20,000 16,298 13,956
Balanced ................... 4,000 3,278 1,376 20,000 19,269 16,927
Growth Investors ........... 4,000 2,716 814 20,000 19,174 16,832
</TABLE>
<TABLE>
<CAPTION>
AT THE END OF THE TENTH YEAR POLICY OWNED SINCE PORTFOLIO'S INCEPTION
---------------------------------- ----------------------------------------
TOTAL POLICY CASH TOTAL POLICY CASH
PREMIUM ACCOUNT SURRENDER PREMIUM ACCOUNT SURRENDER
PORTFOLIO PAID VALUE VALUE PAID VALUE VALUE
--------- ------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Money Market ............... $40,000 $41,622 $39,797 $52,000 $ 53,934 $ 53,204
Int. Gov't Securities ...... 16,000 12,066 9,744
Quality Bond ............... 4,000 2,239 337
High Yield ................. 32,000 33,965 31,775
Growth & Income ............ 4,000 2,375 473
Equity Index ............... 4,000 2,654 752
Common Stock ............... 40,000 69,350 67,525 76,000 257,710 257,710
Global ..................... 28,000 32,567 30,197
International
Aggressive Stock ........... 36,000 64,736 62,546
THE ASSET ALLOCATION SERIES:
----------------------------
Conservative Investors ..... 20,000 16,298 13,956
Balanced ................... 36,000 38,571 36,381
Growth Investors ........... 20,000 19,174 16,832
</TABLE>
THE DEATH BENEFIT GUARANTEE / THREE YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS
POLICY WOULD BE $3,533.96.
THESE VALUES ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
4
<PAGE>
PART 1: DETAILED INFORMATION ABOUT EQUITABLE VARIABLE AND
INCENTIVE LIFE PLUS INVESTMENT CHOICES
THE COMPANY THAT ISSUES INCENTIVE LIFE PLUS
EQUITABLE VARIABLE. Equitable Variable was organized in 1972 in New York State
as a stock life insurance company. We are a wholly-owned subsidiary of The
Equitable Life Assurance Society of the United States. We are licensed to do
business in all 50 states, Puerto Rico, the Virgin Islands and the District of
Columbia. At December 31, 1994, we had approximately $125.8 billion face amount
of variable life insurance in force.
OUR PARENT, EQUITABLE. Equitable, a New York stock life insurance company, has
been in business since 1859. Equitable is a wholly-owned subsidiary of The
Equitable Companies Incorporated (the Holding Company). The largest stockholder
of the Holding Company is AXA, a French insurance holding company. AXA
beneficially owns 60.5% of the outstanding shares of common stock of the Holding
Company plus convertible preferred stock. Under its investment arrangements with
Equitable and the Holding Company, AXA is able to exercise significant influence
over the operations and capital structure of the Holding Company, Equitable and
their subsidiaries. AXA is the principal holding company for most of the
companies in one of the largest insurance groups in Europe. The majority of
AXA's stock is controlled by a group of five French mutual insurance companies.
Equitable, the Holding Company and their subsidiaries managed approximately
$174.5 billion as of December 31, 1994. Equitable's assets do not back the
benefits that we pay under our policies. Equitable's home office is 787 Seventh
Avenue, New York, New York 10019.
THE SEPARATE ACCOUNT AND THE TRUST
THE SEPARATE ACCOUNT. The Separate Account was established on April 19, 1985
under the Insurance Law of the State of New York. The Separate Account is a type
of investment company called a unit investment trust and is registered with the
Securities and Exchange Commission (SEC) under the Investment Company Act of
1940 (1940 Act). This registration does not involve any supervision by the SEC
of the management or investment policies of the Separate Account.
Under New York law, we own the assets of the Separate Account and use them to
support your policy and other variable life insurance policies. The portion of
the Separate Account's assets supporting these policies may not be used to
satisfy liabilities arising out of any other business we may conduct. This means
that the assets supporting Policy Account values maintained in the Separate
Account are not subject to the claims of our other creditors. We may also retain
in the Separate Account amounts owed to us for charges or other permitted
allocations. Because such retained amounts do not support Policy Account values,
we may transfer them from the Separate Account to our general account at our
discretion.
THE TRUST. The Separate Account has several funds, each of which invests in
shares of a corresponding portfolio of the Trust. The Trust is an open-end
diversified management investment company, more commonly called a mutual fund.
As a "series" type of mutual fund, it issues several different "series" of
stock, each of which relates to a different Trust portfolio with a different
investment policy. The Trust does not impose a sales charge or "load" for buying
and selling its shares. The Trust's shares are bought and sold by our Separate
Account at net asset value. The Trust's custodian is The Chase Manhattan Bank,
N.A.
The Trust sells its shares to separate accounts of insurance companies, both
affiliated and not affiliated with Equitable. We currently do not foresee any
disadvantages to our policyowners arising out of this. However, the Trust's
Board of Trustees intends to monitor events in order to identify any material
irreconcilable conflicts that possibly may arise and to determine what action,
if any, should be taken in response. If we believe that the Trust's response to
any of those events insufficiently protects our policyowners, we will see to it
that appropriate action is taken to do so. Also, if we ever believe that any of
the Trust's portfolios is so large as to materially impair the investment
performance of a portfolio or the Trust, we will examine other investment
options.
THE TRUST'S INVESTMENT ADVISER. The Trust is advised by Alliance Capital
Management L.P. (Alliance). Alliance is registered as an investment adviser
under the Investment Advisers Act of 1940. Alliance, a publicly-traded limited
partnership, is indirectly majority-owned by Equitable. Alliance's main office
is 1345 Avenue of the Americas, New York, New York 10105.
Alliance acts as an investment adviser to various separate accounts and general
accounts of Equitable 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. As of December 31, 1994, Alliance was managing
approximately $121.3 billion in assets.
The advisory fee payable by the Trust is based on the following annual
percentages of the value of each portfolio's daily average net assets:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
DAILY AVERAGE NET ASSETS
------------------------------------------
FIRST NEXT OVER
PORTFOLIO $350 MILLION $400 MILLION $750 MILLION
--------- ------------ ------------ ------------
<S> <C> <C> <C>
Common Stock, Money Market and Balanced ................... .400% .375% .350%
Aggressive Stock and Intermediate Government Securities ... .500% .475% .450%
High Yield, Global, Conservative Investors and
Growth Investors ....................................... .550% .525% .500%
-----------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
DAILY AVERAGE NET ASSETS
------------------------------------------
FIRST NEXT OVER
PORTFOLIO $500 MILLION $500 MILLION $1 BILLION
--------- ------------ ------------ ------------
<S> <C> <C> <C>
Quality Bond and Growth & Income........................... .550% .525% .500%
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
FIRST NEXT OVER
PORTFOLIO $750 MILLION $750 MILLION $1.5 BILLION
--------- ------------ ------------ ------------
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Index.............................................. .350% .300% .250%
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
FIRST NEXT OVER
PORTFOLIO $500 MILLION $1 BILLION $1.5 BILLION
--------- ------------ ------------ ------------
<S> <C> <C> <C>
International............................................. .900% .850% .800%
-----------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT POLICIES OF THE TRUST'S PORTFOLIOS. Each portfolio has a different
investment objective which it tries to achieve by following separate investment
policies. The objectives and policies of each portfolio will affect its return
and its risks. There is no guarantee that these objectives will be achieved. The
policies and objectives of the Trust's portfolios are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT POLICY OBJECTIVE
----------- -------------------- -----------
<S> <C> <C>
MONEY MARKET............ Primarily high quality short-term money market High level of current income while
instruments. preserving assets and maintaining
liquidity.
INTERMEDIATE............ Primarily debt securities issued or guaranteed by High current income consistent with
GOVERNMENT the U.S. Government, its agencies and relative stability of principal.
SECURITIES instrumentalities. Each investment will have a
final maturity of not more than 10 years or a
duration not exceeding that of a 10-year Treasury
note.
QUALITY BOND............ Primarily investment grade fixed-income securities. High current income consistent with
preservation of capital.
HIGH YIELD.............. Primarily a diversified mix of high yield, High return by maximizing current income
fixed-income securities involving greater and, to the extent consistent with that
volatility of price and risk of principal and objective, capital appreciation.
income than high quality fixed-income securities.
The medium and lower quality debt securities in
which the Portfolio may invest are known as "junk
bonds."
GROWTH & INCOME......... Primarily income producing common stocks and High total return through a combination
securities convertible into common stocks. of current income and capital
appreciation.
EQUITY INDEX............ Selected securities in the S&P's 500 Index (the Total return performance (before trust
"Index") which the adviser believes will, in the expenses) that approximates the
aggregate, approximate the performance results of investment performance of the Index
the Index. (including reinvestment of dividends) at
a risk level consistent with that of the
Index.
COMMON STOCK............ Primarily common stock and other equity-type Long-term growth of capital and
instruments. increasing income.
GLOBAL.................. Primarily equity securities of non-United States Long-term growth of capital.
as well as United States companies.
INTERNATIONAL........... Primarily equity securities selected principally Long-term growth of capital.
to permit participation in non-United States
companies with prospects for growth.
AGGRESSIVE STOCK........ Primarily common stocks and other equity-type Long-term growth of capital.
securities issued by medium and other smaller
sized companies with strong growth potential.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT POLICY OBJECTIVE
----------- -------------------- -----------
<S> <C> <C>
ASSET ALLOCATION SERIES:
CONSERVATIVE............ Diversified mix of publicly-traded, fixed-income High total return without, in the
INVESTORS and equity securities; asset mix and security adviser's opinion, undue risk to
selection are primarily based upon factors principal.
expected to reduce risk. The Portfolio is
generally expected to hold approximately 70% of
its assets in fixed income securities and 30% in
equity securities.
BALANCED................ Primarily common stocks, publicly-traded debt High return through a combination of
securities and high quality money market current income and capital appreciation.
instruments. The Portfolio is generally expected
to hold 50% of its assets in equity securities and
50% in fixed income securities.
GROWTH INVESTORS........ Diversified mix of publicly-traded, fixed-income High total return consistent with the
and equity securities; asset mix and security adviser's determination of reasonable risk.
selection based upon factors expected to increase
possibility of high long-term return. The
Portfolio is generally expected to hold
approximately 70% of its assets in equity
securities and 30% in fixed income securities.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Because Policy Account values may be invested in mutual fund options, Incentive
Life Plus offers an opportunity for the Cash Surrender Value to appreciate more
rapidly than it would under comparable fixed benefit whole life insurance. You
must, however, accept the risk that if investment performance is unfavorable,
the Cash Surrender Value may not appreciate as rapidly and, indeed, may decrease
in value.
More detailed information about the Trust, its investment policies, risks,
expenses and all other aspects of its operations, appears in its prospectus,
which is attached to this prospectus, and in its Statement of Additional
Information referred to therein.
THE GUARANTEED INTEREST ACCOUNT
You may allocate some or all of your Policy Account to the Guaranteed Interest
Account, which is funded by our general account and pays interest at a declared
rate guaranteed for each policy year. The principal, after deductions, is also
guaranteed. The general account supports all of our insurance and annuity
guarantees, including the Guaranteed Interest Account, as well as our general
obligations. The general account is subject to regulation and supervision by the
Insurance Department of the State of New York and to the insurance laws and
regulations of all jurisdictions where we are authorized to do business. Because
of applicable exemptive and exclusionary provisions, interests in the general
account have not been registered under the Securities Act of 1933 (1933 Act),
nor is the general account an investment company under the 1940 Act.
Accordingly, neither the general account, the Guaranteed Interest Account nor
any interests therein are subject to regulation under the 1933 Act or the 1940
Act. We have been advised that the staff of the SEC has not made a review of the
disclosures that are included in the prospectus for your information and that
relate to the general account and the Guaranteed Interest Account. 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.
The amount you have in the Guaranteed Interest Account at any time is the sum of
the amounts allocated or transferred to it, plus the interest credited to it,
minus amounts deducted, transferred and withdrawn from it. In addition, any
policy loan is secured by an amount in your Policy Account equal to the
outstanding loan. This amount remains part of the Policy Account but is assigned
to the Guaranteed Interest Account. We refer to this amount as the loaned amount
in the Guaranteed Interest Account. A Living Benefit payment will also result in
amounts being transferred to the Guaranteed Interest Account. See LIVING BENEFIT
OPTION on page 11.
ADDING INTEREST IN THE GUARANTEED INTEREST ACCOUNT. We pay a declared interest
rate on all amounts that you have in the Guaranteed Interest Account. At policy
issuance, and prior to each policy anniversary, we declare the rates that will
apply to amounts in the Guaranteed Interest Account for the following policy
year. Different rates may apply to policies currently being issued and
previously issued policies. These annual interest rates will never be less than
the minimum guaranteed interest rate of 4%. Different rates are also paid on
unloaned and loaned amounts in the Guaranteed Interest Account. See POLICY LOAN
INTEREST on page 13. Amounts securing a Living Benefit payment are considered
unloaned amounts for purposes of crediting interest.
Interest is compounded daily at an effective annual rate that equals the
declared rate for each policy year. We credit interest on unloaned amounts in
the Guaranteed Interest Account at the end of each policy month. Interest is
credited on any loaned amount in the Guaranteed Interest Account on each policy
anniversary and any time you entirely repay a policy loan in full. Credited
interest on the loaned amount is allocated to the Separate Account funds and to
the unloaned portion of the Guaranteed Interest Account in accordance with your
premium allocation percentages.
7
<PAGE>
TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT. Transfers out of the
Guaranteed Interest Account to the Separate Account are allowed once a year on
or within 30 days after your policy anniversary. If we receive your transfer
request up to 30 days before your policy anniversary, the transfer will be made
on your policy anniversary. If we receive your request on or within 30 days
after your policy anniversary, the transfer will be made as of the date we
receive your request. You may transfer up to 25% of your unloaned value in the
Guaranteed Interest Account as of the transfer date or the minimum transfer
amount, whichever is more. The minimum transfer amount is $500 or your total
unloaned value in the Guaranteed Interest Account on the transfer date,
whichever is less. Amounts securing a Living Benefit payment may not be
transferred from the Guaranteed Interest Account.
PART 2: DETAILED INFORMATION ABOUT INCENTIVE LIFE PLUS
FLEXIBLE PREMIUMS
You may choose the amount and frequency of premium payments, as long as they are
within the limits described below. We determine the applicable minimum initial
premium based on the age, sex, rating class and tobacco user status of the
insured person, the initial Face Amount of the policy (the initial minimum Face
Amount is $50,000) and any additional benefits selected. In certain situations,
however, no distinction is made based on the sex of the insured person. See COST
OF INSURANCE CHARGE on page 15. You may choose to pay a higher initial premium.
The full initial premium shown on your application must be given to your agent
or broker on or before the day the policy is delivered to you. No insurance
under your policy will take effect (a) until a policy is delivered and the full
initial premium is paid while the person proposed to be insured is living and
(b) unless the information in the application continues to be true and complete,
without material change, as of the time the initial premium is paid. If you have
submitted the full initial premium with your application, we may, subject to
certain conditions, provide a limited amount of temporary insurance on the
proposed insured. You may review a copy of our Temporary Insurance Agreement on
request.
Premiums must be by check or money order drawn on a U.S. bank in U.S. dollars
and made payable to Equitable Variable. Premiums after the first must be sent
directly to our Administrative Office. The minimum premium is $100 (policies
issued in some states or automatic payment plans may have different minimums.)
This minimum may be increased if we give you written notice.
We may return premium payments if we determine that they would cause your policy
to become a modified endowment contract or to cease to qualify as life insurance
under Federal income tax law. We may also make such changes to the policy as we
deem necessary to continue to qualify the policy as life insurance. See TAX
EFFECTS on page 19 for an explanation of modified endowment contracts, the
special tax consequences of such contracts, and how your policy might become a
modified endowment contract.
PLANNED PERIODIC PREMIUMS AND SPECIFIED PREMIUMS. Although premiums are
flexible, the Policy Information Page will show a "planned" periodic premium and
"specified premiums." Specified premiums are called no-lapse guarantee premiums
for policies issued in New York and New Jersey. We measure actual premiums
against specified premiums to determine whether the death benefit guarantee
provision (or the 3-Year no lapse guarantee provision) will prevent the policy
from going into default.
Specified premiums are actuarially determined at issue based on the age, sex,
tobacco user status and rating class of the insured person, the Face Amount and
any additional benefits. Specified premiums may change if you make policy
changes that increase or decrease the Face Amount of the policy or a rider, add
or eliminate a rider, or if there is a change in the insured person's rating or
tobacco user classification. Certain additional benefit riders will cause
specified premiums to increase each year. We reserve the right to limit the
amount of any premium payments which are in excess of specified premiums.
The planned periodic premium is an amount you determine (within limits set by
us) when you apply for the policy. The planned premium may be more or less than
the specified premiums. Neither the planned premium nor the specified premiums
are required premiums.
Failure to pay premiums could cause the policy to go into default and ultimately
terminate. See YOUR POLICY CAN TERMINATE on page 18.
PREMIUM AND MONTHLY CHARGE ALLOCATIONS. On your application you provide us with
initial instructions as to how to allocate your net premiums and monthly charges
among the Funds and the Guaranteed Interest Account. Allocation percentages may
be any whole number from zero to 100, but the sum must equal 100. Allocations to
a Fund take effect on the first business day that follows the 20th calendar day
after the Issue Date of your policy. The Issue Date is shown on the Policy
Information Page, and is the date we actually issue your policy. The date your
allocation instructions take effect is called the Allocation Date. Our business
days are described in HOW WE DETERMINE THE UNIT Value on page 12.
Until the Allocation Date, any net premiums allocated to a Fund will be
allocated to the Money Market Fund, and all monthly deductions allocated to a
Fund will be deducted from the Money Market Fund. On the Allocation Date,
amounts in the Money Market Fund will be allocated to the various Funds in
accordance with your policy application. We may delay the Allocation Date for
the same reasons that we would delay effecting a transfer request. There will be
no charge for the transfer out of the Money Market Fund on the Allocation Date.
You may change the allocation percentages for either your current premium
payment or the current and future premium payments by writing to our
Administrative Office and indicating the changes you wish to make. Your request
must be signed. These changes will go into effect as of the date your request is
received at our Administrative Office, but no earlier than the first business
day following the Allocation Date, and will affect transactions on and after
such date.
8
<PAGE>
DEATH BENEFITS
We pay a benefit to the beneficiary of the policy when the insured person dies.
This benefit will be equal to the death benefit under your policy plus any
additional benefits included in your policy and then due, less any policy loan,
any lien securing a Living Benefit payment and accrued interest. If the insured
person dies during a grace period, we will also deduct any overdue monthly
charges.
You may choose between two death benefit options:
o OPTION A provides a death benefit equal to the policy's Face Amount. Except
as described below, the Option A benefit is fixed.
o OPTION B provides a death benefit equal to the policy's Face Amount PLUS the
amount in your Policy Account on the day the insured person dies. Under
Option B, the value of the benefit is variable and fluctuates with the amount
in your Policy Account.
Policyowners who prefer to have favorable investment experience reflected in
increased insurance coverage should choose Option B. Policyowners who prefer to
have insurance coverage that does not vary in amount and lower cost of insurance
charges should choose Option A.
Under both options, a higher death benefit may apply. This higher death benefit
is a percentage multiple of the amount in your Policy Account. The percentage is
generally based on provisions of Federal tax law which require a minimum death
benefit in relation to cash value for your policy to qualify as life insurance.
A higher percentage multiple than that required by Federal tax law will be
applied at ages 91 and over. Since cost of insurance charges are assessed on the
difference between the Policy Account value and the death benefit, these charges
will increase if the higher death benefit takes effect.
The higher death benefit will be the amount in your Policy Account on the day
the insured person dies times the percentage for the insured person's age
(nearest birthday) at the beginning of the policy year of the insured person's
death. The percentage declines as the insured person gets older. For ages that
are not shown on the following table, the percentage multiples will decrease by
a ratable portion for each full year.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
TABLE OF DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF POLICY ACCOUNT VALUES
INSURED 40 or 45 50 55 60 65 70 75 to 100
PERSON'S AGE under 95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
250% 215% 185% 150% 130% 120% 115% 105% 100%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
For example, if the insured person were 75 years old and your policy had a
Policy Account value of $200,000, the higher death benefit would be 105% of
$200,000 or $210,000.
GUARANTEEING THE DEATH BENEFIT. We will guarantee your death benefit coverage,
regardless of the policy's investment performance, if you have paid a certain
amount of premiums into your policy and you have not withdrawn or borrowed those
amounts. The death benefit guarantee period is either three years (under the
3-Year no lapse guarantee provision) or the longer period described in the next
paragraph (under the death benefit guarantee provision). Whether your policy has
the 3-Year no lapse guarantee provision or the death benefit guarantee provision
depends upon the state in which your policy is issued.
The death benefit option you select (A or B) can affect the length of time that
the death benefit guarantee provision will last. If you have selected death
benefit Option A, and you never change it to Option B, then the death benefit
guarantee provision will terminate on the Final Policy Date. See MATURITY
BENEFIT on page 11. If ever your policy, at any time, has an Option B death
benefit, the death benefit guarantee provision will terminate on the later of
(1) the policy anniversary nearest the insured person's 80th birthday or (2) the
15th policy anniversary. However, if your death benefit first changes to an
Option B after this time, the death benefit guarantee provision will terminate
immediately. The death benefit option does not have any effect on the length of
the 3-Year no lapse guarantee provision.
Under both the 3-Year no lapse guarantee provision and the death benefit
guarantee provision, we compare the specified premium fund with the actual
premium fund in order to determine whether your coverage remains in effect. Your
policy will not go into default if the actual premium fund is equal to or
greater than the specified premium fund and any policy loan plus accrued
interest does not exceed the Cash Surrender Value. The specified premium fund
for any policy month is the accumulation of all the specified premiums shown on
the Policy Information Page up to that month, at 4% interest. The actual premium
fund for any policy month is the accumulation of all the premiums actually paid
under the policy at 4% interest, less all withdrawals accumulated at 4%
interest.
CHANGES IN INSURANCE PROTECTION
CHANGING THE FACE AMOUNT. You may request an increase in the Face Amount after
the first policy year and a decrease after the second policy year. You must send
your signed written request to our Administrative Office. See TAX EFFECTS on
page 19 for the tax consequences of changing the Face Amount. If disability
waiver goes into effect (see ADDITIONAL BENEFITS MAY BE AVAILABLE on page 11),
we will not permit any Face Amount change. Any change will be subject to our
approval and the following conditions:
9
<PAGE>
Face Amount Increases. To increase the Face Amount, you must provide
satisfactory evidence that the insured person is still insurable. The cost of
insurance rate for the amount of the increase will be based on the rating class,
attained age and tobacco user status of the insured person on the date of the
increase and on the insured person's sex. See COST OF INSURANCE CHARGE on page
15. We reserve the right to decline face amount increases if the insured person
has become a more expensive risk.
Any increase must be at least $10,000. Specified premiums as well as monthly
deductions from your Policy Account for the cost of insurance and the death
benefit guarantee provision will generally increase beginning on the date the
increase takes effect. An administrative charge of $1.50 for each additional
$1,000 of insurance (up to a maximum charge of $240) will be deducted from your
Policy Account. See HOW POLICY ACCOUNT CHARGES ARE ALLOCATED on page 16.
Surrender Charges will generally be applicable to a Face Amount increase for
fifteen years from the effective date of the increase. The Premium Surrender
Charge percentage may be higher than the percentage applied prior to the
increase. Face Amount reductions will be applied against prior Face Amount
increases, if any, in the reverse order in which such increases occurred, and
then to the original Face Amount. See SURRENDER CHARGES on page 16.
Following the increase, a portion of each premium payment will be deemed to be
attributable to the Face Amount increase. The Premium Sales Charge will
generally be deducted from this amount, even if we had previously stopped
deducting the charge on the premiums paid before the increase in accordance with
our current practice. The Premium Sales Charge percentage may be lower than the
percentage applied prior to the increase. See DEDUCTIONS FROM PREMIUMS --
PREMIUM SALES CHARGE on page 15.
You will have the right to cancel the Face Amount increase within the later of
(1) 45 days after the application for the increase is signed, (2) 10 days after
receipt of a new Policy Information Page showing the increase and (3) 10 days
after we mail or personally deliver a Notice of Cancellation Right. If you
cancel the increase we will reverse any charges attributable to the increase and
recalculate the Policy Account value, Cash Surrender Value and Surrender Charges
to what they would have been had the increase not taken place. No Premium or
Administrative Surrender Charge will be incurred upon cancellation. We reserve
the right not to offer the cancellation right for Face Amount increases if we
are no longer required to do so under applicable law.
Face Amount Decreases. You may reduce the Face Amount but not below the minimum
we require to issue this policy at the time of the reduction. Any reduction must
be at least $10,000. Specified premiums as well as monthly deductions from your
Policy Account for the death benefit guarantee provision and the cost of
insurance will generally decrease (even though the rates may increase),
beginning on the date the decrease in Face Amount takes effect. Our current
procedure is to disapprove a requested decrease if it would cause a death
benefit based on the Policy Account percentage multiple to apply. See DEATH
BENEFITS on page 9.
Face Amount decreases that reduce the Face Amount below certain levels will
result in higher monthly administrative charges. If you reduce the Face Amount
during the first fifteen policy years or during the first fifteen years after a
Face Amount increase, we may deduct a pro rata share of the applicable Surrender
Charges from the Policy Account. Assuming you have not previously changed the
Face Amount, the pro rata Surrender Charges for a partial surrender will be
determined by dividing the amount of the Face Amount decrease by the initial
Face Amount and multiplying that fraction by the Surrender Charges. Face Amount
reductions will be applied against prior Face Amount increases, if any, in the
reverse order in which such increases occurred, and then to the original Face
Amount. See DEDUCTIONS FROM YOUR POLICY ACCOUNT on page 15 and SURRENDER CHARGES
on page 16.
CHANGING THE DEATH BENEFIT OPTION. At any time after the second policy year
while your policy is in force, you may change the death benefit option by
sending a signed written request to our Administrative Office. See TAX EFFECTS
on page 19 for the tax consequences of changing the death benefit option.
o If you change from OPTION A TO OPTION B, the Face Amount will be decreased by
the amount in your Policy Account on the date of the change. This change will
shorten the length of time the death benefit guarantee provision is
available. See GUARANTEEING THE DEATH BENEFIT on page 9. We may not allow
such a change if it would reduce the Face Amount below the minimum required
to issue this policy at the time of the reduction. We may require evidence of
insurability to make the change.
o If you change from OPTION B TO OPTION A, the Face Amount will be increased by
the amount in the Policy Account on the date of the change.
These increases and decreases in Face Amount are made so that the amount of the
death benefit remains the same on the date of the change. When the death benefit
remains the same, there is no change in the net amount at risk, which is the
amount on which cost of insurance charges are based (see COST OF INSURANCE
CHARGE on page 15). If your death benefit is determined by a percentage multiple
of the Policy Account, however, the new Face Amount will be determined
differently. A Face Amount change that results from a death benefit option
change will not affect any expense or sales charge (including any Surrender
Charge) which varies by Face Amount, and no Surrender Charges will be deducted
or established at the time of the change.
SUBSTITUTION OF INSURED PERSON. If you provide satisfactory evidence that the
person proposed to be insured is insurable, then, subject to certain
restrictions, you may, after the second policy year, substitute the insured
person under your policy. The cost of insurance charges may change, but we will
not change the Surrender Charges. Since substituting the insured person is a
taxable event and may have other adverse tax consequences as well, you should
consult your tax adviser prior to substituting the insured person. As a
condition to substituting the insured person we may require you to sign a form
acknowledging the tax consequences of making this change. A $100 charge will be
deducted from the Policy Account for each substitution of insured person.
10
<PAGE>
WHEN POLICY CHANGES GO INTO EFFECT. A substitution of the insured person, or
change in Face Amount or death benefit option, will go into effect at the
beginning of the policy month that coincides with or follows the date we approve
the request for the change. In some cases we may not approve a change because it
might disqualify your policy as life insurance under applicable Federal tax law.
In other cases there may be adverse tax consequences as a result of the change.
See TAX EFFECTS on page 19.
MATURITY BENEFIT
If the insured person is still living on the policy anniversary nearest his or
her 100th birthday (Final Policy Date), we will pay you the amount in the Policy
Account net of any policy loan, any lien securing a Living Benefit payment and
accrued interest. The policy will then terminate. You may choose to have this
benefit paid in installments.
See TAX EFFECTS on page 19 and YOUR PAYMENT OPTIONS on page 22.
LIVING BENEFIT OPTION
Subject to our underwriting guidelines and availability in your state, our
Living Benefit rider will be added to your policy at issue. The Living Benefit
rider enables the policyowner to receive a portion of the policy's death benefit
(excluding death benefits payable under certain riders) if the insured person
has a terminal illness. Certain eligibility requirements apply when you submit a
Living Benefit claim (for example, satisfactory evidence of less than six month
life expectancy). There is no additional charge for the rider, but we will
deduct an administrative charge of up to $250 from the proceeds of the Living
Benefit payment. In addition, if you tell us that you do not wish to have the
rider added at issue, but you later ask to add it, additional underwriting will
be required and there will be a $100 administrative charge.
When a Living Benefit claim is paid, we establish a lien against the policy. The
amount of the lien is the sum of the Living Benefit payment and any accrued
interest on that payment. Interest will be charged at a rate equal to the
greater of: (i) the yield on a 90-day Treasury bill and (ii) the maximum
adjustable policy loan interest rate permitted in the state your policy is
delivered. See BORROWING FROM YOUR POLICY ACCOUNT -- POLICY LOAN INTEREST on
page 13.
Until a death benefit is paid, or the policy is surrendered, a portion of the
lien is allocated to the policy's Cash Surrender Value. This liened amount will
be transferred to the Guaranteed Interest Account where it will earn interest at
the same rate as unloaned amounts. See THE GUARANTEED INTEREST ACCOUNT on page
7. This liened amount will not be available for loans, transfers or partial
withdrawals. Any death benefit, maturity benefit or Net Cash Surrender Value
payable upon policy surrender will be reduced by the amount of the lien.
Unlike a death benefit received by a beneficiary after the death of an insured,
receipt of a Living Benefit payment may be taxable as a distribution under the
policy. See TAX EFFECTS on page 19 for a discussion of the tax treatment of
distributions under the policy. Consult your tax adviser. Receipt of a Living
Benefit payment may also affect a policyowner's eligibility for certain
government benefits or entitlements. You should contact your Equitable agent if
you wish to make a claim under the rider.
ADDITIONAL BENEFITS MAY BE AVAILABLE
Your policy may include additional benefits. A monthly charge will be deducted
from your Policy Account for each additional benefit you choose. Eligibility for
and changes in these benefits are subject to our underwriting and other rules.
More details will be included in your policy if you choose any of these
benefits. The following additional benefits are currently available: disability
waiver benefits, accidental death benefit, term insurance riders for the insured
person, children's term insurance, term insurance on an additional insured
person, designated insured option rider, option to purchase additional insurance
and first-to-die term insurance.
The designated insured option rider permits the policyowner, upon the death of
the insured person, to purchase insurance on the life of a "designated insured
person" without evidence of insurability. The option to purchase additional
insurance permits you to purchase additional amounts of insurance on the insured
person, without evidence of insurability, upon the occurrence of certain
specified events. The first-to-die rider is yearly renewable term insurance that
insures two lives and pays a death benefit upon the first death.
The term insurance riders for the insured person allow you to purchase an
additional death benefit for a period of time. Combination coverage under the
base policy and a term insurance rider for the insured person will reduce total
cost of insurance and other charges on a current charge basis. Also, term
coverage is not subject to a surrender charge. However, if the higher death
benefit becomes applicable (see DEATH BENEFITS on page 9) or term rider
insurance charges increase in relation to cost of insurance charges on the base
policy, the combination coverage may ultimately become more costly than coverage
under the base policy alone. Moreover, in New York, there are age restrictions
on the final renewal period for term riders. If you later terminate your term
rider coverage and also increase the Face Amount under the base policy, a new
Surrender Charge period will commence. The amount of the death benefit guarantee
premium will be affected by the term rider coverage. Your agent can provide
further information and policy illustrations showing how the term riders can
affect your policy values under different assumptions.
YOUR POLICY ACCOUNT VALUE
The amount in your Policy Account is the sum of the amounts you have in the
Guaranteed Interest Account and in the Funds. Your Policy Account also reflects
various charges. See DEDUCTIONS AND CHARGES on page 14.
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<PAGE>
AMOUNTS IN THE SEPARATE ACCOUNT. Amounts allocated, transferred or added to a
Fund are used to purchase units of that Fund. Units are redeemed from a Fund
when amounts are withdrawn, transferred or deducted for charges or capitalized
loan interest. The number of units purchased or redeemed in a Fund is calculated
by dividing the dollar amount of the transaction by the Fund's unit value
calculated after the close of business that day. On any given day, the value you
have in a Fund is the unit value for that Fund times the number of units
credited to you in that Fund.
HOW WE DETERMINE THE UNIT VALUE. We determine unit values for the Funds at the
end of each business day. Generally, a business day is any day we are open and
the New York Stock Exchange is open for trading. We are closed for national
business holidays, including Martin Luther King, Jr. Day, and also on the Friday
after Thanksgiving. Additionally, we may choose to close on the day immediately
preceding or following a national business holiday or due to emergency
conditions. We will not process any policy transactions received on those days
other than a policy anniversary report, monthly charge deduction and the payment
of death benefit proceeds. The unit value for any business day is equal to the
unit value for the preceding business day multiplied by the net investment
factor for that Fund on that business day.
A net investment factor is determined for each Fund of the Separate Account
every business day as follows: first, we take the net asset value of a share in
the corresponding Trust portfolio at the close of business that day, as reported
by the Trust, and we add the per share amount of any dividends or capital gains
distributions paid by the Trust on that day. We divide this amount by the per
share net asset value on the preceding business day. Then, we subtract a daily
asset charge for each calendar day between business days (for example, a Monday
calculation may include charges for Saturday, Sunday and Monday). The daily
charge is currently at an annual rate of .60% and is guaranteed not to exceed an
annual rate of .90%. See CHARGES AGAINST THE SEPARATE ACCOUNT on page 16.
Finally, we reserve the right to subtract any daily charge for taxes or amounts
set aside as a reserve for taxes. For current Incentive Life Plus unit values,
call (212) 714-5015.
TRANSFERS OF POLICY ACCOUNT VALUE. You may request a transfer of amounts among
Funds or to the Guaranteed Interest Account. Special rules apply to transfers
out of the Guaranteed Interest Account. See TRANSFERS OUT OF THE GUARANTEED
INTEREST ACCOUNT on page 8. You may make a transfer by telephone or by
submitting a signed written transfer request to our Administrative Office.
Transfer request forms are available from your Equitable agent or from our
Administrative Office. Special rules apply to telephone transfers. See TELEPHONE
TRANSFERS on page 12.
The minimum amount which may be transferred is $500. This minimum need not come
from any one Fund or be transferred to any one Fund as long as the total amount
transferred that day, including any amounts transferred to or from the
Guaranteed Interest Account, is at least equal to the minimum. However, we will
transfer the entire amount in any Fund even if it is less than the minimum
specified in your policy. A lower minimum amount applies to our Automatic
Transfer Service which is described below.
Transfers take effect on the date we receive your request, but no earlier than
the first business day following the Allocation Date. When part of a transfer
request cannot be processed, we will not process any part of the request. This
could occur, for example, where the request does not comply with our transfer
limitations, or where the request is for a transfer of an amount greater than
that currently allocated to a Fund. We may delay making a transfer if the New
York Stock Exchange is closed or the SEC has declared that an emergency exists.
In addition, we may delay transfers where permitted under applicable law.
AUTOMATIC TRANSFER SERVICE. The Automatic Transfer Service enables you to make
automatic monthly transfers out of the Money Market Fund into the other Funds.
To start using this service you must first complete a special election form that
is available from your agent or our Administrative Office. You must also have a
minimum of $5,000 in the Money Market Fund on the date the Automatic Transfer
Service is scheduled to begin. You can elect up to eight Funds for monthly
transfers, but the minimum amount that may be transferred to each Fund each
month is $50.
If you elect the Automatic Transfer Service with your policy application, the
automatic transfers will begin in the second policy month following the
Allocation Date. If you elect the Automatic Transfer Service after your
application has been submitted, automatic transfers will begin on the next
monthly processing date after we receive your election form at our
Administrative Office. See POLICY PERIODS, ANNIVERSARIES, DATES AND AGES on page
18.
The Automatic Transfer Service will remain in effect until the earliest of the
following events: (1) the amount in the Money Market Fund is insufficient to
cover the automatic transfer amount; (2) the policy is in a grace period; (3) we
receive at our Administrative Office your written instruction to cancel the
Automatic Transfer Service; or (4) we receive notice of death under the policy.
Using the Automatic Transfer Service does not guarantee a profit or protect
against loss in a declining market.
TELEPHONE TRANSFERS. In order to make transfers by telephone, you must first
complete and return an authorization form. Authorization forms can be obtained
from your Equitable agent or our Administrative Office. The completed signed
form MUST be returned to our Administrative Office before requesting a telephone
transfer.
Telephone transfers may be requested on each day we are open to transact
business. You will receive the Fund's unit values as of the close of business on
the day you call. We do not accept telephone transfer requests after 3:00 p.m.
Eastern Time. Only one telephone transfer request is permitted per day and it
may not be revoked at any time. The telephone transfer requests are
automatically recorded and are invalid if incomplete information is given,
portions of the request are inaudible, no authorization form is on file, or the
request does not comply with the transfer limitations described above.
We have established reasonable procedures 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
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<PAGE>
instructions communicated by telephone. If we do not employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
we may be liable for any losses arising out of any act or any failure to act
resulting from our own negligence, lack of good faith, or willful misconduct. In
light of the procedures established, we will not be liable for following
telephone instructions that we reasonably believe to be genuine.
During times of extreme market activity it may be impossible to contact us to
make a telephone transfer. If this occurs, you should submit a written transfer
request to our Administrative Office. Our rules on telephone transfers are
subject to change and we reserve the right to discontinue telephone transfers in
the future.
CHARGE FOR TRANSFERS. We have reserved the right under your policy to make a
charge of up to $25 for transfers of Policy Account value. Currently, you will
be able to make 12 free transfers in any policy year, but we will charge $25 per
transfer after the twelfth transfer. All transfers made on one transfer request
form will count as one transfer, and all transfers made in one telephone request
will count as one transfer. Transfers made through the Automatic Transfer
Service or on the Allocation Date will not count toward the twelve free
transfers. No charge will ever apply to the transfer of all of your amounts in
the Separate Account to the Guaranteed Interest Account.
BORROWING FROM YOUR POLICY ACCOUNT
You may borrow up to 90% of your policy's Cash Surrender Value using only your
policy as security for the loan. Any new loan must be at least $500. If you
request an additional loan, the additional amount will be added to the
outstanding loan and accrued loan interest. Any amount that secures a loan
remains part of your Policy Account but is assigned to the Guaranteed Interest
Account. This loaned amount earns an interest rate expected to be different from
the interest rate for unloaned amounts. Amounts securing a Living Benefit
payment are not available for policy loans.
HOW TO REQUEST A LOAN. You may request a loan by sending a signed written
request to our Administrative Office. You should tell us how much of the loan
you want taken from your unloaned amount in the Guaranteed Interest Account and
how much you want taken from the Funds. If you request a loan from a Fund, we
will redeem units sufficient to cover that part of the loan and transfer the
amount to the loaned portion of the Guaranteed Interest Account. The amounts you
have in each Fund or the Account will be determined as of the day your request
for a loan is received at our Administrative Office.
If you do not indicate how you wish to allocate it, the loan will be allocated
according to the deduction allocation percentages applicable to your Policy
Account. If the loan cannot be allocated based on these percentages, it will be
allocated based on the proportions of your unloaned amount in the Guaranteed
Interest Account and your values in the Separate Account to the unloaned value
of your Policy Account.
POLICY LOAN INTEREST. Interest on a policy loan accrues daily at an adjustable
interest rate. We determine the rate at the beginning of each policy year. The
same rate applies to any outstanding policy loans and any new amounts you borrow
during the year. You will be notified of the current rate when you apply for a
loan. The maximum rate is the greater of 5%, or the "Published Monthly Average"
for the month that ends two months before the interest rate is set. The
"Published Monthly Average" is the Monthly Average Corporates yield shown in
Moody's Corporate Bond Yield Averages published by Moody's Investors Service,
Inc. If this average is no longer published, we will use any successor or the
average established by the insurance supervisory official of the jurisdiction in
which the policy is delivered. We will not charge more than the maximum rate
permitted by applicable law. We may also set a rate lower than the maximum.
Any change in the rate from one year to the next will be at least 1/2%. The
maximum loan interest rate will only change, therefore, if the Published Monthly
Average differs from the previous interest rate by at least 1/2 of 1%. You will
be notified in advance of any increase in the interest rate on any loan you have
outstanding.
When you borrow on your policy, the amount of your loan is set aside in the
Guaranteed Interest Account where it earns a declared rate for loaned amounts.
The interest rate we credit to the loaned portion of the Guaranteed Interest
Account will be at an annual rate up to 2% less than the loan interest rate we
charge. However, we reserve the right to credit a lower rate than this if in the
future tax laws change such that our taxes on policy loans or policy loan
interest are increased.
Under our current rules, the rate we credit on loaned amounts for the first
fifteen policy years is 1% less than the rate we charge for policy loan
interest, and beginning in the sixteenth policy year, the rate difference drops
from 1% to 1/4 of 1%. Because Incentive Life Plus was offered for the first time
in 1995, no reduction in the rate difference in the sixteenth policy year has
yet been attained. These rate differentials are those currently in effect and
are not guaranteed. Interest credited on loaned amounts will never be less than
4%.
WHEN INTEREST IS DUE. Interest is due on each policy anniversary. If you do not
pay the interest when it is due, it will be added to your outstanding loan and
allocated based on the deduction allocation percentages for your Policy Account
which are then in effect. This means an additional loan is made to pay the
interest and amounts are transferred from the investment funds to make the loan.
If the interest cannot be allocated on this basis, it will be allocated as
described above for allocating your loan.
REPAYING THE LOAN. You may repay all or part of a policy loan at any time. While
you have a policy loan, we assume that any money you send us is a premium
payment. If you wish to have any of these payments applied as a loan repayment,
you must specifically so indicate in writing. Loan repayments are not subject to
charges for applicable taxes or a Premium Sales Charge. Any amount not needed to
repay a loan and accrued loan interest will be applied as a premium payment. We
will first allocate loan repayments to our Guaranteed Interest Account until the
amount of any loans originally allocated to that Account have been repaid. After
you have repaid this amount, you may choose how you want us to allocate the
balance of any additional repayments. If you do not provide specific
instructions, repayments will be allocated on the basis of your premium
allocation percentages.
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<PAGE>
THE EFFECTS OF A POLICY LOAN. A loan will have a permanent effect on the value
of your Policy Account and, therefore, on the benefits under your policy, even
if the loan is repaid. The loaned amount set aside in the Guaranteed Interest
Account will not be available for investment in the Funds or in the unloaned
portion of the Guaranteed Interest Account. Whether you earn more or less with
the loaned amount set aside depends on the investment experience of the Funds
and the rates declared for the unloaned portion of the Guaranteed Interest
Account. The amount of any policy loan and accrued loan interest will reduce the
proceeds paid from your policy upon the death of the insured person, policy
maturity or policy surrender. In addition, a loan will reduce the amount
available for you to withdraw from your policy. See TAX EFFECTS on page 19 for
the tax consequences of a policy loan. A loan may also affect the length of time
that your insurance remains in force because the amount set aside to secure your
loan cannot be used to cover monthly deductions or a loan may prevent the death
benefit guarantee provision from keeping the policy out of default. See YOUR
POLICY CAN TERMINATE on page 18.
PARTIAL WITHDRAWALS AND SURRENDER
PARTIAL WITHDRAWALS. At any time after the first policy year while the insured
person is living, you may request a partial withdrawal of your Net Cash
Surrender Value by writing to our Administrative Office. Your request must be
signed. When you make a partial withdrawal, an expense charge of $25 or 2% of
the amount requested, whichever is less, will be deducted from your Policy
Account. Any such withdrawal is subject to our approval and to certain
conditions. Amounts securing a Living Benefit payment are not available for
partial withdrawals. In addition, we reserve the right to decline a request for
a partial withdrawal. Under our current rules, a withdrawal must:
o be at least $500,
o not cause the death benefit to fall below the minimum Face Amount for which
we would issue the policy at the time, and
o not cause the policy to fail to qualify as life insurance under applicable
tax law.
You may specify how much of the withdrawal you want taken from amounts you have
in each Fund and the unloaned portion of the Guaranteed Interest Account. The
related expense charge will also be deducted from the amount withdrawn. If you
do not specifically indicate, we will make the withdrawal and deduct the related
expense charge on the basis of your deduction allocation percentages. If we
cannot make the withdrawal and deduct the expense charge in the manner discussed
above, we will make the withdrawal and deduction based on the proportions of
your unloaned amounts in the Guaranteed Interest Account and the Funds to the
total unloaned value of your Policy Account.
A partial withdrawal reduces the amount you have in your Policy Account and Cash
Surrender Value. Normally, it also reduces the death benefit on a
dollar-for-dollar basis, but does not affect the net amount at risk, which is
the difference between the current death benefit and the amount in your Policy
Account. If you selected death benefit Option A, the Face Amount of your policy
will generally be reduced so that there will be no change in the net amount at
risk. However, under either option, if the death benefit is based on the Policy
Account percentage multiple, the reduction in death benefit would be greater and
the net amount at risk would be reduced. See DEATH BENEFITS on page 9. The
withdrawal and these reductions will be effective as of the date your request is
received at our Administrative Office. See TAX EFFECTS on page 19 for the tax
consequences of a partial withdrawal and a reduction in benefits.
SURRENDER FOR NET CASH SURRENDER VALUE. The Cash Surrender Value is the amount
in your Policy Account minus the Surrender Charges described under SURRENDER
CHARGES on page 16. The Net Cash Surrender Value equals the Cash Surrender Value
minus any loan and accrued loan interest.
You may surrender your policy for its Net Cash Surrender Value at any time while
the insured person is living. See TAX EFFECTS on page 19 for the tax
consequences of a surrender. We will deduct from the Net Cast Surrender Value
any amount securing a Living Benefit payment. We will compute the Net Cash
Surrender Value as of the date we receive your written surrender request and the
policy at our Administrative Office. All insurance coverage under your policy
will end on that date.
DEDUCTIONS AND CHARGES
DEDUCTIONS FROM PREMIUMS. Charges for applicable taxes are deducted from all
premiums and a Premium Sales Charge will be deducted from your premiums as
specified below. The balance of each premium (the net premium) is placed in your
Policy Account.
Charges for Applicable Taxes and all additional charges imposed on premium
payments by states and certain jurisdictions are deducted from each premium
payment. Such taxes currently range from .75% to 5% (Virgin Islands). This tax
is incurred by Equitable Variable, so you cannot deduct it on your income tax
return. The amount of the tax will vary depending on the jurisdiction in which
the insured person resides.
This charge will be increased or decreased to reflect any changes in the
applicable tax. In addition, if an insured person changes his or her place of
residence, you should notify us to change the charge to the tax rate of the new
jurisdiction. Any change will take effect on the next policy anniversary.
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<PAGE>
Premium Sales Charge. A percentage of each premium will be deducted to
compensate us in part for sales and promotional expenses in connection with
selling Incentive Life Plus, such as commissions, the cost of preparing sales
literature, other promotional activities and other direct and indirect expenses.
We pay these expenses from our own resources, including the Premium Sales
Charge, any Premium Surrender Charge we might collect and any profit we may earn
on the charges deducted under the policy. See SURRENDER CHARGES on page 16. The
Premium Sales Charge percentage depends upon the Face Amount of the Policy as
follows:
<TABLE>
<CAPTION>
FACE AMOUNT RANGE: $50,000 TO $99,999 $100,000 TO $499,999 $500,000 AND OVER
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PERCENTAGE: 6% 4% 3%
</TABLE>
Currently, we deduct the Premium Sales Charge from each premium payment until
the cumulative premiums paid equals ten times the "sales load target premium."
The sales load target premium varies by issue age, sex and tobacco user status
of the insured person and the policy's Face Amount, and is generally less than
or equal to 75% of one annual whole life premium calculated at 4% interest and
guaranteed maximum cost of insurance and expense charges. We reserve the right,
however, to deduct the Premium Sales Charge from each premium payment at any
time.
If you request a Face Amount increase above the previous highest Face Amount, we
will establish a new sales load target premium attributable to the amount of the
increase, and the Premium Sales Charge will be deducted from that portion of
each subsequent premium payment deemed attributable to the increase until such
premium payments have cumulatively reached ten times the new sales load target
premium. Moreover, if the increase moves the policy into a higher Face Amount
range, the Premium Sales Charge percentage applied to future premiums will be
the lower percentage for that Face Amount range. Face Amount decreases do not
change the Premium Sales Charge percentage.
DEDUCTIONS FROM YOUR POLICY ACCOUNT. At the beginning of each policy month, the
following charges are deducted from your Policy Account:
Monthly Administrative Charge. The administrative charge is designed to cover
the costs of issuing your policy and the costs of maintaining your policy, such
as billing, policy transactions and policyowner communications. This charge is
designed to reimburse us for expenses and we do not expect to profit from it.
The amount of the monthly administrative charge depends upon the initial Face
Amount, the policy year and the issue age of the insured person as follows:
<TABLE>
<CAPTION>
FACE AMOUNT RANGE $50,000 FACE AMOUNT RANGE $100,000 FACE AMOUNT RANGE $500,000
ISSUE AGE TO $99,999 TO $499,999 AND OVER
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0-29 $20 in years 1 & 2 $40 in year 1 $25 in year 1
$8 in years 3 and later* $6 in year 2 and later* $6 in year 2 and later*
30+ $30 in years 1 & 2 $55 in year 1 $25 in year 1
$8 in years 3 and later* $6 in year 2 and later* $6 in year 2 and later*
<FN>
*GUARANTEED NEVER TO BE MORE THAN $10.
</FN>
</TABLE>
The monthly administrative charge will increase from $6 to $8 if you request a
Face Amount reduction that moves the policy into the lowest Face Amount range.
The charge will decrease from $8 to $6 if you request a Face Amount increase
after the second policy year that moves the policy out of the lowest Face Amount
range (the $20 or $30 charge will continue through the second policy year).
Cost Of Insurance Charge. The cost of insurance charge is calculated by
multiplying the net amount at risk at the beginning of the policy month by the
monthly cost of insurance rate applicable to the insured person at that time.
The net amount at risk is the difference between the current death benefit (not
including any term coverage on the insured person) and the amount in your Policy
Account. See ADDITIONAL BENEFITS MAY BE AVAILABLE on page 11 for a description
of term insurance riders.
Your cost of insurance charge will vary from month to month with changes in the
net amount at risk. For example, if the current death benefit for the month is
increased because the death benefit is based on a percentage multiple of the
Policy Account, then the net amount at risk for the month will increase.
Assuming the percentage multiple is not in effect, increases or decreases to the
Policy Account will result in a corresponding decrease or increase to the net
amount at risk under Option A policies, but no change to the net amount at risk
under Option B policies. Increases or decreases to the Policy Account can result
from making premium payments, investment experience or the deduction of charges.
The monthly cost of insurance rate applicable to your policy will be based on
our current monthly cost of insurance rates. The current monthly cost of
insurance rates may be changed from time to time. However, the current rates
will never be more than the guaranteed maximum rates set forth in your policy.
The guaranteed rates are based on the Commissioner's 1980 Standard Ordinary Male
and Female Smoker and Non-Smoker Mortality Tables. The current and guaranteed
monthly cost of insurance rates are determined based on the sex, age, rating
class and tobacco user status of the insured person. In addition, the current
rates also vary depending on the duration of the policy (i.e., the length of
time since a policy has been issued) and the Face Amount. Current cost of
insurance rates are generally highest for Face Amounts less than $100,000 and
generally lowest for Face Amounts of $200,000 and above.
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<PAGE>
Beginning in the tenth policy year, current monthly cost of insurance charges
are reduced by an amount equal to a percentage of your unloaned Policy Account
Value on the date such charges are assessed. This means that the larger your
unloaned Policy Account Value, the greater your potential reduction in current
cost of insurance charges. This percentage begins at an annual rate of .05%,
grading up to an annual rate of .50% in policy years 26 and later. This cost of
insurance charge reduction applies on a current basis and is not guaranteed.
Because Incentive Life Plus was offered for the first time in 1995, no reduction
of cost of insurance charges in the tenth policy year has yet been attained.
Lower current cost of insurance rates apply at most ages for insured persons who
qualify as non-tobacco users. To qualify, an insured person must meet additional
requirements that relate to tobacco use. In addition, the insured person must be
age twenty or over. Insured persons who are under twenty years of age may ask us
to review their current tobacco habits when they reach the policy anniversary
nearest their twentieth birthday.
There will be no distinctions based on sex in the cost of insurance rates for
Incentive Life Plus policies sold in Montana. Cost of insurance rates applicable
to a policy issued in Montana will not be greater than the comparable male rates
set forth or illustrated in this prospectus. Similarly, illustrated policy
values in Part 4 would be no less favorable for comparable policies issued in
this state. The guaranteed cost of insurance rates for Incentive Life Plus
policies in this state are based on the Commissioner's 1980 Standard Ordinary SB
Smoker and NB Non-Smoker Mortality Table.
Congress and the legislatures of various states have from time to time
considered legislation that would require insurance rates to be the same for
males and females of the same age, rating class and tobacco user status. In
addition, employers and employee organizations should consider, in consultation
with counsel, the impact of Title VII of the Civil Rights Act of 1964 on the
purchase of Incentive Life Plus in connection with an employment-related
insurance or benefit plan. In a 1983 decision, the United States Supreme Court
held that, under Title VII, optional annuity benefits under a deferred
compensation plan could not vary on the basis of sex.
Death Benefit Guarantee Charge. One cent per $1,000 of Face Amount (including
any amount of yearly renewable term insurance) is deducted monthly to compensate
us for the risk we assume by guaranteeing the death benefit under the death
benefit guarantee provision. This charge is deducted regardless of whether
specified premiums are paid, but it will not be deducted after the death benefit
guarantee provision terminates. This charge will not be deducted in states where
the death benefit guarantee provision is not available.
Charges For Additional Benefits. The cost of any additional benefits you choose
will be deducted monthly. Your policy contains tables showing the guaranteed
maximum charges for all of these insurance costs.
Transaction Charges. In addition to the monthly deductions from your Policy
Account described above, we charge fees for certain policy transactions: see
PARTIAL WITHDRAWALS on page 14, CHANGING THE FACE AMOUNT on page 9, SUBSTITUTION
OF INSURED PERSON on page 10 and TRANSFERS OF POLICY ACCOUNT VALUE on page 12.
Also, if, after your policy is issued, you request more than one illustration in
a policy year, we may charge a fee. See ILLUSTRATIONS OF POLICY BENEFITS on page
27.
How Policy Account Charges Are Allocated. Generally, deductions from your Policy
Account for monthly charges are made from the Funds and the unloaned portion of
our Guaranteed Interest Account in accordance with the deduction allocation
percentages specified in your application unless you instruct us in writing to
do otherwise. See PREMIUM AND MONTHLY CHARGE ALLOCATIONS on page 8. If a
deduction cannot be made in accordance with these percentages, it will be made
based on the proportions that your unloaned amounts in the Guaranteed Interest
Account and your amounts in the Funds bear to the total unloaned value of your
Policy Account.
Changes. Any changes in the cost of insurance rates, charges for additional
benefits, Premium Sales Charge, mortality and expense risk charge or
administrative charges will be by class of insured person and will be based on
changes in future expectations about such factors as investment earnings,
mortality, the length of time policies will remain in effect, expenses and
taxes. We reserve the right to make a charge in the future for taxes or reserves
set aside for taxes, which would reduce the investment experience of the Funds.
See TAX EFFECTS on page 19.
CHARGES AGAINST THE SEPARATE ACCOUNT. These charges are reflected in the unit
values for the Funds of the Separate Account. See HOW WE DETERMINE THE UNIT
VALUE on page 12.
A charge for assuming MORTALITY AND EXPENSE RISKS will be made. The annual
current rate is .60%. The annual guaranteed rate is .90%. We are committed to
fulfilling our obligations under the policy and providing service to you over
the lifetime of your policy. Despite the uncertainty of future events, we
guarantee that monthly administrative and cost of insurance deductions from your
Policy Account will never be greater than the maximum amounts shown in your
policy. In making this guarantee, we assume the mortality risk that insured
persons will live for shorter periods than we estimated. When this happens, we
have to pay a greater amount of death benefit than we expected to pay in
relation to the cost of insurance charges we received. We also assume the
expense risk that the cost of issuing and administering policies will be greater
than we expected. If the amount collected from this charge exceeds losses from
the risks assumed, it will be to our profit.
TRUST CHARGES. The Funds purchase shares of the Trust at net asset value. That
price reflects investment management fees and other direct expenses that have
already been deducted from the assets of the Trust. The Trust does not impose a
sales charge. See THE TRUST'S INVESTMENT ADVISER on page 5.
SURRENDER CHARGES. There will be a difference between the amount in your Policy
Account and the Cash Surrender Value of your policy for at least the first
fifteen policy years. This difference is the result of the Premium Surrender
Charge (which is a contingent deferred sales load) and an Administrative
Surrender Charge. See also PREMIUM SALES CHARGE on page 15. These charges are
contingent because you pay them only if you surrender your policy, reduce its
Face Amount or it terminates. They are deferred because we do not deduct them
from your
16
<PAGE>
premiums. Because these Surrender Charges are contingent and deferred, the
amount we might collect in a policy year is not related to the actual sales
expenses for that year. A table of maximum Surrender Charges (maximum Premium
Surrender Charge plus the maximum Administrative Surrender Charge) appears on
the Policy Information Page.
Assuming you have not previously changed the Face Amount, the pro rata Surrender
Charges for a partial surrender will be determined by dividing the amount of the
Face Amount decrease by the initial Face Amount and multiplying that fraction by
the Surrender Charges. Face Amount reductions will be applied against prior Face
Amount increases, if any, in the reverse order in which such increases occurred,
and then to the original Face Amount.
Premium Surrender Charge. To determine the Premium Surrender Charge, "target"
premiums are used. Target premiums are not based on the "planned" premium you
determine, but are actuarially determined based on the age, sex and tobacco user
status of the insured person and the Face Amount. Target premiums are different
from sales load target premiums that are used to determine the Premium Sales
Charge.
The maximum Premium Surrender Charge for the initial Face Amount of your policy
(the "base policy") will equal 66% of one target premium. This maximum will not
vary based on the amount of premiums you pay or when you pay them. After the
first nine policy years, this maximum Premium Surrender Charge on the base
policy begins to decrease by 11% per year on a monthly basis for policy years
ten through fifteen. After fifteen years, the Premium Surrender Charge
attributable to the base policy expires.
Subject to the maximum, the Premium Surrender Charge is calculated based on your
actual premium payments. The Premium Surrender Charge percentage depends upon
the Face Amount and the policy year in which the premium payment is made as
follows:
<TABLE>
<CAPTION>
POLICY YEAR OF FACE AMOUNT RANGE FACE AMOUNT RANGE FACE AMOUNT RANGE
PREMIUM PAYMENT $50,000 TO $99,999 $100,000 TO $499,999 $500,000 AND OVER
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
YEAR 1 (UP TO ONE
SEC GUIDELINE 24% 26% 27%
ANNUAL PREMIUM)
---------------------------------------------------------------------------------------
YEAR 1 (OVER ONE 3% 5% 6%
SEC GUIDELINE
ANNUAL PREMIUM)
---------------------------------------------------------------------------------------
YEAR 2 3% 5% 6%
THROUGH 15
(ALL PREMIUMS)
</TABLE>
The SEC Guideline Annual Premium is the level annual amount that would be
payable in each policy year under certain assumptions defined by the SEC. These
assumptions include cost of insurance charges based on the 1980 Commissioner's
Standard Ordinary Mortality Tables, net investment earnings at an annual rate of
5%, and the fees and charges associated with the policy.
Attempting to structure the timing and amount of premium payments to reduce the
potential surrender charge below the maximum is not recommended. Paying small
amounts of premium in the policy's first fifteen years to reduce the potential
surrender charge could increase the risk that your policy will terminate without
value.
If you increase the Face Amount above the previous highest Face Amount (computed
without regard to changes in Face Amount resulting from changing the death
benefit option), we will establish an additional Premium Surrender Charge
corresponding to the increased amount. An additional target premium attributable
to the increase will be established and the additional Premium Surrender Charge
will be subject to the same maximum percentage of 66%. This maximum will start
to decline in the tenth year after the increase in the same manner as the
Premium Surrender Charge on the base policy.
A portion of each premium payment made after a Face Amount increase will be
deemed to be attributable to such increase, even if you do not increase the
amount or frequency of your premium payments. The allocation of premiums between
the base policy and Face Amount increases is actuarially determined in
accordance with SEC regulations. Moreover, if the increase moves the policy into
a higher Face Amount range, the Premium Surrender Charge percentage applied to
future premiums--even those premiums allocated to the base policy--will be the
higher percentage for that Face Amount range. Face Amount decreases do not
change the Premium Surrender Charge percentage.
Administrative Surrender Charge. The Administrative Surrender Charge per $1,000
of Face Amount in the first three policy years (subject to a $3,000 maximum) is:
ISSUE AGE: 0-34 35-44 45-49 50-54 55+
$2 $3 $4 $5 $6
After the first three policy years, the Administrative Surrender Charge grades
down on a monthly basis to zero at the end of the eighth policy year.
A Face Amount increase above the previous highest Face Amount will result in a
new layer of Administrative Surrender Charges applicable to the increase.
17
<PAGE>
ADDITIONAL INFORMATION ABOUT INCENTIVE LIFE PLUS
YOUR POLICY CAN TERMINATE. Your insurance coverage under Incentive Life Plus
continues as long as the Net Cash Surrender Value of the policy is enough to pay
the monthly deductions. The Net Cash Surrender Value equals the Cash Surrender
Value minus any loan and accrued loan interest. If the Net Cash Surrender Value
at the beginning of any policy month is less than the deductions for that month,
your policy will go into default unless the operation of either the death
benefit guarantee provision or the 3-Year no lapse guarantee provision results
in a waiver of the monthly deductions. See GUARANTEEING THE DEATH BENEFIT on
page 9.
If your policy goes into default, we will notify you, and any assignees on our
records, in writing, that a 61-day grace period has begun and indicate the
payment that is needed to avoid policy termination at the end of the grace
period. The required payment will not be more than an amount which would
increase the Net Cash Surrender Value to cover total monthly deductions for
three months (without regard to any investment performance in the Policy
Account). The required payment and any residual Policy Account value will be
used to cover the overdue deductions. However, if your Policy Account has
unfavorable investment experience, the required payment may not be sufficient to
cover the overdue deductions on the date we receive the payment. In this case, a
new 61-day grace period will begin. While a policy is in a grace period, you may
not transfer Policy Account value or make other policy changes.
If we do not receive payment within the 61 days, your policy will terminate
without value. We will withdraw any amount left in your Policy Account and apply
this amount to the overdue deductions, any applicable Surrender Charges and any
unpaid loan and accrued loan interest. We will inform you, and any assignee, at
last known addresses that your policy has ended without value. See TAX EFFECTS
on page 19 for the potential tax consequences of the termination of a policy.
YOU MAY RESTORE A POLICY AFTER IT TERMINATES. You may restore a policy within
six months after it terminates if you provide evidence that the insured person
(and any other person insured under a rider) is still insurable, and you make
the premium payment that we require to restore the policy. The policy will be
restored as of the beginning of the policy month which coincides with or follows
the date we approve your application. Previous loans will not be reactivated.
From the required payment we will deduct the charge for applicable taxes and the
Premium Sales Charge. On the effective date of restoration, the Policy Account
will be equal to the balance of the required payment plus a Surrender Charge
credit. This credit will be equal to the Surrender Charges that were deducted on
the date of default, but not greater than the applicable Surrender Charges as of
the effective date of restoration. We will start to make monthly deductions as
of the effective date of restoration. On that date, the monthly administrative
charges from the beginning of the grace period to the effective date of
restoration will be deducted from the Policy Account. See TAX EFFECTS on page 19
for the potential tax consequences of restoring a terminated policy. Some states
may vary the time period and conditions for policy restoration.
POLICY PERIODS, ANNIVERSARIES, DATES AND AGES. When an application for an
Incentive Life Plus policy is completed and submitted to us, we decide whether
or not to issue the policy. This decision is made based on the information in
the application and our standards for issuing insurance and classifying risks.
If we decide not to issue a policy, any premium paid will be refunded.
The Issue Date, shown on the Policy Information Page, is the date your policy is
actually issued, but if we have advanced the Register Date, the Issue Date will
be the same as the Register Date. Generally, contestability is measured from the
Issue Date, as is the suicide exclusion.
The Register Date, also shown on the Policy Information Page, is used to measure
policy years and policy months. Charges and deductions are first made as of the
Register Date. As to when coverage under the policy begins, see FLEXIBLE
PREMIUMS on page 8.
Generally, we determine the Register Date based upon when we receive your full
initial premium. In most cases:
o If you submit the full initial premium to your Equitable agent at the time
you sign the application, and we issue the policy as it was applied for, then
the Register Date will be the later of (a) the date part I of the policy
application was signed or, (b) the date part II of the policy application was
signed by a medical professional.
o If we do not receive your full initial premium at our Administrative Office
before the Issue Date or, if the policy is not issued as applied for, the
Register Date will be the same as the Issue Date.
An early Register Date may be permitted for employer sponsored cases in order to
accommodate a common Register Date for all employees. We may also permit
policyowners to advance a Register Date (up to three months) in employer
sponsored cases. An early Register Date may also be permitted to provide a
younger age at issue.
The investment start date is the date that your initial net premium begins to
vary with the investment performance of the Funds or accrue interest in the
Guaranteed Interest Account. Generally, the investment start date will be the
same as the Register Date if the full initial premium is received at our
Administrative Office before the Register Date. Otherwise, the investment start
date will be the date the full initial premium is received at our Administrative
Office. Thus, to the extent that your first premium is received before the
Register Date, there will be a period during which the initial premium will not
be experiencing investment performance. The investment start date for policies
with early Register Dates will be the date the premium is received at our
Administrative Office. Any subsequent premium payment received after the
investment start date will begin to experience investment performance as of the
date such payment is received at our Administrative Office. Remember, the amount
of your initial net premium allocated to the Funds may be temporarily allocated
to the Money Market Fund prior to allocation in accordance with your
instructions. See FLEXIBLE PREMIUMS on page 8.
18
<PAGE>
Age. Generally, when we refer to the age of the insured person, we mean his or
her age on the birthday nearest to the beginning of the particular policy year.
TAX EFFECTS
This discussion is based on our understanding of the effect of the current
Federal income tax laws as currently interpreted on Incentive Life Plus policies
owned by U.S. resident individuals. The tax effects on corporate taxpayers
subject to the Federal alternative minimum tax, non-U.S. residents or non-U.S.
citizens, may be different. This discussion is general in nature, and should not
be considered tax advice, for which you should consult your legal or tax
adviser.
POLICY PROCEEDS. An Incentive Life Plus policy will be treated as "life
insurance" for Federal income tax purposes if it meets the definitional
requirement of the Internal Revenue Code (the Code) and as long as the
portfolios of the Trust satisfy the diversification requirements under the Code.
We believe that Incentive Life Plus will meet these requirements, and that under
Federal income tax law:
o the death benefit received by the beneficiary under your Incentive Life Plus
policy will not be subject to Federal income tax; and
o as long as your policy remains in force, increases in the Policy Account
value as a result of interest or investment experience will not be subject to
Federal income tax unless and until there is a distribution from your policy,
such as a loan or a partial withdrawal.
SPECIAL TAX RULES MAY APPLY, HOWEVER, IF YOU TRANSFER YOUR OWNERSHIP OF THE
POLICY. CONSULT YOUR TAX ADVISER BEFORE ANY TRANSFER OF YOUR POLICY.
The Federal income tax consequences of a distribution from your policy will
depend on whether your policy is determined to be a "modified endowment." The
character of any income recognized will be ordinary income as opposed to capital
gain.
A MODIFIED ENDOWMENT IS a life insurance policy which fails to meet a
"seven-pay" test. In general, a policy will fail the seven-pay test if the
cumulative amount of premiums paid under the policy at any time during the first
seven policy years exceeds a calculated premium level. The calculated seven-pay
premium level is based on a hypothetical policy issued on the same insured
person and for the same initial death benefit which, under specified conditions
(which include the absence of expense, administrative and surrender charges),
would be fully paid for after seven level annual payments. Your policy will be
treated as a modified endowment unless the cumulative premiums paid under your
policy, at all times during the first seven policy years, are less than or equal
to the cumulative seven-pay premiums which would have been paid under the
hypothetical policy on or before such times.
Whenever there is a "material change" under a policy, it will generally be
treated as a new contract for purposes of determining whether the policy is a
modified endowment, and subjected to a new seven-pay period and a new seven-pay
limit. The new seven-pay limit would be determined taking into account, under a
downward adjustment formula, the Policy Account value of the policy at the time
of such change. A materially changed policy would be considered a modified
endowment if it failed to satisfy the new seven-pay limit. A material change
would occur if there was a substitution of the insured person, and could also
occur as a result of a change in death benefit option, the selection of
additional benefits, an increase in Face Amount and certain other changes.
If the benefits are reduced during the first seven policy years after entering
into the policy (or within seven years after a material change), for example, by
requesting a decrease in Face Amount or in some cases, by making a partial
withdrawal or terminating additional benefits under a rider, the calculated
seven-pay premium level will be redetermined based on the reduced level of
benefits and applied retroactively for purposes of the seven-pay test. If the
premiums previously paid are greater than the recalculated seven-pay premium
level limit, the policy will become a modified endowment. Generally, a life
insurance policy which is received in exchange for a modified endowment will
also be considered a modified endowment.
Changes made to a life insurance policy, for example, a decrease in benefits or
the termination of or restoration of a terminated policy, may have other effects
on your policy, including impacting the maximum amount of premiums that can be
paid under the policy, as well as the maximum amount of Policy Account value
that may be maintained under the policy. In some cases, this may cause us to
take action in order to assure your policy continues to qualify as life
insurance. See POLICY CHANGES on page 20.
IF YOUR INCENTIVE LIFE PLUS POLICY IS NOT A MODIFIED ENDOWMENT, as long as it
remains in force, a loan under your policy will be treated as indebtedness and
no part of the loan will be subject to current Federal income tax. Interest on
the loan will generally not be tax deductible. After the first 15 policy years,
the proceeds from a partial withdrawal will not be subject to Federal income tax
except to the extent such proceeds exceed your "Basis" in your policy. Your
Basis in your policy generally will equal the premiums you have paid less any
amounts previously recovered through tax-free policy distributions. During the
first fifteen policy years, the proceeds from a partial withdrawal could be
subject to Federal income tax to the extent your Policy Account value exceeds
your Basis in your policy. The portion subject to tax will depend upon the ratio
of your death benefit to the Policy Account value (or in some cases, the
premiums paid) under your policy and the age of the insured person at the time
of the withdrawal. In addition, if at any time your policy is surrendered, the
excess, if any, of your Cash Surrender Value (which includes the amount of
policy loan and accrued loan interest) over your Basis will be subject to
Federal income tax. IN ADDITION, IF A POLICY TERMINATES WHILE THERE IS A POLICY
LOAN, THE CANCELLATION OF SUCH LOAN AND ACCRUED LOAN INTEREST WILL BE TREATED AS
A DISTRIBUTION AND COULD BE SUBJECT TO TAX UNDER THE ABOVE RULES. On the Final
Policy Date, the excess of the amount of any benefit paid, not taking into
account any reduction for any loan and accrued loan interest, over your Basis in
the policy, will be subject to Federal income tax.
19
<PAGE>
IF YOUR POLICY IS A MODIFIED ENDOWMENT, any distribution from your policy will
be taxed on an "income-first" basis. Distributions for this purpose include a
loan (including any increase in the loan amount to pay interest on an existing
loan or an assignment or a pledge to secure a loan) or partial withdrawal. Any
such distributions will be considered taxable income to you to the extent your
Policy Account value exceeds your Basis in the policy. For modified endowments,
your Basis would be increased by the amount of any prior loan under your policy
that was considered taxable income to you. For purposes of determining the
taxable portion of any distribution, all modified endowments issued by the same
insurer or an affiliate to the same policyowner (excluding certain qualified
plans) during any calendar year are to be aggregated. The Secretary of the
Treasury has authority to prescribe additional rules to prevent avoidance of
"income-first" taxation on distributions from modified endowments.
A 10% penalty tax will also apply to the taxable portion of a distribution from
a modified endowment. The penalty tax will not, however, apply to distributions
(i) to taxpayers 59 1/2 years of age or older, (ii) in the case of a disability
(as defined in the Code) or (iii) received as part of a series of substantially
equal periodic annuity payments for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the taxpayer and his
beneficiary. If your policy is surrendered, the excess, if any, of your Cash
Surrender Value over your Basis will be subject to Federal income tax and,
unless one of the above exceptions applies, the 10% penalty tax. If your policy
terminates while there is a policy loan, the cancellation of such loan and
accrued loan interest will be treated as a distribution to the extent not
previously treated as such and could be subject to tax, including the penalty
tax, as described under the above rules. In addition, upon the Final Policy Date
the excess of the amount of any benefit paid, not taking into account any
reduction for any loan and accrued loan interest, over your Basis in the policy,
will be subject to Federal income tax and, unless an exception applies, a 10%
penalty tax.
If your policy becomes a modified endowment, distributions that occur during the
policy year it becomes a modified endowment and any subsequent policy year will
be taxed as described in the two preceding paragraphs. In addition distributions
from a policy within two years before it becomes a modified endowment will be
subject to tax in this manner. THIS MEANS THAT A DISTRIBUTION MADE FROM A POLICY
THAT IS NOT A MODIFIED ENDOWMENT COULD LATER BECOME TAXABLE AS A DISTRIBUTION
FROM A MODIFIED ENDOWMENT. The Secretary of the Treasury has been authorized to
prescribe rules which would treat similarly other distributions made in
anticipation of a policy becoming a modified endowment.
DIVERSIFICATION. Under Section 817(h) of the Code, the Secretary of the Treasury
has the authority to set standards for diversification of the investments
underlying variable life insurance policies. The Treasury Department has issued
final regulations regarding the diversification requirements. Failure to meet
these requirements would disqualify your policy as a variable life insurance
policy under Section 7702 of the Code. If this were to occur, you would be
subject to Federal income tax on the income under the policy for the period of
the disqualification and subsequent periods. The Separate Account, through the
Trust, intends to comply with these requirements.
In connection with the issuance of the then temporary diversification
regulations, the Treasury Department stated that it anticipated the issuance of
regulations or rulings prescribing the circumstances in which the ability of a
policyowner to direct his investment to particular funds of a separate account
may cause the policyowner, rather than the insurance company, to be treated as
the owner of the assets in the account. If you were considered the owner of the
assets of the Separate Account, income and gains from the account would be
included in your gross income for Federal income tax purposes. Under current law
we believe that Equitable Variable, and not the owner of the policy, would be
considered the owner of the assets of the Separate Account.
POLICY CHANGES. For you and your beneficiary to receive the tax treatment
discussed above, your policy must initially qualify and continue to qualify as
life insurance under Sections 7702 and 817(h) of the Code. We have reserved in
the policy the right to decline to accept all or part of any premium payments,
decline to change death benefit options, or decline to make partial withdrawals
that based upon our interpretation of current tax rules would cause your policy
to fail to qualify. We may also make changes in the policy or its riders or
require additional premium payments or make distributions from the policy to the
extent we deem necessary to qualify your policy as life insurance for tax
purposes. Any such change will apply uniformly to all policies that are
affected. You will be given written notice of such changes.
TAX CHANGES. The United States Congress has in the past considered, is currently
considering and may in the future consider legislation that, if enacted, could
change the tax treatment of life insurance policies. In addition, the Treasury
Department may amend existing regulations, issue regulations on the
qualification of life insurance and modified endowment contracts, or adopt new
interpretations of existing laws. State tax laws or, if you are not a United
States resident, foreign tax laws, may also affect the tax consequences to you,
the insured person or your beneficiary. These laws may change from time to time
without notice and, as a result, the tax consequences described above 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 effect. We
suggest you consult your legal or tax adviser.
ESTATE AND GENERATION SKIPPING TAXES. If the insured person is the policyowner,
the death benefit under Incentive Life Plus will generally be includable in the
policyowner's estate for purposes of Federal estate tax. If the policyowner is
not the insured person, under certain conditions only the Cash Surrender Value
of the policy would be so includable. Federal estate tax is integrated with
Federal gift tax under a unified rate schedule. In general, estates less than
$600,000 will not incur a Federal estate tax liability. In addition, an
unlimited marital deduction may be available for Federal estate tax purposes.
As a general rule, if a "transfer" is made to a person two or more generations
younger than the policyowner, a generation skipping tax may be payable at rates
similar to the maximum estate tax rate in effect at the time. The generation
skipping tax provisions generally apply to "transfers" which would be subject to
the gift and estate tax rules. Individuals are generally allowed an aggregate
generation skipping tax exemption of $1 million. Because these rules are
complex, you should consult with your tax adviser for specific information,
especially where benefits are passing to younger generations.
20
<PAGE>
The particular situation of each policyowner or beneficiary will determine how
ownership or receipt of policy proceeds will be treated for purposes of Federal
estate and generation skipping taxes as well as state and local estate,
inheritance and other taxes.
PENSION AND PROFIT-SHARING PLANS. If Incentive Life Plus policies are purchased
by a fund which forms part of a pension or profit-sharing plan qualified under
Sections 401(a) or 403 of the Code for the benefit of participants covered under
the plan, the Federal income tax treatment of such policies will be somewhat
different from that described above.
If purchased as part of a pension or profit-sharing plan, the current cost of
insurance for the net amount at risk is treated as a "current fringe benefit"
and is required to be included annually in the plan participant's gross income.
This cost (generally referred to as the "P.S. 58" cost) is reported to the
participant annually. If the plan participant dies while covered by the plan and
the policy proceeds are paid to the participant's beneficiary, then the excess
of the death benefit over the Policy Account value will not be subject to
Federal income tax. However, the Policy Account value will generally be taxable
to the extent it exceeds the sum of $5,000 plus the participant's cost basis in
the policy. The participant's cost basis will generally include the costs of
insurance previously reported as income to the participant. Special rules may
apply if the participant had borrowed from his Policy Account or was an
owner-employee under the plan.
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased by
a tax qualified plan. You should consult your legal adviser.
OTHER EMPLOYEE BENEFIT PROGRAMS. Complex rules may apply when a policy is held
by an employer or a trust, or acquired by an employee, in connection with the
provision of employee benefits. These policyowners also must consider whether
the policy was applied for by or issued to a person having an insurable interest
under applicable state law, as the lack of insurable interest may, among other
things, affect the qualification of the policy as life insurance for Federal
income tax purposes and the right of the beneficiary to death benefits.
Employers and employer-created trusts may be subject to reporting, disclosure
and fiduciary obligations under the Employee Retirement Income Security Act of
1974 (ERISA). You should consult your legal adviser.
OUR TAXES. Under the life insurance company tax provisions of the Code, variable
life insurance is treated in a manner consistent with fixed life insurance. The
operations of the Separate Account are reported in our Federal income tax return
but we currently pay no income tax on investment income and capital gains
reflected in variable life insurance policy reserves. Therefore, no charge is
currently being made to any Fund for taxes. We reserve the right to make a
charge in the future for taxes incurred, for example, a charge to the Separate
Account for income taxes incurred by us that are allocable to the policy.
We may have to pay state, local or other taxes in addition to applicable taxes
based on premiums. At present, these taxes are not substantial. If they
increase, charges may be made for such taxes when they are attributable to the
Separate Account or allocable to the policy.
WHEN WE WITHHOLD INCOME TAXES. Generally, unless you provide us with a written
election to the contrary before we make the distribution, we are required to
withhold income tax from any portion of the money you receive if the withdrawal
of money from your Policy Account or the surrender or the maturity of your
policy is a taxable transaction. If you do not wish us to withhold tax from the
payment, or if enough is not withheld, you may have to pay later. You may also
have to pay penalties under the tax rules if your withholding and estimated tax
payments are insufficient. In some cases, where generation skipping taxes may
apply, we may also be required to withhold for such taxes unless we are provided
satisfactory written notification that no such taxes are due.
PART 3: ADDITIONAL INFORMATION
YOUR VOTING PRIVILEGES
TRUST VOTING PRIVILEGES. As explained in Part 1, we invest the assets in the
Funds in shares of the corresponding Trust portfolios. Equitable Variable is the
legal owner of the shares and will attend, and has the right to vote at, any
meeting of the Trust's shareholders. Among other things, we may vote on any
matters described in the Trust's prospectus or requiring a vote by shareholders
under the 1940 Act.
Even though we own the shares, to the extent required by the 1940 Act, you will
have the opportunity to tell us how to vote the number of shares that can be
attributed to your policy. We will vote those shares at meetings of Trust
shareholders according to your instructions. If we do not receive instructions
in time from all policyowners, we will vote shares in a portfolio for which no
instructions have been received in the same proportion as we vote shares for
which we have received instructions in that portfolio. We will vote any Trust
shares that we are entitled to vote directly due to amounts we have accumulated
in the Funds in the same proportions that all policyowners vote, including those
who participate in other separate accounts. If the Federal securities laws or
regulations or interpretations of them change so that we are permitted to vote
shares of the Trust in our own right or to restrict policyowner voting, we may
do so.
HOW WE DETERMINE YOUR VOTING SHARES. You may participate in voting only on
matters concerning the Trust portfolios corresponding to the Funds to which your
Policy Account is allocated. The number of Trust shares in each Fund that are
attributable to your policy is determined by dividing the amount in your Policy
Account allocated to that Fund by the net asset value of one share of the
corresponding Trust portfolio as of the record date set by the Trust's Board for
the Trust's shareholders meeting. The record date for this purpose must be at
least 10 and no more than 90 days before the meeting of the Trust. Fractional
shares are counted.
If you are entitled to give us voting instructions, we will send you proxy
material and a form for providing voting instructions. In certain cases, we may
disregard instructions relating to changes in the Trust's adviser or the
investment policies of its portfolios. We will advise you if we do and detail
the reasons in the next semiannual report to policyowners.
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<PAGE>
SEPARATE ACCOUNT VOTING RIGHTS. Under the 1940 Act, certain actions (such as
some of those described under OUR RIGHT TO CHANGE HOW WE OPERATE, below) may
require policyowner approval. In that case, you will be entitled to one vote for
every $100 of value you have in the Funds. We will cast votes attributable to
amounts we have in the Funds in the same proportions as votes cast by
policyowners.
OUR RIGHT TO CHANGE HOW WE OPERATE
In addition to changing or adding investment companies, we have the right to
modify how we or the Separate Account operate. We intend to comply with
applicable law in making any changes and, if necessary, we will seek policyowner
approval. We have the right to:
o add Funds to, or remove Funds from, the Separate Account, combine two or more
Funds within the Separate Account, or withdraw assets relating to Incentive
Life Plus from one Fund and put them into another;
o register or end the registration of the Separate Account under the 1940 Act;
o operate the Separate Account under the direction of a committee or discharge
such a committee at any time (the committee may be composed entirely of
persons who are "interested persons" of Equitable Variable under the 1940
Act);
o restrict or eliminate any voting rights of policyowners or other people who
have voting rights that affect the Separate Account;
o operate the Separate Account or one or more of the Funds in any other form
the law allows, including a form that allows us to make direct investments.
Our Separate Account may be charged an advisory fee if its investments are
made directly rather than through an investment company. We may make any
legal investments we wish. In choosing these investments, we will rely on our
own or outside counsel for advice. In addition, we may disapprove any change
in investment advisers or in investment policy unless a law or regulation
provides differently.
If any changes are made that result in a material change in the underlying
investments of a Fund, you will be notified as required by law. We may, for
example, cause the Fund to invest in a mutual fund other than, or in addition
to, the Trust. If you then wish to transfer the amount you have in that Fund to
another Fund of the Separate Account or to the Guaranteed Interest Account, you
may do so, without charge, by contacting our Administrative Office. At the same
time, you may also change how your net premiums and deductions are allocated.
OUR REPORTS TO POLICYOWNERS
Shortly after the end of each policy year you will receive a report that
includes information about your policy's current death benefit, Policy Account
value, Cash Surrender Value and policy loan. Notices will be sent to you to
confirm premium payments (except premiums paid through an automated
arrangement), transfers and certain other policy transactions.
LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY
We can challenge the validity of your insurance policy based on material
misstatements in your application and any application for change. However, there
are some limits on how and when we can challenge the policy.
o We cannot challenge the policy after it has been in effect, during the
insured person's lifetime, for two years from the date the policy was issued
or restored after termination. (Some states may require that we measure this
time in some other way.)
o We cannot challenge any policy change that requires evidence of insurability
(such as an increase in Face Amount or a substitution of insured person)
after the change has been in effect for two years during the insured person's
lifetime.
o We cannot challenge an additional benefit rider that provides benefits in the
event that the insured person becomes totally disabled, after two years from
the later of the Issue Date or the date as of which the additional benefit
rider became effective. We can require proof of continuing disability while
such a rider is in effect as specified in the rider.
If the insured person dies within the time that we may challenge the validity of
the policy, we may delay payment until we decide whether to challenge the
policy. If the insured person's age or sex is misstated on any application, the
death benefit and any additional benefits provided will be those which would be
purchased by the most recent deduction for the cost of insurance and the cost of
any additional benefits at the insured person's correct age and sex.
If the insured person commits suicide within two years after the date on which
the policy was issued, the death benefit will be limited to the total of all
premiums that have been paid to the time of death minus any outstanding policy
loan, accrued loan interest and any partial withdrawals of Net Cash Surrender
Value. If the insured person commits suicide within two years after the
effective date of an increase in Face Amount that you requested, we will pay the
death benefit based on the Face Amount which was in effect before the increase,
plus the monthly cost of insurance deductions for the increase (including the
transaction charge for the Face Amount increase). A new two-year suicide and
contestability period will begin on the date of substitution following a
substitution of insured. Some states require that we measure this time by some
other date.
YOUR PAYMENT OPTIONS
Policy benefits or other payments, such as the Net Cash Surrender Value, may be
paid immediately in one sum or you may choose another form of payment for all or
part of the money. Payments under these options are not affected by the
investment experience of any Fund. Instead, interest accrues pursuant to the
options chosen.
22
<PAGE>
You will make a choice of payment option (or any later changes) and your choice
will take effect in the same way as it would if you were changing a beneficiary.
(See YOUR BENEFICIARY below.) If you do not arrange for a specific form of
payment before the insured person dies, the beneficiary will be paid through the
Equitable Access Account(TM). See WHEN WE PAY POLICY PROCEEDS below. The
beneficiary will then have a choice of payment options. However, if you do make
an arrangement with us for how the money will be paid, the beneficiary cannot
change the choice after the insured person dies. Different payment options may
result in different tax consequences.
The beneficiary or any other person who is entitled to receive payment may name
a successor to receive any amount that we would otherwise pay to that person's
estate if that person died. The person who is entitled to receive payment may
change the successor at any time.
We must approve any arrangements that involve more than one payment option, or a
payee who is not a natural person (for example, a corporation), or a payee who
is a fiduciary. Also, the details of all arrangements will be subject to our
rules at the time the arrangements are selected and take effect. This includes
rules on the minimum amount we will pay under an option, minimum amounts for
installment payments, withdrawal or commutation rights (your rights to receive
payments over time, for which we may offer a lump sum payment), the naming of
people who are entitled to receive payment and their successors, and the ways of
proving age and survival.
YOUR BENEFICIARY
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the insurance benefits of the policy. You may change the beneficiary
during the insured person's lifetime by writing to our Administrative Office. If
no beneficiary is living when the insured person dies, we will pay the death
benefit in equal shares to the insured person's surviving children. If there are
no surviving children, we will pay the death benefit to the insured person's
estate.
ASSIGNING YOUR POLICY
You may assign (transfer) your rights in the policy to someone else as
collateral for a loan or for some other reason, if we agree. A copy of the
assignment must be forwarded to our Administrative Office. We are not
responsible for any payment we make or any action taken before we receive notice
of the assignment or for the validity of the assignment. An absolute assignment
is a change of ownership. BECAUSE THERE MAY BE TAX CONSEQUENCES, INCLUDING THE
LOSS OF INCOME TAX-FREE TREATMENT FOR ANY DEATH BENEFIT PAYABLE TO THE
BENEFICIARY, YOU SHOULD CONSULT YOUR TAX ADVISER PRIOR TO MAKING AN ASSIGNMENT.
WHEN WE PAY POLICY PROCEEDS
We will pay any death benefits, maturity benefit, Net Cash Surrender Value or
loan proceeds within seven days after we receive the last required form or
request (and other documents that may be required for payment of death benefits)
at our Administrative Office. Death benefits are determined as of the date of
death of the insured person and will not be affected by subsequent changes in
the unit values of the Funds. Death benefits will generally be paid through the
Equitable Access Account, an interest bearing checking account. A beneficiary
will have immediate access to the proceeds by writing a check on the account. We
pay interest from the date of death to the date the Equitable Access Account is
closed. If an Equitable agent helps the beneficiary of a policy to prepare the
documents that are required for payment of the death benefit, we will send the
Equitable Access Account checkbook or check to the agent within seven days after
we receive the required documents. Our agents will take reasonable steps to
arrange for prompt delivery to the beneficiary.
We may, however, delay payment if we contest the policy. We may also delay
payment if we cannot determine the amount of the payment because the New York
Stock Exchange is closed, because trading in securities has been restricted by
the SEC, or because the SEC has declared that an emergency exists. In addition,
if necessary to protect our policyowners, we may delay payment where permitted
under applicable law.
We may defer payment of any Net Cash Surrender Value or loan amount (except a
loan to pay a premium to us) from the Guaranteed Interest Account for up to six
months after we receive your request. We will pay interest of at least 3% a year
from the date we receive your request if we delay more than 30 days in paying
you such amounts from the Guaranteed Interest Account.
DIVIDENDS
No dividends are paid on the policy described in this prospectus.
REGULATION
We are regulated and supervised by the New York State Insurance Department. In
addition, we are subject to the insurance laws and regulations in every
jurisdiction where we sell policies.
The Incentive Life Plus policy (Plan No. 94-300) has been filed with and
approved by insurance officials in 50 states, Puerto Rico and the Virgin
Islands. No Incentive Life Plus policy is available in the District of Columbia.
We submit annual reports on our operations and finances to insurance officials
in all the jurisdictions where we sell policies. The officials are responsible
for reviewing our reports to be sure that we are financially sound.
SPECIAL CIRCUMSTANCES
Equitable Variable may vary the charges and other terms of Incentive Life Plus
where special circumstances result in sales or administrative expenses or
mortality risks that are different than those normally associated with Incentive
Life Plus policies. These variations will be made only in accordance with
uniform rules that we establish.
23
<PAGE>
DISTRIBUTION
Equico Securities, Inc. (Equico), a wholly-owned subsidiary of Equitable, is the
principal underwriter of the Trust under a Distribution Agreement. Equico is
also the distributor of our variable life insurance policies and Equitable's
variable annuity contracts under a Distribution and Servicing Agreement.
Equico's principal business address is 1755 Broadway, New York, NY 10019. Equico
is registered with the SEC as a broker-dealer under the Securities Exchange Act
of 1934 (the Exchange Act) and is a member of the National Association of
Securities Dealers, Inc. Equico is paid a fee for its services as distributor of
our policies. For 1994, Equitable and Equitable Variable paid Equico a fee of
$216,920 for its services under the Distribution and Servicing Agreement.
We sell our policies through agents who are licensed by state insurance
officials to sell our variable life policies. These agents are also registered
representatives of Equico. The agent who sells you this policy receives sales
commissions from Equitable. We reimburse Equitable from our own resources,
including the Premium Sales Charge deducted from your premium and any Premium
Surrender Charge we might collect. Generally, during the first policy year, the
agent will receive an amount equal to a maximum of 50% of the premiums paid up
to a certain amount and 3% of the premiums paid in excess of that amount. For
policy years two through ten, the agent receives an amount up to a maximum of 6%
of the premiums paid up to a certain amount and 3% of the premiums paid in
excess of that amount; and, for years eleven and later, the agent receives an
amount up to 3% of the premiums paid. Following a requested Face Amount
increase, commissions on a portion of the premium will be calculated based on
the same rates described above. Use of a term rider on the insured person in
place of an equal amount of coverage under the base policy generally reduces
commissions. Agents with limited years of service may be paid differently.
We also sell our policies through independent brokers who are licensed by state
insurance officials to sell our variable life policies. They will also be
registered representatives either of Equico or of another company registered
with the SEC as a broker-dealer under the Exchange Act. The commissions for
independent brokers will be no more than those for agents and the same policy
for recovery of commissions applies. Commissions will be paid through the
registered broker-dealer.
Equitable performs certain sales and administrative duties for us pursuant to a
written agreement which is automatically renewed each year, unless either party
terminates. Under this agreement, we pay Equitable for salary costs and other
services and an amount for indirect costs incurred through our use of Equitable
personnel and facilities. We also reimburse Equitable for sales expenses related
to business other than variable life insurance policies. The amounts paid and
accrued to Equitable by us under the sales and services agreements totalled
approximately $380.5 million in 1994, $355.7 million in 1993 and $374.9 million
in 1992.
LEGAL PROCEEDINGS
We are not involved in any material legal proceedings.
ACCOUNTING AND ACTUARIAL EXPERTS
The financial statements of Separate Account FP and Equitable Variable included
in this prospectus have been audited for the years ended December 31, 1994 and
1993 by Price Waterhouse LLP and for the year ended December 31, 1992 by
Deloitte & Touche LLP, as stated in their respective reports. The financial
statements of Separate Account FP and Equitable Variable for the years ended
December 31, 1994 and 1993 included in this prospectus have been so included in
reliance on the reports of Price Waterhouse LLP, independent accountants, given
on the authority of such firm as experts in accounting and auditing. The
financial statements of Separate Account FP and Equitable Variable for the year
ended December 31, 1992 included in this prospectus have been so included in
reliance on the reports of Deloitte & Touche LLP, independent accountants, given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of Equitable Variable contained in this prospectus
should be considered only as bearing upon the ability of Equitable Variable to
meet its obligations under the Incentive Life Plus policies. They should not be
considered as bearing upon the investment experience of the funds of the
Separate Account.
Actuarial matters in this prospectus have been examined by Barbara Fraser,
F.S.A., M.A.A.A., who is a Vice President and Actuary of Equitable. Her opinion
on actuarial matters is filed as an exhibit to the Registration Statement we
filed with the SEC.
ADDITIONAL INFORMATION
We have filed a Registration Statement relating to the Separate Account and the
variable life insurance policy described in this prospectus with the SEC. The
Registration Statement, which is required by the Securities Act of 1933,
includes additional information that is not required in this prospectus under
the rules and regulations of the SEC. If you would like the additional
information, you may obtain it from the SEC's main office in Washington, D.C.
You will have to pay a fee for the material.
24
<PAGE>
MANAGEMENT
Here is a list of our directors and principal officers and a brief statement of
their business experience for the past five years. Unless otherwise noted, the
following persons have been involved in the management of Equitable and its
subsidiaries in various positions for the last five years. Unless otherwise
noted, their address is 787 Seventh Avenue, New York, New York 10019.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
------------------ ----------------------
<S> <C>
DIRECTORS
Michel Beaulieu...................... Director of Equitable Variable since February 1992. Senior Vice President, Equitable, since
September 1991; prior thereto, Chief Life Actuary AXA group 1989 to 1991; Managing Director
Blondeau & CIE (France) 1986 to 1989. Director, Equity & Law (London).
Laurent Clamagirand.................. Director of Equitable Variable since February 1995; Director of Financial Reporting,
Equitable, since November 1994; prior thereto, International Controller, AXA, January 1990
to October 1994; Director, Equitable of Colorado, since March 1995.
Christophe Dupont-Madinier........... Director of Equitable Variable since February 1993. Senior Vice President, AXA (Paris,
France), since 1988. Director, Donaldson, Lufkin & Jenrette, Inc.; Alliance Capital
Management Corporation, Equitable Real Estate Investment Management, Inc.
William T. McCaffrey................. Director of Equitable Variable since February 1987. Executive Vice President, Equitable,
since February 1986 and Chief Administrative Officer since February 1988; prior thereto,
various other Equitable positions. Director, Equitable Foundation since September 1986.
Peter D. Noris....................... Director of Equitable Variable since June 1995. Executive Vice President and Chief
Investment Officer, Equitable, since May 1995; prior thereto, Vice President, Salomon
Brothers, Inc., 1992 to 1995; Principal of Equity Division, Morgan Stanley & Co. Inc., from
1984 to 1992.
Michael J. Rich...................... Director of Equitable Variable since May 1995. Senior Vice President, Equitable, since
October 1994; prior thereto, Vice President of Underwriting, John Hancock Mutual Life
Insurance Co. since 1988.
Jose S. Suquet....................... Director of Equitable Variable since January 1995. Executive Vice President and Chief Agency
Officer, Equitable, since August 1994; prior thereto, Agency Manager, Equitable, since
February 1985.
OFFICERS--DIRECTORS
James M. Benson...................... President, Equitable Variable since December, 1993; Vice Chairman of the Board, Equitable
Variable July 1993 to December 1993. President and Chief Operating Officer, Equitable,
February 1994 to present; Senior Executive Vice President, April 1993 to February 1994.
Prior thereto, President, Management Compensation Group, 1983 to February 1993. Director,
Alliance Capital, October 1993 to present.
Harvey Blitz......................... Vice President, Equitable Variable since April 1995; Director of Equitable Variable since
October 1992. Senior Vice President, Equitable since September 1987. Senior Vice President,
The Equitable Companies Incorporated, since July 1992. Director, Equico Securities, Inc.,
since September 1992; Equitable of Colorado, since September 1992; Equisource and its
subsidiaries since October 1992.
Gordon Dinsmore...................... Senior Vice President, Equitable Variable, since February 1991. Senior Vice President,
Equitable since September 1989; prior thereto, various other Equitable positions. Director
and Senior Vice President, March 1991 to present, Equitable of Colorado; Director, FHJV
Holdings, Inc., December 1990 to present; Director, Equitable Distributors, Inc., August
1993 to present, and Director Equitable Foundation, May 1991 to present.
Jerry de St Paer..................... Senior Investment Officer, Equitable Variable since April 1995; Director of Equitable
Variable since April 1992. Executive Vice President & Chief Financial Officer, Equitable,
since April 1992; prior thereto, Executive Vice President since December 1990; Senior Vice
President & Treasurer June 1990 to December 1990; Senior Vice President, Equitable
Investment Corporation January 1987 to January 1991; Executive Vice President & Chief
Financial Officer, The Equitable Companies Incorporated since May 1992; Director, Economic
Services Corporation & various Equitable subsidiaries.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
------------------ ----------------------
<S> <C>
OFFICERS--DIRECTORS (Continued)
Joseph J. Melone..................... Chairman of the Board and Chief Executive Officer, Equitable Variable, since November 1990;
Chairman of the Board and Chief Executive Officer, Equitable, February 1994 to present;
President and Chief Executive Officer, September 1992 to February 1994; President and Chief
Operating Officer from November 1990 to September 1992. President and Chief Operating
Officer of The Equitable Companies Incorporated since July 1992. Prior thereto, President,
The Prudential Insurance Company of America, since December 1984. Director, Equity & Law
(United Kingdom) and various other Equitable subsidiaries.
Samuel B. Shlesinger................. Senior Vice President, Equitable Variable, since February 1988. Senior Vice President and
Actuary, Equitable; prior thereto, Vice President and Actuary. Director, Chairman and CEO,
Equitable of Colorado.
Dennis D. Witte...................... Senior Vice President, Equitable Variable, since February 1991; Senior Vice President,
Equitable, since July 1990; prior thereto, various other Equitable positions.
OFFICERS
Kevin R. Byrne....................... Treasurer, Equitable Variable, since September 1990; Vice President and Treasurer, Equitable
since September 1993; prior thereto, Vice President from March 1989 to September 1993. Vice
President and Treasurer, The Equitable Companies Incorporated, September 1993 to present;
Frontier Trust since August 1990; Equisource and its subsidiaries October 1990 to present.
Stephen Hogan........................ Vice President and Controller, Equitable Variable, February 1994 to present. Vice President,
Equitable, January 1994 to present; prior thereto, Controller, John Hancock subsidiaries,
from 1987 to December 1993.
Franklin Kennedy, III................ Vice President, Equitable Variable, since August 1981. Senior Vice President, Alliance
1345 Avenue of the Americas Capital Management Corporation, July 1993 to present; Senior Vice President, Equitable
New York, New York 10105 Capital Management Corporation, March 1987 to July 1993. Vice President, The Hudson River
Trust. Managing Director and Chief Investment Officer, Equitable Investment Management
Corporation, from November 1983 to January 1987.
J. Thomas Liddle, Jr................. Senior Vice President and Chief Financial Officer, Equitable Variable, since February 1986.
Senior Vice President, Equitable since April 1991; prior thereto, Vice President and
Actuary, Equitable.
William A. Narducci.................. Vice President and Chief Claims Officer, Equitable Variable since February 1989. Vice
200 Plaza Drive President, Equitable since February 1988; prior thereto, Assistant Vice President.
Secaucus, New Jersey 07096
John P. Natoli....................... Vice President and Chief Underwriting Officer, Equitable Variable, since February 1988. Vice
President, Equitable.
</TABLE>
26
<PAGE>
PART 4: ILLUSTRATIONS OF POLICY BENEFITS
To help clarify how the key financial elements of the policy work, a series of
tables has been prepared. The tables show how death benefits, Policy Account and
Cash Surrender Values ("policy benefits") under a hypothetical Incentive Life
Plus policy could vary over time if the Funds of our Separate Account had
CONSTANT hypothetical gross annual investment returns of 0%, 6% or 12% over the
years covered by each table. Actual investment results may be more or less than
those shown. The tables are for a 40 year old preferred risk male non-tobacco
user. Planned premium payments of $4,000 for an initial Face Amount of $300,000
are assumed to be paid at the beginning of each policy year. The illustration
assumes no policy loan has been taken. The differences between the Policy
Account and the Cash Surrender Values in the first fifteen years are the
Surrender Charges. See SURRENDER CHARGES on page 16.
The tables illustrate both current and guaranteed charges. The current charges
include reductions in cost of insurance charges beginning in the tenth policy
year and daily charges against the Separate Account investment Funds of .60% per
annum for mortality and expense risks (.90% for the guaranteed table). The
tables also assume .51% per annum for investment management (the average of the
effective annual advisory fees applicable to each Trust portfolio during 1994
and the maximum advisory fee for the International Portfolio) and .03% per annum
for direct Trust expenses. The charge reflected for direct Trust expenses
exceeds the aggregate actual charges incurred by the portfolios of the Trust as
a percentage of aggregate average daily Trust net assets during 1994. The effect
of these adjustments is that on a 0% gross rate of return the net rate of return
would be -1.14%, on 6% it would be 4.80%, and on 12% it would be 10.73%.
Remember, however, that investment management fees and direct Trust expenses
vary by portfolio. See THE TRUST'S INVESTMENT ADVISER on page 5. The tables also
assume a charge for applicable taxes of 2% of premiums. There are tables for
both death benefit Option A and death benefit Option B.
The second column of each table shows the effect of an amount equal to the
premiums invested to earn interest, after taxes, of 5% compounded annually.
These tables show that if a policy is returned in its very early years for
payment of its Cash Surrender Value, that Cash Surrender Value will be low in
comparison to the amount of the premiums accumulated with interest. Thus, the
cost of owning your policy for a relatively short time will be high.
The internal rate of return on Cash Surrender Value is equivalent to an interest
rate (after taxes) at which an amount equal to the illustrated premiums could
have been invested outside the Policy to arrive at the Cash Surrender Value of
the Policy. The internal rate of return on the death benefit is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated premiums
could have been invested outside the Policy to arrive at the death benefit of
the Policy. The internal rate of return is compounded annually, and the premiums
are assumed to be paid at the beginning of each policy year.
INDIVIDUAL ILLUSTRATIONS. On request, we will furnish you with a comparable
illustration based on your policy's factors. Upon request after issuance, we
will also provide a comparable illustration reflecting your actual Policy
Account value. If you request illustrations more than once in any policy year,
we may charge for the illustration.
27
<PAGE>
INCENTIVE LIFE PLUS
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000
MALE AGE 40
PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION A
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED ------------------------------ ----------------------------- --------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- -------- -------- -------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 $300,000 $300,000 $300,000 $ 2,376 $ 2,557 $ 2,737 $ 474 $ 665 $ 835
2 8,610 300,000 300,000 300,000 5,266 5,794 6,345 3,164 3,692 4,243
3 13,240 300,000 300,000 300,000 8,081 9,145 10,297 5,779 6,843 7,995
4 18,103 300,000 300,000 300,000 10,811 12,603 14,620 8,489 10,281 12,298
5 23,208 300,000 300,000 300,000 13,460 16,179 19,362 11,118 13,837 17,020
6 28,568 300,000 300,000 300,000 16,019 19,868 24,557 13,657 17,506 22,195
7 34,196 300,000 300,000 300,000 18,485 23,673 30,253 16,115 21,303 27,884
8 40,106 300,000 300,000 300,000 20,856 27,599 36,507 18,666 25,409 34,318
9 46,312 300,000 300,000 300,000 23,155 31,676 43,408 20,965 29,486 41,218
10 52,827 300,000 300,000 300,000 25,521 36,062 51,193 23,696 34,237 49,368
15 90,630 300,000 300,000 300,000 36,275 60,911 104,700 36,275 60,911 104,700
20 138,877 300,000 300,000 300,000 44,870 91,556 195,506 44,870 91,556 195,506
25 (age 65) $200,454 $300,000 $300,000 $431,350 $51,293 $131,009 $353,566 $51,293 $131,009 $353,566
<FN>
(1) Assumes net interest of 5% compounded annually.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED --------------------------- ---------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 -88.14% -83.64% -79.11% 7,400.00% 7,400.00% 7,400.00%
2 8,610 -47.97 -41.69 -35.51 717.47 717.47 717.47
3 13,240 -32.32 -25.57 -18.97 283.61 283.61 283.61
4 18,103 -23.80 -16.93 -10.25 162.42 162.42 162.42
5 23,208 -18.97 -12.04 -5.33 109.30 109.30 109.30
6 28,568 -15.93 -8.95 -2.23 80.35 80.35 80.35
7 34,196 -13.86 -6.84 -0.10 62.43 62.43 62.43
8 40,106 -12.14 -5.15 1.55 50.35 50.35 50.35
9 46,312 -11.06 -4.02 2.70 41.74 41.74 41.74
10 52,827 -9.80 -2.85 3.79 35.31 35.31 35.31
15 90,630 -6.60 0.19 6.69 18.45 18.45 18.45
20 138,877 -5.91 1.27 7.91 11.41 11.41 11.41
25 (age 65) $200,454 -5.63% 2.02% 8.72% 7.67% 7.67% 9.98%
<FN>
(1) Assumes net interest of 5% compounded annually.
</FN>
</TABLE>
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS
POLICY WOULD BE $3,533.96.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN.
28
<PAGE>
INCENTIVE LIFE PLUS
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000
MALE AGE 40
PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION A
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED ------------------------------ ----------------------------- --------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- -------- -------- -------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 $300,000 $300,000 $300,000 $ 2,341 $ 2,520 $ 2,699 $ 439 $ 618 $ 797
2 8,610 300,000 300,000 300,000 5,137 5,658 6,201 3,035 3,556 4,099
3 13,240 300,000 300,000 300,000 7,849 8,891 10,020 5,547 6,589 7,719
4 18,103 300,000 300,000 300,000 10,468 12,216 14,185 8,146 9,894 11,863
5 23,208 300,000 300,000 300,000 12,998 15,640 18,734 10,656 13,298 16,392
6 28,568 300,000 300,000 300,000 15,428 19,155 23,698 13,066 16,793 21,336
7 34,196 300,000 300,000 300,000 17,756 22,764 29,119 15,386 20,394 26,749
8 40,106 300,000 300,000 300,000 19,979 26,467 35,043 17,789 24,277 32,853
9 46,312 300,000 300,000 300,000 22,093 30,265 41,523 19,903 28,075 39,334
10 52,827 300,000 300,000 300,000 24,090 34,155 48,614 22,265 32,330 46,789
15 90,630 300,000 300,000 300,000 31,938 54,780 95,609 31,938 54,780 95,609
20 138,877 300,000 300,000 300,000 34,712 76,442 171,006 34,712 76,442 171,006
25 (age 65) $200,454 $300,000 $300,000 $362,036 $29,371 $97,412 $296,751 $29,371 $97,412 $296,751
<FN>
(1) Assumes net interest of 5% compounded annually.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED --------------------------- ---------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 -89.03% -84.56% -80.07% 7,400.00% 7,400.00% 7,400.00%
2 8,610 -49.56 -43.28 -37.10 717.47 717.47 717.47
3 13,240 -33.90 -27.11 -20.50 283.61 283.61 283.61
4 18,103 -25.24 -18.33 -11.61 162.42 162.42 162.42
5 23,208 -20.30 -13.31 -6.56 109.30 109.30 109.30
6 28,568 -17.17 -10.13 -3.35 80.35 80.35 80.35
7 34,196 -15.02 -7.93 -1.14 62.43 62.43 62.43
8 40,106 -13.25 -6.18 0.58 50.35 50.35 50.35
9 46,312 -12.16 -5.02 1.77 41.74 41.74 41.74
10 52,827 -11.01 -3.91 2.83 35.31 35.31 35.31
15 90,630 -8.39 -1.15 5.63 18.45 18.45 18.45
20 138,877 -8.86 -0.44 6.78 11.41 11.41 11.41
25 (age 65) $200,454 -11.48% -0.20% 7.60% 7.67% 7.67% 8.87%
<FN>
(1) Assumes net interest of 5% compounded annually.
</FN>
</TABLE>
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS
POLICY WOULD BE $3,533.96.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN.
29
<PAGE>
INCENTIVE LIFE PLUS
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000
MALE AGE 40
PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION B
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED ------------------------------ ----------------------------- --------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- -------- -------- -------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 $302,370 $302,549 $302,730 $ 2,370 $ 2,549 $ 2,730 $ 468 $ 648 $ 828
2 8,610 305,246 305,772 306,320 5,246 5,772 6,320 3,144 3,670 4,218
3 13,240 308,040 309,097 310,242 8,040 9,097 10,242 5,738 6,795 7,940
4 18,103 310,739 312,517 314,519 10,739 12,517 14,519 8,417 10,195 12,197
5 23,208 313,347 316,039 319,190 13,347 16,039 19,190 11,005 13,697 16,848
6 28,568 315,855 319,657 324,287 15,855 19,657 24,287 13,493 17,295 21,925
7 34,196 318,257 323,368 329,848 18,257 23,368 29,848 15,887 20,998 27,478
8 40,106 320,551 327,174 335,921 20,551 27,174 35,921 18,361 24,985 33,731
9 46,312 322,758 331,102 342,582 22,758 31,102 42,582 20,568 28,912 40,392
10 52,827 325,017 335,304 350,057 25,017 35,304 50,057 23,192 33,479 48,233
15 90,630 334,994 358,558 400,356 34,994 58,558 100,356 34,994 58,558 100,356
20 138,877 342,281 385,698 482,027 42,281 85,698 182,027 42,281 85,698 182,027
25 (age 65) $200,454 $346,671 $418,014 $618,242 $46,671 $118,014 $318,242 $46,671 $118,014 $318,242
<FN>
(1) Assumes net interest of 5% compounded annually.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED --------------------------- ---------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 -88.31% -83.81% -79.30% 7,549.24% 7,463.74% 7,468.25%
2 8,610 -48.21 -41.95 -35.78 724.99 725.75 726.53
3 13,240 -32.60 -25.86 -19.27 287.38 287.87 288.40
4 18,103 -24.10 -17.24 -10.57 165.09 165.52 166.01
5 23,208 -19.29 -12.36 -5.66 111.47 111.90 112.40
6 28,568 -16.27 -9.30 -2.58 82.24 82.68 83.21
7 34,196 -14.21 -7.20 -0.47 64.13 64.59 65.17
8 40,106 -12.52 -5.53 1.17 51.93 52.42 53.05
9 46,312 -11.46 -4.42 2.29 43.22 43.74 44.43
10 52,827 -10.21 -3.26 3.38 36.72 37.27 38.04
15 90,630 -7.10 -0.30 6.20 19.66 20.39 21.59
20 138,877 -6.57 0.65 7.31 12.47 13.42 15.18
25 (age 65) $200,454 -6.53% 1.25% 8.05% 8.60% 9.78% 12.21%
<FN>
(1) Assumes net interest of 5% compounded annually.
</FN>
</TABLE>
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS
POLICY WOULD BE $3,533.96.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN.
30
<PAGE>
INCENTIVE LIFE PLUS
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $4,000 INITIAL FACE AMOUNT $300,000
MALE AGE 40
PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION B
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED ------------------------------ ----------------------------- --------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- -------- -------- -------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 $302,334 $302,512 $302,691 $ 2,334 $ 2,512 $ 2,691 $ 432 $ 610 $ 789
2 8,610 305,117 305,635 306,175 5,117 5,635 6,175 3,015 3,533 4,073
3 13,240 307,806 308,842 309,965 7,806 8,842 9,965 5,504 6,540 7,663
4 18,103 310,395 312,129 314,082 10,395 12,129 14,082 8,073 9,807 11,760
5 23,208 312,884 315,499 318,560 12,884 15,499 18,560 10,542 13,157 16,218
6 28,568 315,263 318,942 323,426 15,263 18,942 23,426 12,901 16,580 21,064
7 34,196 317,527 322,458 328,711 17,527 22,458 28,711 15,157 20,088 26,341
8 40,106 319,673 326,042 334,455 19,673 26,042 34,455 17,483 23,852 32,265
9 46,312 321,696 329,691 340,697 21,696 29,691 40,697 19,506 27,501 38,507
10 52,827 323,586 333,397 347,478 23,586 33,397 47,478 21,761 31,572 45,653
15 90,630 330,589 352,299 391,026 30,589 52,299 91,026 30,589 52,299 91,026
20 138,877 331,788 369,732 455,441 31,788 69,732 155,441 31,788 69,732 155,441
25 (age 65) $200,454 $324,009 $381,242 $549,397 $24,009 $81,242 $249,397 $24,009 $81,242 $249,397
<FN>
(1) Assumes net interest of 5% compounded annually.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED --------------------------- ---------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 -89.20% -84.74% -80.27% 7,458.35% 7,462.81% 7,467.28%
2 8,610 -49.81 -43.55 -37.38 724.81 725.55 726.32
3 13,240 -34.19 -27.42 -20.81 287.27 287.75 288.27
4 18,103 -25.56 -18.65 -11.94 165.00 165.43 165.90
5 23,208 -20.63 -13.65 -6.91 111.40 111.82 112.30
6 28,568 -17.52 -10.48 -3.72 82.17 82.60 83.12
7 34,196 -15.40 -8.31 -1.53 64.07 64.51 65.07
8 40,106 -13.65 -6.57 0.18 51.87 52.34 52.95
9 46,312 -12.58 -5.44 1.34 43.15 43.65 44.32
10 52,827 -11.45 -4.35 2.39 36.64 37.17 37.91
15 90,630 -9.01 -1.74 5.05 19.51 20.20 21.34
20 138,877 -9.94 -1.33 5.97 12.22 13.08 14.73
25 (age 65) $200,454 -14.00% -1.64% 6.46% 8.16% 9.20% 11.48%
<FN>
(1) Assumes net interest of 5% compounded annually.
</FN>
</TABLE>
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS
POLICY WOULD BE $3,533.96.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN.
31
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
<TABLE>
<CAPTION>
INTERMEDIATE
MONEY GOVERNMENT HIGH COMMON EQUITY
MARKET SECURITIES YIELD BALANCED STOCK INDEX
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------ ----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of The
Hudson River Trust -- at
market value (Notes 2 and 9)
Cost: $138,079,624 .............. $138,112,384
31,003,727 .............. $28,266,864
50,877,692 .............. $50,004,589
341,928,746 .............. $339,049,871
814,398,039 .............. $812,349,390
31,724,933 .............. $31,325,647
Receivable (payable) for
policy related
transactions ................. 4,109,267 49,140 (10,836) (18,276) 622,866 21,063
------------ ----------- ----------- ------------ ------------ -----------
Total Assets .................... 142,221,651 28,316,004 49,993,753 339,031,595 812,972,256 31,346,710
------------ ----------- ----------- ------------ ------------ -----------
LIABILITIES
Payable (receivable) for
purchases (sales) of shares of
The Hudson River Trust ....... 3,997,965 52,945 15,230 122,383 705,098 21,172
Amount retained by Equitable
Variable in Separate Account
FP (Note 6) .................. 727,601 608,984 523,622 493,647 1,260,957 200,135
------------ ----------- ----------- ------------ ------------ -----------
Total Liabilities ............... 4,725,566 661,929 538,852 616,030 1,966,055 221,307
------------ ----------- ----------- ------------ ------------ -----------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS .............. $137,496,085 $27,654,075 $49,454,901 $338,415,565 $811,006,201 $31,125,403
============ =========== =========== ============ ============ ===========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
----------------------------
AGGRESSIVE GROWTH & QUALITY CONSERVATIVE GROWTH
GLOBAL STOCK INCOME BOND INVESTORS INVESTORS
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------ ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of The
Hudson River Trust -- at
market value (Notes 2 and 9)
Cost: $239,147,145 .............. $242,277,425
325,633,174 .............. $356,394,492
7,040,082 .............. $6,898,497
137,464,263 .............. $121,943,063
139,172,881 .............. $130,405,184
368,555,840 .............. $367,785,147
Receivable (payable) for
policy related
transactions ................. 693,092 (1,580,927) 191,538 (6,487) 102,625 410,514
------------ ------------ ---------- ------------ ------------ ------------
Total Assets .................... 242,970,517 354,813,565 7,090,035 121,936,576 130,507,809 368,195,661
------------ ------------ ---------- ------------ ------------ ------------
LIABILITIES
Payable (receivable) for
purchases (sales) of shares of
The Hudson River Trust ....... 592,036 (1,539,689) 191,896 (6,195) 91,960 493,712
Amount retained by Equitable
Variable in Separate Account
FP (Note 6) .................. 540,010 681,389 989,756 4,706,299 475,351 482,395
------------ ------------ ---------- ------------ ------------ ------------
Total Liabilities ............... 1,132,046 (858,300) 1,181,652 4,700,104 567,311 976,107
------------ ------------ ---------- ------------ ------------ ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS .............. $241,838,471 $355,671,865 $5,908,383 $117,236,472 $129,940,498 $367,219,554
============ ============ ========== ============ ============ ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-1
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONEY MARKET DIVISION
----------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust .............. $5,368,883 $4,163,389 $4,686,996
Expenses (Note 3):
Mortality and expense risk charges ................. 826,379 834,113 778,018
---------- ---------- ----------
NET INVESTMENT INCOME ................................... 4,542,504 3,329,276 3,908,978
---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Realized gain (loss) on investments ................ 95,530 (339,754) (136,115)
Realized gain distribution from
The Hudson River Trust ........................... -- -- --
---------- ---------- ----------
NET REALIZED GAIN (LOSS) ................................ 95,530 (339,754) (136,115)
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................ (14,267) (224,885) (178,161)
End of period ...................................... 32,760 (14,267) (224,885)
---------- ---------- ----------
Change in unrealized appreciation (depreciation)
during the period .................................. 47,027 210,618 (46,724)
---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 142,557 (129,136) (182,839)
---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $4,685,061 $3,200,140 $3,726,139
========== ========== ==========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT SECURITIES DIVISION
--------------------------------------------
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust .............. $ 5,671,984 $14,930,827 $14,839,013
Expenses (Note 3):
Mortality and expense risk charges ................. 527,675 1,470,325 1,569,627
------------ ----------- -----------
NET INVESTMENT INCOME ................................... 5,144,309 13,460,502 13,269,386
------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Realized gain (loss) on investments ................ (10,163,976) 3,999,846 (196,985)
Realized gain distribution from
The Hudson River Trust ........................... -- 11,449,074 4,721,432
------------ ----------- -----------
NET REALIZED GAIN (LOSS) ................................ (10,163,976) 15,448,920 4,524,447
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................ (1,617,237) 1,966,231 6,448,937
End of period ...................................... (2,736,863) (1,617,237) 1,966,231
------------ ----------- -----------
Change in unrealized appreciation (depreciation)
during the period .................................. (1,119,626) (3,583,468) (4,482,706)
------------ ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (11,283,602) 11,865,452 41,741
------------ ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $ (6,139,293) $25,325,954 $13,311,127
============ =========== ===========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM WORLD INCOME DIVISION
---------------------------------------
1994* 1993 1992
--------- --------- -----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust .............. $ 81,851 $ 504,768 $ 687,929
Expenses (Note 3):
Mortality and expense risk charges ................. 2,373 27,415 33,520
--------- --------- -----------
NET INVESTMENT INCOME ................................... 79,478 477,353 654,409
--------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Realized gain (loss) on investments ................ (115,812) (645,029) (347,915)
Realized gain distribution from
The Hudson River Trust ........................... -- -- --
--------- --------- -----------
NET REALIZED GAIN (LOSS) ................................ (115,812) (645,029) (347,915)
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................ (76,633) (676,871) (5,422)
End of period ...................................... -- (76,633) (676,871)
--------- --------- -----------
Change in unrealized appreciation (depreciation)
during the period .................................. 76,633 600,238 (671,449)
--------- --------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (39,179) (44,791) (1,019,364)
--------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $ 40,299 $ 432,562 $ (364,955)
========= ========= ===========
<FN>
See Notes to Financial Statements.
*For the period January 1, 1994 through February 22, 1994 (date of
substitution).
</FN>
</TABLE>
FSA-2
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
HIGH YIELD DIVISION
----------------------------------------
1994 1993 1992
----------- ---------- ----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust .............. $ 4,578,946 $4,488,259 $4,025,728
Expenses (Note 3):
Mortality and expense risk charges ................. 305,522 285,992 248,485
----------- ---------- ----------
NET INVESTMENT INCOME ................................... 4,273,424 4,202,267 3,777,243
----------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Realized gain (loss) on investments .................. (328,199) 107,852 (813,039)
Realized gain distribution from
The Hudson River Trust ............................. -- 1,030,687 --
----------- ---------- ----------
NET REALIZED GAIN (LOSS) ................................ (328,199) 1,138,539 (813,039)
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................ 4,734,999 763,746 (772,587)
End of period ...................................... (873,103) 4,734,999 763,746
----------- ---------- ----------
Change in unrealized appreciation (depreciation)
during the period .................................. (5,608,102) 3,971,253 1,536,333
----------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (5,936,301) 5,109,792 723,294
----------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $(1,662,877) $9,312,059 $4,500,537
=========== ========== ==========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
BALANCED DIVISION
--------------------------------------------
1994 1993 1992
------------ ----------- ------------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust .............. $ 10,557,487 $10,062,862 $ 9,484,792
Expenses (Note 3):
Mortality and expense risk charges ................. 2,103,510 2,047,811 1,728,449
------------ ----------- ------------
NET INVESTMENT INCOME ................................... 8,453,977 8,015,051 7,756,343
------------ ----------- ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Realized gain (loss) on investments .................. 858,164 1,446,919 870,777
Realized gain distribution from
The Hudson River Trust ............................. -- 20,280,817 21,249,123
------------ ----------- ------------
NET REALIZED GAIN (LOSS) ................................ 858,164 21,727,736 22,119,900
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................ 37,960,661 30,072,900 68,832,284
End of period ...................................... (2,878,875) 37,960,661 30,072,900
------------ ----------- ------------
Change in unrealized appreciation (depreciation)
during the period .................................. (40,839,536) 7,887,761 (38,759,384)
------------ ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (39,981,372) 29,615,497 (16,639,484)
------------ ----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $(31,527,395) $37,630,548 $ (8,883,141)
============ =========== ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK DIVISION
---------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust .............. $ 11,755,355 $ 10,311,886 $ 8,962,566
Expenses (Note 3):
Mortality and expense risk charges ................. 4,741,008 4,005,102 3,127,993
------------ ------------ ------------
NET INVESTMENT INCOME ................................... 7,014,347 6,306,784 5,834,573
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Realized gain (loss) on investments .................. 292,144 4,176,629 (2,382,465)
Realized gain distribution from
The Hudson River Trust ............................. 43,936,280 85,777,775 34,335,116
------------ ------------ ------------
NET REALIZED GAIN (LOSS) ................................ 44,228,424 89,954,404 31,952,651
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................ 71,350,568 22,647,989 46,299,874
End of period ...................................... (2,048,649) 71,350,568 22,647,989
------------ ------------ ------------
Change in unrealized appreciation (depreciation)
during the period .................................. (73,399,217) 48,702,579 (23,651,885)
------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (29,170,793) 138,656,983 8,300,766
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $(22,156,446) $144,963,767 $ 14,135,339
============ ============ ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-3
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY
INDEX
DIVISION GLOBAL DIVISION
--------- -----------------------------------------
1994* 1994 1993 1992
--------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust .............. $ 596,180 $ 2,768,605 $ 1,060,406 $ 392,650
Expenses (Note 3):
Mortality and expense risk charges ................. 152,789 1,211,620 466,897 216,472
--------- ----------- ----------- ----------
NET INVESTMENT INCOME ................................... 443,391 1,556,985 593,509 176,178
--------- ----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Realized gain (loss) on investments .................. (6,949) 3,347,704 1,333,766 (31,023)
Realized gain distribution from
The Hudson River Trust ............................. 134,154 4,821,242 11,642,904 267,304
--------- ----------- ----------- ----------
NET REALIZED GAIN (LOSS) ................................ 127,205 8,168,946 12,976,670 236,281
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................ -- 7,062,877 2,783,724 3,523,568
End of period ...................................... (399,286) 3,130,280 7,062,877 2,783,724
--------- ----------- ----------- ----------
Change in unrealized appreciation (depreciation)
during the period .................................. (399,286) (3,932,597) 4,279,153 (739,844)
--------- ----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (272,081) 4,236,349 17,255,823 (503,563)
--------- ----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $ 171,310 $ 5,793,334 $17,849,332 $ (327,385)
========= =========== =========== ==========
<FN>
See Notes to Financial Statements.
*Commencement of operations on April 1.
</FN>
</TABLE>
<TABLE>
<CAPTION>
GROWTH & INCOME
AGGRESSIVE STOCK DIVISION DIVISION
---------------------------------------------- ---------------------
1994 1993 1992 1994 1993**
------------ ------------ ------------ --------- -------
<S> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust .............. $ 400,102 $ 766,228 $ 1,550,129 $ 108,492 $ 3,394
Expenses (Note 3):
Mortality and expense risk charges ................. 1,944,639 1,757,109 1,620,545 19,204 1,833
------------ ------------ ------------ --------- -------
NET INVESTMENT INCOME ................................... (1,544,537) (990,881) (70,416) 89,288 1,561
------------ ------------ ------------ --------- -------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Realized gain (loss) on investments .................. (6,075,250) 35,696,507 8,236,284 (11,709) (134)
Realized gain distribution from
The Hudson River Trust ............................. -- 25,339,962 25,704,106 -- --
------------ ------------ ------------ --------- -------
NET REALIZED GAIN (LOSS) ................................ (6,075,250) 61,036,469 33,940,390 (11,709) (134)
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................ 35,185,988 53,885,737 96,740,910 (904) --
End of period ...................................... 30,761,318 35,185,988 53,885,737 (141,585) (904)
------------ ------------ ------------ --------- -------
Change in unrealized appreciation (depreciation)
during the period .................................. (4,424,670) (18,699,749) (42,855,173) (140,681) (904)
------------ ------------ ------------ --------- -------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (10,499,920) 42,336,720 (8,914,783) (152,390) (1,038)
------------ ------------ ------------ --------- -------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $(12,044,457) $ 41,345,839 $ (8,985,199) $ (63,102) $ 523
============ ============ ============ ========= =======
<FN>
See Notes to Financial Statements.
**Commencement of operations on October 1.
</FN>
</TABLE>
FSA-4
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
QUALITY BOND DIVISION
----------------------------
1994 1993*
------------ -----------
<S> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust .............. $ 8,123,722 $ 1,221,840
Expenses (Note 3):
Mortality and expense risk charges ................. 689,178 163,308
------------ -----------
NET INVESTMENT INCOME ................................... 7,434,544 1,058,532
------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Realized gain (loss) on investments .................. (410,697) (106)
Realized gain distribution from
The Hudson River Trust ............................. -- 130,973
------------ -----------
NET REALIZED GAIN (LOSS) ................................ (410,697) 130,867
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................ (1,886,621) --
End of period ...................................... (15,521,200) (1,886,621)
------------ -----------
Change in unrealized appreciation (depreciation)
during the period .................................. (13,634,579) (1,886,621)
------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (14,045,276) (1,755,754)
------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $ (6,610,732) $ (697,222)
============ ===========
<FN>
See Notes to Financial Statements.
*Commencement of operations on October 1.
</FN>
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-------------------------------------------
CONSERVATIVE INVESTORS DIVISION
-------------------------------------------
1994 1993 1992
------------ ---------- -----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust .............. $ 6,205,574 $4,088,977 $ 3,499,270
Expenses (Note 3):
Mortality and expense risk charges ................. 750,164 551,610 345,819
------------ ---------- -----------
NET INVESTMENT INCOME ................................... 5,455,410 3,537,367 3,153,451
------------ ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Realized gain (loss) on investments .................. (421,502) 91,739 (10,094)
Realized gain distribution from
The Hudson River Trust ............................. -- 4,651,717 2,200,535
------------ ---------- -----------
NET REALIZED GAIN (LOSS) ................................ (421,502) 4,743,456 2,190,441
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................ 1,915,037 2,223,612 4,140,474
End of period ...................................... (8,767,697) 1,915,037 2,223,612
------------ ---------- -----------
Change in unrealized appreciation (depreciation)
during the period .................................. (10,682,734) (308,575) (1,916,862)
------------ ---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (11,104,236) 4,434,881 273,579
------------ ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $ (5,648,826) $7,972,248 $ 3,427,030
============ ========== ===========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
--------------------------------------------
GROWTH INVESTORS DIVISION
--------------------------------------------
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust .............. $ 10,663,204 $ 5,922,228 $ 3,386,842
Expenses (Note 3):
Mortality and expense risk charges ................. 1,995,747 1,274,117 670,800
------------ ----------- -----------
NET INVESTMENT INCOME ................................... 8,667,457 4,648,111 2,716,042
------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Realized gain (loss) on investments .................. 241,591 52,392 187,420
Realized gain distribution from
The Hudson River Trust ............................. -- 14,624,517 7,569,846
------------ ----------- -----------
NET REALIZED GAIN (LOSS) ................................ 241,591 14,676,909 7,757,266
Unrealized appreciation (depreciation) on investments:
Beginning of period ................................ 20,567,604 12,746,740 15,687,285
End of period ...................................... (770,693) 20,567,604 12,746,740
------------ ----------- -----------
Change in unrealized appreciation (depreciation)
during the period .................................. (21,338,297) 7,820,864 (2,940,545)
------------ ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (21,096,706) 22,497,773 4,816,721
------------ ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $(12,429,249) $27,145,884 $ 7,532,763
============ =========== ===========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-5
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONEY MARKET DIVISION
----------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ 4,542,504 $ 3,329,276 $ 3,908,978
Net realized gain (loss) ........ 95,530 (339,754) (136,115)
Change in unrealized appreciation
(depreciation) on investments . 47,027 210,618 (46,724)
------------ ------------ ------------
Net increase (decrease)
from operations ............... 4,685,061 3,200,140 3,726,139
------------ ------------ ------------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 4) ........... 82,536,703 64,845,505 88,068,896
Benefits and other policy related
transactions (Note 5).......... (32,432,771) (31,747,197) (38,311,621)
Net transfers among divisions ... (25,466,044) (50,510,704) (67,793,471)
------------ ------------ ------------
Net increase (decrease) from
policy related transactions ... 24,637,888 (17,412,396) (18,036,196)
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 6) .... (24,067) 92,890 (203,598)
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS .. 29,298,882 (14,119,366) (14,513,655)
NET ASSETS, BEGINNING OF PERIOD .... 108,197,203 122,316,569 136,830,224
------------ ------------ ------------
NET ASSETS, END OF PERIOD .......... $137,496,085 $108,197,203 $122,316,569
============ ============ ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT SECURITIES DIVISION
------------------------------------------------
1994 1993 1992
------------- ------------- ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ 5,144,309 $ 13,460,502 $ 13,269,386
Net realized gain (loss) ........ (10,163,976) 15,448,920 4,524,447
Change in unrealized appreciation
(depreciation) on investments . (1,119,626) (3,583,468) (4,482,706)
------------- ------------- ------------
Net increase (decrease)
from operations ............... (6,139,293) 25,325,954 13,311,127
------------- ------------- ------------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 4) ........... 18,915,140 26,598,113 22,081,588
Benefits and other policy related
transactions (Note 5).......... (5,813,181) (7,539,335) (8,121,103)
Net transfers among divisions ... (125,116,319) (180,916,946) 26,878,651
------------- ------------- ------------
Net increase (decrease) from
policy related transactions ... (112,014,360) (161,858,168) 40,839,136
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 6) .... 15,335 (69,330) (127,134)
------------- ------------- ------------
INCREASE (DECREASE) IN NET ASSETS .. (118,138,318) (136,601,544) 54,023,129
NET ASSETS, BEGINNING OF PERIOD .... 145,792,393 282,393,937 228,370,808
------------- ------------- ------------
NET ASSETS, END OF PERIOD .......... $ 27,654,075 $ 145,792,393 $282,393,937
============= ============= ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM WORLD INCOME DIVISION
-------------------------------------------
1994* 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ 79,478 $ 477,353 $ 654,409
Net realized gain (loss) ........ (115,812) (645,029) (347,915)
Change in unrealized appreciation
(depreciation) on investments . 76,633 600,238 (671,449)
----------- ----------- -----------
Net increase (decrease)
from operations ............... 40,299 432,562 (364,955)
----------- ----------- -----------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 4) ........... 82,255 1,240,219 2,627,349
Benefits and other policy related
transactions (Note 5).......... (139,016) (822,325) (1,006,650)
Net transfers among divisions ... (2,976,927) (2,708,004) (1,657,362)
----------- ----------- -----------
Net increase (decrease) from
policy related transactions ... (3,033,688) (2,290,110) (36,663)
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 6) .... (20,398) (234,973) 149,435
----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS .. (3,013,787) (2,092,521) (252,183)
NET ASSETS, BEGINNING OF PERIOD .... 3,013,787 5,106,308 5,358,491
----------- ----------- -----------
NET ASSETS, END OF PERIOD .......... $ -- $ 3,013,787 $ 5,106,308
=========== =========== ===========
<FN>
See Notes to Financial Statements.
*For the period January 1, 1994 through February 22, 1994 (date of
substitution).
</FN>
</TABLE>
FSA-6
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
HIGH YIELD DIVISION
--------------------------------------------
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ 4,273,424 $ 4,202,267 $ 3,777,243
Net realized gain (loss) ........ (328,199) 1,138,539 (813,039)
Change in unrealized appreciation
(depreciation) on investments . (5,608,102) 3,971,253 1,536,333
------------ ----------- -----------
Net increase (decrease)
from operations ............... (1,662,877) 9,312,059 4,500,537
------------ ----------- -----------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 4) ........... 14,287,345 10,787,763 5,370,452
Benefits and other policy related
transactions (Note 5) ......... (7,162,537) (5,179,424) (3,291,125)
Net transfers among divisions ... (11,048,174) 1,006,671 (3,898,127)
------------ ----------- -----------
Net increase (decrease) from
policy related transactions ... (3,923,366) 6,615,010 (1,818,800)
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 6) .... 16,028 (31,889) (248,594)
------------ ----------- -----------
INCREASE (DECREASE) IN NET ASSETS .. (5,570,215) 15,895,180 2,433,143
NET ASSETS, BEGINNING OF PERIOD .... 55,025,116 39,129,936 36,696,793
------------ ----------- -----------
NET ASSETS, END OF PERIOD .......... $ 49,454,901 $55,025,116 $39,129,936
============ =========== ===========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
BALANCED DIVISION
----------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ 8,453,977 $ 8,015,051 $ 7,756,343
Net realized gain (loss) ........ 858,164 21,727,736 22,119,900
Change in unrealized appreciation
(depreciation) on investments . (40,839,536) 7,887,761 (38,759,384)
------------ ------------ ------------
Net increase (decrease)
from operations ............... (31,527,395) 37,630,548 (8,883,141)
------------ ------------ ------------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 4) ........... 70,116,900 67,351,402 63,379,628
Benefits and other policy related
transactions (Note 5) ......... (45,655,363) (44,497,967) (40,544,283)
Net transfers among divisions ... (19,954,097) (6,834,099) 6,188,919
------------ ------------ ------------
Net increase (decrease) from
policy related transactions ... 4,507,440 16,019,336 29,024,264
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 6) .... 47,322 256,506 (357,962)
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS .. (26,972,633) 53,906,390 19,783,161
NET ASSETS, BEGINNING OF PERIOD .... 365,388,198 311,481,808 291,698,647
------------ ------------ ------------
NET ASSETS, END OF PERIOD .......... $338,415,565 $365,388,198 $311,481,808
============ ============ ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK DIVISION
----------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ 7,014,347 $ 6,306,784 $ 5,834,573
Net realized gain (loss) ........ 44,228,424 89,954,404 31,952,651
Change in unrealized appreciation
(depreciation) on investments . (73,399,217) 48,702,579 (23,651,885)
------------ ------------ ------------
Net increase (decrease)
from operations ............... (22,156,446) 144,963,767 14,135,339
------------ ------------ ------------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 4) ........... 171,525,812 124,210,476 108,161,996
Benefits and other policy related
transactions (Note 5) ......... (93,481,219) (77,837,895) (67,400,166)
Net transfers among divisions ... 19,730,410 (9,498,455) (7,520,965)
------------ ------------ ------------
Net increase (decrease) from
policy related transactions ... 97,775,003 36,874,126 33,240,865
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 6) .... 44,948 (124,376) (264,131)
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS .. 75,663,505 181,713,517 47,112,073
NET ASSETS, BEGINNING OF PERIOD .... 735,342,696 553,629,179 506,517,107
------------ ------------ ------------
NET ASSETS, END OF PERIOD .......... $811,006,201 $735,342,696 $553,629,179
============ ============ ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-7
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
EQUITY
INDEX
DIVISION GLOBAL DIVISION
----------- ---------------------------------------------
1994* 1994 1993 1992
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ 443,391 $ 1,556,985 $ 593,509 $ 176,178
Net realized gain (loss) ........ 127,205 8,168,946 12,976,670 236,281
Change in unrealized appreciation
(depreciation) on investments . (399,286) (3,932,597) 4,279,153 (739,844)
----------- ------------ ------------ -----------
Net increase (decrease)
from operations ............... 171,310 5,793,334 17,849,332 (327,385)
----------- ------------ ------------ -----------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 4) ........... 690,540 77,766,997 25,508,452 13,671,349
Benefits and other policy related
transactions (Note 5) ......... (472,818) (23,371,745) (8,931,159) (6,376,660)
Net transfers among divisions ... 30,736,505 47,610,957 59,544,080 2,213,524
----------- ------------ ------------ -----------
Net increase (decrease) from
policy related transactions ... 30,954,227 102,006,209 76,121,373 9,508,213
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 6) .... (134) (17,737) 4,085 10,523
----------- ------------ ------------ -----------
INCREASE (DECREASE) IN NET ASSETS .. 31,125,403 107,781,806 93,974,790 9,191,351
NET ASSETS, BEGINNING OF PERIOD .... -- 134,056,665 40,081,875 30,890,524
----------- ------------ ------------ -----------
NET ASSETS, END OF PERIOD .......... $31,125,403 $241,838,471 $134,056,665 $40,081,875
=========== ============ ============ ===========
<FN>
See Notes to Financial Statements.
*Commencement of operations on April 1.
</FN>
</TABLE>
<TABLE>
<CAPTION>
GROWTH & INCOME
AGGRESSIVE STOCK DIVISION DIVISION
---------------------------------------------- -----------------------
1994 1993 1992 1994 1993**
------------ ------------ ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ (1,544,537) $ (990,881) $ (70,416) $ 89,288 $ 1,561
Net realized gain (loss) ........ (6,075,250) 61,036,469 33,940,390 (11,709) (134)
Change in unrealized appreciation
(depreciation) on investments . (4,424,670) (18,699,749) (42,855,173) (140,681) (904)
------------ ------------ ------------ ---------- --------
Net increase (decrease)
from operations ............... (12,044,457) 41,345,839 (8,985,199) (63,102) 523
------------ ------------ ------------ ---------- --------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 4) ........... 101,932,221 77,930,596 67,361,634 2,953,965 182,381
Benefits and other policy related
transactions (Note 5) ......... (48,604,650) (39,462,340) (33,003,929) (481,430) (6,581)
Net transfers among divisions ... 4,346,636 (73,890,214) 12,011,802 3,033,230 279,153
------------ ------------ ------------ ---------- --------
Net increase (decrease) from
policy related transactions ... 57,674,207 (35,421,958) 46,369,507 5,505,765 454,953
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 6) .... 35,791 (2,220) (34,456) 6,113 4,131
------------ ------------ ------------ ---------- --------
INCREASE (DECREASE) IN NET ASSETS .. 45,665,541 5,921,661 37,349,852 5,448,776 459,607
NET ASSETS, BEGINNING OF PERIOD .... 310,006,324 304,084,663 266,734,811 459,607 --
------------ ------------ ------------ ---------- --------
NET ASSETS, END OF PERIOD .......... $355,671,865 $310,006,324 $304,084,663 $5,908,383 $459,607
============ ============ ============ ========== ========
<FN>
See Notes to Financial Statements.
**Commencement of operations on October 1.
</FN>
</TABLE>
FSA-8
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
---------------------------------------------
QUALITY BOND DIVISION CONSERVATIVE INVESTORS DIVISION
----------------------------- ---------------------------------------------
1994 1993* 1994 1993 1992
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ 7,434,544 $ 1,058,532 $ 5,455,410 $ 3,537,367 $ 3,153,451
Net realized gain (loss) ........ (410,697) 130,867 (421,502) 4,743,456 2,190,441
Change in unrealized appreciation
(depreciation) on investments . (13,634,579) (1,886,621) (10,682,734) (308,575) (1,916,862)
------------ ------------ ------------ ------------ -----------
Net increase (decrease)
from operations ............... (6,610,732) (697,222) (5,648,826) 7,972,248 3,427,030
------------ ------------ ------------ ------------ -----------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 4) ........... (850,240) 181,283 48,492,315 43,782,002 22,620,423
Benefits and other policy related
transactions (Note 5) ......... (2,891,278) (441,626) (21,612,430) (17,644,077) (9,193,400)
Net transfers among divisions ... 25,765,197 100,786,909 (2,076,793) 6,165,330 6,845,573
------------ ------------ ------------ ------------ -----------
Net increase (decrease) from
policy related transactions ... 23,724,159 100,526,566 24,803,092 32,303,255 20,272,596
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE
IN SEPARATE ACCOUNT FP (Note 6) . 255,654 38,047 22,600 18,535 (201,980)
------------ ------------ ------------ ------------ -----------
INCREASE (DECREASE) IN NET ASSETS .. 17,369,081 99,867,391 19,176,866 40,294,038 23,497,646
NET ASSETS, BEGINNING OF PERIOD .... 99,867,391 -- 110,763,632 70,469,594 46,971,948
------------ ------------ ------------ ------------ -----------
NET ASSETS, END OF PERIOD .......... $117,236,472 $ 99,867,391 $129,940,498 $110,763,632 $70,469,594
============ ============ ============ ============ ===========
<FN>
See Notes to Financial Statements.
*Commencement of operations on October 1.
</FN>
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
----------------------------------------------
GROWTH INVESTORS DIVISION
----------------------------------------------
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ 8,667,457 $ 4,648,111 $ 2,716,042
Net realized gain (loss) ........ 241,591 14,676,909 7,757,266
Change in unrealized appreciation
(depreciation) on investments . (21,338,297) 7,820,864 (2,940,545)
------------ ------------ ------------
Net increase (decrease)
from operations ............... (12,429,249) 27,145,884 7,532,763
------------ ------------ ------------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 4) ........... 139,140,391 105,136,825 58,021,833
Benefits and other policy related
transactions (Note 5) ......... (54,863,821) (36,431,873) (20,773,734)
Net transfers among divisions ... 20,294,785 30,908,183 21,968,817
------------ ------------ ------------
Net increase (decrease) from
policy related transactions ... 104,571,355 99,613,135 59,216,916
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE
IN SEPARATE ACCOUNT FP (Note 6) . 15,372 (27,455) (145,201)
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS .. 92,157,478 126,731,564 66,604,478
NET ASSETS, BEGINNING OF PERIOD .... 275,062,076 148,330,512 81,726,034
------------ ------------ ------------
NET ASSETS, END OF PERIOD .......... $367,219,554 $275,062,076 $148,330,512
============ ============ ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-9
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS
1. Equitable Variable Life Insurance Company (Equitable Variable), a
wholly-owned subsidiary of The Equitable Life Assurance Society of the
United States (Equitable), established Separate Account FP (Account) as a
unit investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940. The Account consists of twelve
investment divisions: the Money Market Division, the Intermediate Government
Securities Division, the High Yield Division, the Balanced Division, the
Common Stock Division, the Global Division, the Aggressive Stock Division,
the Conservative Investors Division, the Growth Investors Division, the
Growth & Income Division, the Quality Bond Division and the Equity Index
Division. The assets in each Division are invested in shares of a designated
portfolio (Portfolio) of a mutual fund, The Hudson River Trust (the Trust).
Each Portfolio has separate investment objectives.
The Account supports the operations of Incentive Life(TM), flexible premium
variable life insurance policies, Incentive Life 2000(TM), flexible premium
variable life insurance policies, Champion 2000(TM), modified premium
variable whole life insurance policies, Survivorship 2000(TM), flexible
premium joint survivorship variable life insurance policies and SP-Flex(TM),
variable life insurance policies with additional premium option,
collectively, the Policies, and the Incentive Life 2000, Champion 2000 and
Survivorship 2000 policies are referred to as the Series 2000 Policies. All
Policies are issued by Equitable Variable. The assets of the Account are the
property of Equitable Variable. However, the portion of the Account's assets
attributable to the Policies will not be chargeable with liabilities arising
out of any other business Equitable Variable may conduct.
Under the Policies, policyowners may allocate amounts in their individual
accounts to the Divisions of the Account. Some policies permit amounts to be
allocated to options other than the Account. Net transfers out of the
Account of $35,120,632, $125,668,098 and $4,762,639 for 1994, 1993 and 1992,
respectively, are included in Net Transfers Among Divisions. The net assets
of any Division of the Account may not be less than the aggregate of the
policyowners' accounts allocated to that Division. Additional assets are set
aside in Equitable Variable's General Account to provide for (1) the
unearned portion of the monthly charges for mortality costs, and (2) other
policy benefits, as required under the state insurance law.
2. The significant accounting policies of the Account are as follows:
Investments are made in shares of the Trust and are valued at the net asset
values per share of the respective Portfolios. The net asset value is
determined by the Trust using the market or fair value of the underlying
assets of the Portfolio.
Investment transactions are recorded on the trade date. Realized gains and
losses include gains and losses on redemptions of the Trust's shares
(determined on the identified cost basis) and Trust distributions
representing the net realized gains on Trust investment transactions.
The operations of the Account are included in the consolidated Federal
income tax return of Equitable. Under the provisions of the Policies,
Equitable Variable has the right to charge the Account for Federal income
tax attributable to the Account. No charge is currently being made against
the Account for such tax since, under current tax law, Equitable Variable
pays no tax on investment income and capital gains reflected in variable
life insurance policy reserves. However, Equitable Variable retains the
right to charge for any Federal income tax incurred which is attributable to
the Account if the law is changed. Charges for state and local taxes, if
any, attributable to the Account also may be made.
Dividends are recorded as income at the end of each quarter on the
ex-dividend date. Capital gains are distributed by the Trust at the end of
each year.
3. Under the Policies, Equitable Variable assumes mortality and expense risks
and, to cover these risks, deducts charges from the assets of the Account
currently at annual rates of 0.60% of the net assets attributable to
Incentive Life, Incentive Life 2000 and Champion 2000 policyowners, 0.90% of
net assets attributable to Survivorship 2000 policyowners, and 0.85% for
SP-Flex policyowners. Under SP-Flex, Equitable Variable also deducts charges
from the assets of the Account for mortality and administrative costs of
0.60% and 0.35%, respectively, of net assets attributable to SP-Flex
policies.
Under Incentive Life and the Series 2000 Policies, mortality and
administrative costs are charged in a different manner than SP-Flex policies
(see Notes 4 and 5).
4. Before amounts are allocated to the Account for Incentive Life and the
Series 2000 Policies, Equitable Variable deducts state and local premium
taxes and either an initial policy fee (Incentive Life) or a premium sales
charge (Series 2000 Policies) from premiums. Under SP-Flex, the entire
initial premium is allocated to the Account. However, before any additional
premiums under SP-Flex are allocated to the Account, an administrative
charge is deducted.
FSA-10
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. The amounts attributable to Incentive Life and the Series 2000 policyowners'
accounts are charged monthly by Equitable Variable for mortality and
administrative costs. These charges are withdrawn from the Account along
with amounts for additional benefits. Under the Policies, amounts for
certain policy-related transactions (such as policy loans and surrenders)
are transferred out of the Separate Account.
6. The amount retained by Equitable Variable in the Account arise principally
from (1) contributions from Equitable Variable, and (2) that portion,
determined ratably, of the Account's investment results applicable to those
assets in the Account in excess of the net assets for the Policies. Amounts
retained by Equitable Variable are not subject to charges for mortality and
expense risks or mortality and administrative costs.
Amounts retained by Equitable Variable in the Account may be transferred at
any time by Equitable Variable to its General Account.
The following table shows the surplus contributions (withdrawals) by
investment division:
INVESTMENT DIVISION 1994 1993
------------------- ---- ----
Common Stock -- --
Money Market -- $ 1,145,000
Balanced -- --
Aggressive Stock -- --
High Yield -- 330,000
Global -- (6,895,000)
Conservative Investors -- 575,000
Growth Investors -- 130,000
Short-Term World Income $(5,165,329) --
Intermediate Government Securities -- --
Growth & Income -- 1,000,000
Quality Bond -- 5,000,000
Equity Index 200,000 --
----------- -----------
$(4,965,329) $ 1,285,000
=========== ===========
There were net withdrawals of $14,970,000 by Equitable Variable in 1992.
7. Equitable Variable has entered into a Distribution and Servicing Agreement
with Equitable and Equico Securities Inc. (Equico), whereby registered
representatives of Equico, authorized as variable life insurance agents
under applicable state insurance laws, sell the Policies. The registered
representatives are compensated on a commission basis by Equitable.
Equitable Variable also has entered into an agreement with Equitable under
which Equitable performs the administrative services related to the
Policies, including underwriting and issuance, billings and collections, and
policyowner services. There is no charge to the Account related to this
agreement.
8. On February 22, 1994, Equitable Variable, the Account and the Trust
substituted shares of the Trust's Intermediate Government Securities
Portfolio for shares of the Trust's Short-Term World Income Portfolio. The
amount transferred to Intermediate Government Securities Portfolio was
$2,192,109. The 1994 Short-Term World Income Division statement of
operations and statement of changes in net assets relate to the period from
January 1, 1994 to February 22, 1994 (date of substitution). The Short-Term
World Income Division is not available for future investments.
9. The Separate Account rates of return attributable to Incentive Life,
Incentive Life 2000 and Champion 2000 policyowners are different to
Survivorship 2000 and to SP-Flex policyowners because asset charges are
deducted at different rates under each policy (see Note 3).
The tables on the following pages show the gross and net investment returns
with respect to the Divisions for the periods shown. The net return for each
Division is based upon net assets for a policy which commences with the
beginning date of such period and is not based on the average net assets in
the Division during such period. Gross return is equal to the total return
earned by the underlying Trust investment.
FSA-11
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
RATES OF RETURN:
INCENTIVE LIFE,
---------------
INCENTIVE LIFE 2000
-------------------
AND CHAMPION 2000*
-----------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------ JANUARY 26(a) TO
MONEY MARKET DIVISION 1994 1993 1992 1991 1990 1989 1988 1987 DECEMBER 31, 1986
--------------------- ---- ---- ---- ---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 4.02 % 3.00 % 3.56 % 6.18 % 8.24 % 9.18 % 7.32 % 6.63 % 6.05 %
Net return................ 3.39 % 2.35 % 2.94 % 5.55 % 7.59 % 8.53 % 6.68 % 5.99 % 5.47 %
</TABLE>
INTERMEDIATE
GOVERNMENT YEARS ENDED DECEMBER 31,
SECURITIES ------------------------------- APRIL 1(a) TO
DIVISION 1994 1993 1992 DECEMBER 31, 1991
----------- ---- ---- ---- -----------------
Gross return..... (4.37)% 10.58 % 5.60 % 12.26 %
Net return....... (4.95)% 9.88 % 4.96 % 11.60 %
SHORT-TERM YEARS ENDED DECEMBER 31,
WORLD INCOME ------------------------------- APRIL 1(a) TO
DIVISION 1994 1993 1992 DECEMBER 31, 1991
-------- ---- ---- ---- -----------------
Gross return... -- 4.81 % (2.96)% 3.19 %
Net return..... -- 4.14 % (3.54)% 2.74 %
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------- JANUARY 26(a) TO
HIGH YIELD DIVISION 1994 1993 1992 1991 1990 1989 1988 1987 DECEMBER 31, 1986
------------------- ---- ---- ---- ---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 4.68 % --
Net return................ (3.37)% 22.41 % 11.64 % 23.72 % (1.71)% 4.50 % 9.08 % 4.05 % --
BALANCED DIVISION
-----------------
Gross return.............. (8.02)% 12.28 % (2.84)% 41.26 % 0.24 % 25.83 % 13.27 % (0.85)% 29.07 %
Net return................ (8.57)% 11.64 % (3.42)% 40.42 % (0.36)% 25.08 % 12.59 % (1.45)% 28.34 %
COMMON STOCK DIVISION
---------------------
Gross return.............. (2.14)% 24.84 % 3.22 % 37.88 % (8.12)% 25.59 % 22.43 % 7.49 % 15.65 %
Net return................ (2.73)% 24.08 % 2.60 % 37.06 % (8.67)% 24.84 % 21.70 % 6.84 % 15.01 %
</TABLE>
MARCH 31(a) TO
EQUITY INDEX DIVISION DECEMBER 31, 1994
--------------------- ------------------
Gross return.............. 1.08 %
Net return................ 0.58 %
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------- AUGUST 31(a) TO
GLOBAL DIVISION 1994 1993 1992 1991 1990 1989 1988 DECEMBER 31, 1987
--------------- ---- ---- ---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (13.27)%
Net return................ 4.60 % 31.33 % (1.10)% 29.77 % (6.63)% 26.17 % 10.22 % (13.45)%
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------- JANUARY 26(a) TO
AGGRESSIVE STOCK DIVISION 1994 1993 1992 1991 1990 1989 1988 1987 DECEMBER 31, 1986
------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. (3.81)% 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % 7.31 % 35.88 %
Net return................ (4.39)% 16.05 % (3.74)% 85.75 % 7.51 % 42.64 % 0.53 % 6.66 % 35.13 %
</TABLE>
YEAR ENDED OCTOBER 1(a) TO
GROWTH & INCOME DIVISION DECEMBER 31, 1994 DECEMBER 31, 1993
------------------------ ------------------ ------------------
Gross return.............. (0.58)% (0.25)%
Net return................ (1.17)% (0.41)%
YEAR ENDED OCTOBER 1(a) TO
QUALITY BOND DIVISION DECEMBER 31, 1994 DECEMBER 31, 1993
--------------------- ----------------- -----------------
Gross return.............. (5.10)% (0.51)%
Net return................ (5.67)% (0.66)%
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
----------------------- YEARS ENDED DECEMBER 31,
CONSERVATIVE ------------------------------------------------- OCTOBER 2(a) TO
INVESTORS DIVISION 1994 1993 1992 1991 1990 DECEMBER 31, 1989
------------------ ---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Gross return.............. (4.10)% 10.76 % 5.72 % 19.87 % 6.37 % 3.09 %
Net return................ (4.67)% 10.15 % 5.09 % 19.16 % 5.73 % 2.94 %
GROWTH INVESTORS DIVISION
-------------------------
Gross return.............. (3.15)% 15.26 % 4.90 % 48.89 % 10.66 % 3.98 %
Net return................ (3.73)% 14.58 % 4.27 % 48.01 % 10.00 % 3.82 %
<FN>
*Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992.
(a) Date as of which net premiums under the policies were first allocated to the
Division. The gross return and the net return for the periods indicated are
not annual rates of return.
</FN>
</TABLE>
FSA-12
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
RATES OF RETURN:
SP-FLEX
-------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------ AUGUST 31(a) TO
MONEY MARKET DIVISION 1994 1993 1992 1991 1990 1989 1988 DECEMBER 31, 1987
--------------------- ---- ---- ---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 4.02 % 3.00 % 3.56 % 6.17 % 8.24 % 9.18 % 7.32 % 2.15 %
Net return................ 2.17 % 1.13 % 1.71 % 4.29 % 6.30 % 7.24 % 5.41 % 1.62 %
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
INTERMEDIATE GOVERNMENT ----------------------------------- APRIL 1(a) TO
SECURITIES DIVISION 1994 1993 1992 DECEMBER 31, 1991
------------------- ---- ---- ---- ------------------
<S> <C> <C> <C> <C>
Gross return.............. (4.37)% 10.58 % 5.60 % 12.10 %
Net return................ (6.08)% 8.57 % 3.71 % 10.59 %
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
SHORT-TERM ---------------------------------- APRIL 1(a) TO
WORLD INCOME DIVISION 1994 1993 1992 DECEMBER 31, 1991
--------------------- ---- ---- ---- ------------------
<S> <C> <C> <C> <C>
Gross return.............. -- 4.81 % (2.95)% 3.20 %
Net return................ -- 2.90 % (4.69)% 1.81 %
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------- AUGUST 31(a) TO
1994 1993 1992 1991 1990 1989 1988 DECEMBER 31, 1987
---- ---- ---- ---- ---- ---- ---- -----------------
HIGH YIELD DIVISION
-------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 1.95 %
Net return................ (4.52)% 20.96 % 10.30 % 22.25 % (2.89)% 3.26 % 7.78 % 1.39 %
BALANCED DIVISION
-----------------
Gross return.............. (8.02)% 12.28 % (2.83)% 41.27 % 0.24 % 25.83 % 13.27 % (20.26)%
Net return................ (9.66)% 10.31 % (4.57)% 38.75 % (1.56)% 23.59 % 11.25 % (20.71)%
COMMON STOCK DIVISION
---------------------
Gross return.............. (2.14)% 24.84 % 3.23 % 37.87 % (8.12)% 25.59 % 22.43 % (22.57)%
Net return................ (3.88)% 22.60 % 1.38 % 35.43 % (9.76)% 23.36 % 20.26 % (23.00)%
GLOBAL DIVISION
---------------
Gross return.............. 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (11.40)%
Net return................ 3.36 % 29.77 % (2.28)% 28.23 % (7.75)% 24.67 % 8.90 % (11.86)%
AGGRESSIVE STOCK DIVISION
-------------------------
Gross return.............. (3.81)% 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % (24.28)%
Net return................ (5.53)% 14.67 % (4.89)% 83.54 % 6.23 % 40.95 % (0.66)% (24.68)%
</TABLE>
SEPTEMBER 1(a) TO
GROWTH & INCOME DIVISION DECEMBER 31, 1994
------------------------ ------------------
Gross return.............. (3.40)%
Net return................ (3.55)%
QUALITY BOND DIVISION
---------------------
Gross return.............. (2.20)%
Net return................ (2.35)%
EQUITY INDEX DIVISION
---------------------
Gross return.............. (2.54)%
Net return................ (2.69)%
ASSET ALLOCATION SERIES
----------------------- SEPTEMBER 1(a) TO
CONSERVATIVE INVESTORS DIVISION DECEMBER 31, 1994
------------------------------- -------------------
Gross return.................. (1.83)%
Net return.................... (1.98)%
GROWTH INVESTORS DIVISION
-------------------------
Gross return.................. (3.16)%
Net return.................... (3.31)%
(a) Date as of which net premiums under the policies were first allocated to the
Division. The gross return and the net return for the periods indicated are
not annual rates of return.
FSA-13
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
RATES OF RETURN:
SURVIVORSHIP 2000
-----------------
YEARS ENDED DECEMBER 31, AUGUST 17(a) TO
------------------------- DECEMBER 31,
MONEY MARKET DIVISION 1994 1993 1992
--------------------- ---- ---- ----
Gross return.............. 4.02 % 3.00 % 1.11 %
Net return................ 3.08 % 2.04 % 0.77 %
INTERMEDIATE GOVERNMENT
SECURITIES DIVISION
-------------------
Gross return.............. (4.37)% 10.58 % 0.90 %
Net return................ (5.23)% 9.55 % 0.56 %
SHORT-TERM
WORLD INCOME DIVISION
---------------------
Gross return.............. -- 4.81 % (4.34)%
Net return................ -- 3.83 % (4.66)%
HIGH YIELD DIVISION
-------------------
Gross return.............. (2.79)% 23.15 % 1.84 %
Net return................ (3.66)% 22.04 % 1.50 %
BALANCED DIVISION
-----------------
Gross return.............. (8.02)% 12.28 % 5.37 %
Net return................ (8.84)% 11.30 % 5.02 %
COMMON STOCK DIVISION
---------------------
Gross return.............. (2.14)% 24.84 % 5.28 %
Net return................ (3.02)% 23.70 % 4.93 %
GLOBAL DIVISION
---------------
Gross return.............. 5.23 % 32.09 % 4.87 %
Net return................ 4.29 % 30.93 % 4.52 %
AGGRESSIVE STOCK DIVISION
-------------------------
Gross return.............. (3.81)% 16.77 % 11.49 %
Net return................ (4.68)% 15.70 % 11.11 %
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
GROWTH & INCOME DIVISION 1994 1993
------------------------ ---- ----
Gross return.............. (0.58)% (0.25)%
Net return................ (1.47)% (0.48)%
QUALITY BOND DIVISION
---------------------
Gross return.............. (5.10)% (0.51)%
Net return................ (5.95)% (0.73)%
MARCH 1(a) TO
DECEMBER 31,
-------------
EQUITY INDEX DIVISION 1994
--------------------- ----
Gross return.............. 1.08 %
Net return................ 0.33 %
ASSET ALLOCATION SERIES
----------------------- YEARS ENDED DECEMBER 31, AUGUST 17(a) TO
CONSERVATIVE ------------------------- DECEMBER 31,
INVESTORS DIVISION 1994 1993 1992
------------------ ---- ---- ----
Gross return.............. (4.10)% 10.76 % 1.38 %
Net return................ (4.96)% 9.81 % 1.04 %
GROWTH INVESTORS DIVISION
-------------------------
Gross return.............. (3.15)% 15.26 % 6.89 %
Net return................ (4.02)% 14.24 % 6.53 %
(a) Date as of which net premiums under the policies were first allocated to the
Division. The gross return and the net return for the periods indicated are
not annual rates of return.
FSA-14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Equitable Variable Life Insurance Company
and Policyowners of Separate Account FP
of Equitable Variable Life Insurance Company
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of Money Market Division,
Intermediate Government Securities Division, High Yield Division, Balanced
Division, Common Stock Division, Equity Index Division, Global Division,
Aggressive Stock Division, Growth & Income Division, Quality Bond Division,
Conservative Investors Division and Growth Investors Division, separate
investment divisions of Equitable Variable Life Insurance Company (the
"Company") Separate Account FP at December 31, 1994 and the results of each of
their operations and the changes in each of their net assets for each of the two
years in the period then ended (for Growth & Income Division for the year then
ended and for the period October 1, 1993 (commencement of operations) through
December 31, 1993, for Short-Term World Income Division for the period January
1, 1994 through February 22, 1994 (date of substitution) and the year ended
December 31, 1993 and for Equity Index Division for the period April 1, 1994
(commencement of operations) through December 31, 1994), in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company'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 in The Hudson River Trust at
December 31, 1994 with the transfer agent, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
New York, NY
February 8, 1995
FSA-15
<PAGE>
INDEPENDENT AUDITORS' REPORT
Equitable Variable Life Insurance Company:
We have audited the statements of operations and changes in net assets for the
year ended December 31, 1992 of the Aggressive Stock, High Yield, Global, Common
Stock, Balanced, Money Market, Conservative Investors, Growth Investors,
Intermediate Government Securities, and Short-Term World Income Divisions of
Separate Account FP of Equitable Variable Life Insurance Company. These
financial statements are the responsibility of Equitable Variable Life Insurance
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the results of operations and the changes in net assets of the
Divisions of Separate Account FP of Equitable Variable Life Insurance Company
for the year ended December 31, 1992 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 16, 1993
FSA-16
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
--------- ---------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Held to maturity, at amortized cost ...................................... $ 2,008.5 $ 2,229.9
Available for sale, at estimated fair value .............................. 2,138.8 2,402.3
Policy loans ............................................................... 1,185.2 1,087.3
Mortgage loans on real estate .............................................. 888.5 1,059.5
Equity real estate ......................................................... 641.0 613.6
Other equity investments ................................................... 239.1 307.3
Other invested assets ...................................................... 107.8 87.6
--------- ---------
Total investments ........................................................ 7,208.9 7,787.5
Cash and cash equivalents ..................................................... 182.3 98.0
Deferred policy acquisition costs ............................................. 2,077.1 1,946.7
Other assets .................................................................. 240.7 214.0
Separate Accounts assets ...................................................... 3,345.3 3,048.7
--------- ---------
TOTAL ASSETS .................................................................. $13,054.3 $13,094.9
========= =========
LIABILITIES
Policyholders' account balances ............................................... $ 7,340.0 $ 7,614.7
Future policy benefits and other policyholders' liabilities ................... 509.4 475.2
Other liabilities ............................................................. 441.1 540.7
Separate Accounts liabilities ................................................. 3,314.9 3,011.6
--------- ---------
Total liabilities ........................................................ 11,605.4 11,642.2
--------- ---------
Commitments and contingencies (Notes 7, 9, 10 and 11)
SHAREHOLDER'S EQUITY
Common stock, par value $1 per share;
5.0 million shares authorized, 1.5 million shares issued and outstanding.... 1.5 1.5
Capital in excess of par value ................................................ 1,355.7 1,305.7
Retained earnings ............................................................. 165.5 129.5
Net unrealized investment (losses) gains ...................................... (72.6) 22.3
Minimum pension liability ..................................................... (1.2) (6.3)
--------- ---------
Total shareholder's equity ............................................... 1,448.9 1,452.7
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY .................................... $13,054.3 $13,094.9
========= =========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-1
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and investment-type product policy fee income ........ $ 552.6 $ 485.2 $ 425.0
Premiums ............................................................ 40.1 46.9 50.8
Net investment income ............................................... 526.8 557.6 574.5
Investment (losses) gains, net ...................................... (4.6) 1.5 (54.0)
Other income ........................................................ 2.9 3.0 5.5
-------- -------- --------
Total revenues .................................................... 1,117.8 1,094.2 1,001.8
-------- -------- --------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances ................ 389.3 439.2 510.6
Policyholders' benefits ............................................. 242.3 251.0 247.5
Other operating costs and expenses .................................. 413.8 356.7 306.5
-------- -------- --------
Total benefits and other deductions ............................ 1,045.4 1,046.9 1,064.6
-------- -------- --------
Earnings (loss) before Federal income taxes and cumulative
effect of accounting changes ........................................ 72.4 47.3 (62.8)
Federal income tax expense (benefit) ................................... 25.0 20.5 (21.6)
-------- -------- --------
Earnings (loss) before cumulative effect of accounting changes ......... 47.4 26.8 (41.2)
Cumulative effect of accounting changes, net of Federal income taxes.... (11.4) -- (22.4)
-------- -------- --------
Net Earnings (Loss) .................................................... $ 36.0 $ 26.8 $ (63.6)
======== ======== ========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-2
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
COMMON STOCK, AT PAR VALUE:
Beginning and end of year ...................... $ 1.5 $ 1.5 $ 1.5
-------- -------- --------
CAPITAL IN EXCESS OF PAR VALUE:
Balance, beginning of year ..................... 1,305.7 1,055.7 955.7
Additional capital in excess of par value ...... 50.0 250.0 100.0
-------- -------- --------
Balance, end of year ........................... 1,355.7 1,305.7 1,055.7
-------- -------- --------
RETAINED EARNINGS:
Balance, beginning of year ..................... 129.5 102.7 166.3
Net earnings (loss) ............................ 36.0 26.8 (63.6)
-------- -------- --------
Balance, end of year ........................... 165.5 129.5 102.7
-------- -------- --------
NET UNREALIZED INVESTMENT (LOSSES) GAINS:
Balance, beginning of year ..................... 22.3 11.1 7.7
Change in unrealized investment (losses) gains.. (94.9) 11.2 3.4
-------- -------- --------
Balance, end of year ........................... (72.6) 22.3 11.1
-------- -------- --------
MINIMUM PENSION LIABILITY:
Balance, beginning of year ..................... (6.3) --
Change in minimum pension liability ............ 5.1 (6.3)
-------- --------
Balance, end of year ........................... (1.2) (6.3)
-------- --------
TOTAL SHAREHOLDER'S EQUITY, END OF YEAR ........... $1,448.9 $1,452.7 $1,171.0
======== ======== ========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-3
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
NET EARNINGS (LOSS) .................................................... $ 36.0 $ 26.8 $ (63.6)
ADJUSTMENTS TO RECONCILE NET EARNINGS (LOSS) TO NET CASH (USED) PROVIDED
BY OPERATING ACTIVITIES:
Investment losses (gains), net ...................................... 4.6 (1.5) 54.0
General Account policy charges ...................................... (572.8) (496.7) (412.3)
Interest credited to policyholders' account balances ................ 389.3 439.2 510.6
Other, net .......................................................... (17.2) 117.2 (95.1)
--------- --------- ---------
Net cash (used) provided by operating activities ....................... (160.1) 85.0 (6.4)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities and repayments ........................................... 511.8 1,165.8 717.7
Sales ............................................................... 2,119.0 2,844.2 1,533.5
Return of capital from joint ventures and limited partnerships ...... 14.2 56.3 68.3
Purchases ........................................................... (2,251.7) (4,414.0) (2,584.0)
Other, net .......................................................... (102.2) (98.8) (103.5)
--------- --------- ---------
Net cash provided (used) by investing activities ....................... 291.1 (446.5) (368.0)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits .......................................................... 602.8 612.9 611.3
Withdrawals ....................................................... (697.7) (506.2) (544.4)
Capital contribution from Equitable Life ............................ 50.0 250.0 100.0
Other, net .......................................................... (1.8) 2.0 --
--------- --------- ---------
Net cash (used) provided by financing activities ....................... (46.7) 358.7 166.9
--------- --------- ---------
Change in cash and cash equivalents .................................... 84.3 (2.8) (207.5)
Cash and cash equivalents, beginning of year ........................... 98.0 100.8 308.3
--------- --------- ---------
Cash and Cash Equivalents, End of Year ................................. $ 182.3 $ 98.0 $ 100.8
========= ========= =========
Supplemental cash flow information:
Interest Paid ....................................................... $ 5.7 $ 2.1
========= =========
Income Taxes Refunded ............................................... $ 8.4 $ .3 $ 8.5
========= ========= =========
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-4
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Equitable Variable Life Insurance Company ("Equitable Variable Life") was
incorporated on September 11, 1972 as a wholly owned subsidiary of The
Equitable Life Assurance Society of the United States ("Equitable Life").
Equitable Variable Life's operations consist principally of the sale of
interest-sensitive life insurance and annuity products.
In accordance with Equitable Life's plan of demutualization, Equitable Life
converted to a stock life insurance company on July 22, 1992 and became a
wholly owned subsidiary of The Equitable Companies Incorporated (the
"Holding Company").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation--The accompanying
consolidated financial statements include the accounts of Equitable Variable
Life and its non-insurance subsidiaries (collectively "EVLICO"). After July
22, 1992, EVLICO commenced to prepare its general purpose consolidated
financial statements in conformity with generally accepted accounting
principles ("GAAP") for stock life insurance companies. Such principles have
been applied retroactively in the preparation of these consolidated
financial statements for all periods prior to conversion. All significant
intercompany transactions and balances have been eliminated in
consolidation.
Certain reclassifications have been made in the amounts presented for prior
periods to conform these periods with the 1994 presentation.
Accounting Changes--In the fourth quarter of 1994 (effective as of January
1, 1994), EVLICO adopted Statement of Financial Accounting Standards
("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits," which
requires employers to recognize the obligation to provide postemployment
benefits. Implementation of this statement resulted in a charge for the
cumulative effect of accounting change of $11.4 million, net of a Federal
income tax benefit of $6.2 million. The current year impact from the
implementation of this statement had no material effect on the 1994
consolidated statement of earnings.
In the first quarter of 1993, EVLICO adopted SFAS No. 113, "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts,"
which establishes the conditions for reinsurance accounting. With the
adoption of this statement, certain reinsurance contracts were reclassified
in 1993 and are presented on a gross basis. Implementation of this statement
had no material effect on EVLICO's consolidated financial statements.
At December 31, 1993, EVLICO adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which expands the use of fair
value accounting for those securities that a company does not have positive
intent and ability to hold to maturity. Implementation of this statement
increased consolidated shareholder's equity by $7.2 million, net of deferred
policy acquisition costs and deferred Federal income tax.
In the fourth quarter of 1992 (effective as of January 1, 1992), EVLICO
adopted SFAS No. 109, "Accounting for Income Taxes" and SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." The
cumulative effect of accounting changes of $22.4 million is comprised of a
credit of $65.0 million related to the income tax statement and a charge of
$87.4 million, net of a Federal income tax benefit of $45.0 million, related
to the postretirement benefit statement.
In 1992, effective in the fourth quarter, EVLICO changed its method of
accounting for foreclosed assets to comply with AICPA Statement of Position
No. 92-3, "Accounting for Foreclosed Assets." This change resulted in a
charge of $16.1 million which is reflected in investment (losses) gains,
net.
New Accounting Pronouncements--In the first quarter of 1995, EVLICO intends
to adopt SFAS No. 114, "Accounting by Creditors for Impairment of a Loan."
This statement applies to all creditors and addresses the accounting for
impairment of a loan by specifying how allowances for credit losses should
be determined. The statement also applies to all loans that are restructured
in a troubled debt restructuring involving a modification of terms. It
requires that impaired loans that are within the scope of this statement be
measured based on the present value of expected future cash flows discounted
at the loan's effective interest rate or, as a practical expedient, at the
loan's observable market price or the fair value of the collateral if the
loan is collateral dependent. EVLICO is currently providing for impairment
of loans through an allowance for possible losses, and the implementation of
this statement is not expected to have a significant effect on the level of
this allowance. As a result, there should be no material effect on EVLICO's
consolidated statements of earnings or shareholder's equity upon adoption.
Valuation of Investments--Fixed maturities which EVLICO has both the ability
and the intent to hold to maturity are stated principally at amortized cost.
For publicly traded fixed maturities and for directly negotiated fixed
maturities, the amortized cost is adjusted for impairments in value deemed
to be other than temporary. Fixed maturities which have been identified as
available for sale are reported at estimated fair value.
F-5
<PAGE>
Mortgage loans on real estate are stated at unpaid principal balances, net
of unamortized discounts and valuation allowances. The valuation allowances
are based on losses expected by management to be realized on transfers of
mortgage loans to real estate (upon foreclosure or in-substance
foreclosure), on the disposition or settlement of mortgage loans and on
mortgage loans which management believes may not be collectible in full. In
establishing valuation allowances, management considers, among other things,
the estimated fair value of the underlying collateral.
Policy loans are stated at unpaid principal balances.
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. Valuation allowances
on real estate held for the production of income are computed using the
forecasted cash flows of the respective properties discounted at a rate
equal to EVLICO's cost of funds; valuation allowances on real estate
available for sale are computed using the lower of estimated current fair
value or depreciated cost, net of disposition cost.
Partnerships and joint venture interests in which EVLICO does not have
control and a majority economic interest are reported on the equity basis of
accounting and are included with either equity real estate or other equity
investments, as appropriate.
Equity securities, comprised of common and non-redeemable preferred 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.
Cash and cash equivalents include 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.
Investment Results and Unrealized Investment Gains (Losses)--Realized
investment gains and losses are determined by specific identification and
are presented as a component of revenue. Valuation allowances are netted
against the asset categories to which they apply and changes in the
valuation allowances are included in investment gains or losses.
Unrealized investment gains and losses on fixed maturities available for
sale and equity securities are accounted for as a separate component of
shareholder's equity, net of related deferred Federal income taxes and
deferred policy acquisition costs related to universal life and
investment-type products.
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 policy holders' 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 life and annuity policies with life contingencies are
recognized generally 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.
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. Deferred policy acquisition costs are subject to
recoverability testing at the time of policy issue and loss recognition
testing at the end of each accounting period.
For universal life products and investment-type products, deferred policy
acquisition costs are amortized over the expected average life of the
contracts (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 effects of revisions to
experience on previous amortization of deferred policy acquisition costs are
reflected in earnings and change in unrealized investment gains (losses) in
the period estimated gross profits are revised.
Amortization charged to income amounted to $200.2 million, $135.5 million
and $61.8 million for the years ended December 31, 1994, 1993 and 1992,
respectively.
Policyholders' Account Balances and Future Policy Benefits--EVLICO's
insurance contracts are primarily universal life and investment-type
contracts. Policyholders' account balances are equal to the policy account
values. The policy account values represent an accumulation of gross premium
payments plus credited interest less expense and mortality charges and
withdrawals.
The future policy benefit liabilities for the remainder of EVLICO's
insurance contracts, consisting primarily of supplementary contracts with
life contingencies and various policy riders, are computed by various
valuation methods based on assumed interest rates and mortality and
morbidity assumptions reflecting EVLICO's experience and industry standards.
F-6
<PAGE>
Federal Income Taxes--EVLICO is included in a consolidated Federal income
tax return with Equitable Life and its other eligible subsidiaries. In
accordance with an agreement between EVLICO and Equitable Life, the amount
of current income taxes as determined on a separate return basis will be
paid to, or received from, Equitable Life. Benefits for losses, which are
paid to EVLICO to the extent they are utilized by Equitable Life, may not
have been received in the absence of such agreement. Effective January 1,
1992, 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 the enacted income tax rates and laws.
Separate Accounts--Separate Accounts are established in conformity with the
New York State Insurance Law and are generally not chargeable with
liabilities that arise from any other business of EVLICO. Separate Accounts
assets are subject to General Account claims only to the extent the value of
such assets exceeds the 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, are shown as separate captions in the
consolidated balance sheets. Assets held in the Separate Accounts are
carried at quoted market values or, where quoted values are not available,
at estimated fair values as determined by management.
The investment results of Separate Accounts are reflected directly in
Separate Accounts liabilities. For the years ended December 31, 1994, 1993
and 1992, investment results of Separate Accounts were $135.9 million,
$344.1 million and $52.1 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 of the Separate Accounts are included
in revenues.
F-7
<PAGE>
3. INVESTMENTS
The following tables provide additional information relating to fixed
maturities and equity securities:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
-------- ------- ------ ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
December 31, 1994
-----------------
Fixed Maturities:
Held to Maturity:
Corporate ................................................. $1,812.4 $ 11.9 $ 93.1 $1,731.2
U.S. Treasury securities and U.S. government
and agency securities ................................... 180.4 -- 21.7 158.7
States and political subdivisions ......................... 14.4 -- .9 13.5
Foreign governments ....................................... 1.3 .1 -- 1.4
-------- ------ ------ --------
Total Held to Maturity ...................................... $2,008.5 $ 12.0 $115.7 $1,904.8
======== ====== ====== ========
Available for Sale:
Corporate ................................................. $1,622.3 $ 5.1 $112.6 $1,514.8
Mortgage-backed ........................................... 221.9 .5 16.4 206.0
U.S. Treasury securities and U.S. government and
agency securities ....................................... 365.4 1.4 20.7 346.1
States and political subdivisions ......................... 4.8 -- .6 4.2
Foreign governments ....................................... 14.8 .2 -- 15.0
Redeemable preferred stock ................................ 58.0 .1 5.4 52.7
-------- ------ ------ --------
Total Available for Sale .................................... $2,287.2 $ 7.3 $155.7 $2,138.8
======== ====== ====== ========
Equity Securities:
Common stock ................................................ $ 42.0 $ 10.1 $ 9.4 $ 42.7
======== ====== ====== ========
December 31, 1993
-----------------
Fixed Maturities:
Held to Maturity:
Corporate ................................................. $2,056.2 $108.4 $ 8.5 $2,156.1
Mortgage-backed ........................................... 55.3 2.1 -- 57.4
U.S. Treasury securities and U.S. government and
agency securities ....................................... 22.4 1.5 -- 23.9
States and political subdivisions ......................... 85.7 3.3 .1 88.9
Foreign governments ....................................... 10.3 1.2 -- 11.5
-------- ------ ------ --------
Total Held to Maturity ...................................... $2,229.9 $116.5 $ 8.6 $2,337.8
======== ====== ====== ========
Available for Sale:
Corporate ................................................. $1,673.1 $ 55.7 $ 7.5 $1,721.3
Mortgage-backed ........................................... 444.5 14.1 .6 458.0
U.S. Treasury securities and U.S. government and
securities agency ....................................... 73.4 1.8 .3 74.9
States and political subdivisions ......................... 119.7 4.5 .3 123.9
Foreign governments ....................................... 19.6 1.5 .1 21.0
Redeemable preferred stock ................................ 5.2 -- 2.0 3.2
-------- ------ ------ --------
Total Available for Sale .................................... $2,335.5 $ 77.6 $ 10.8 $2,402.3
======== ====== ====== ========
Equity Securities:
Common stock .............................................. $ 40.6 $ 25.9 $ .2 $ 66.3
Non-redeemable preferred stock ............................ .4 .1 .2 .3
-------- ------ ------ --------
Total Equity Securities ........................................ $ 41.0 $ 26.0 $ .4 $ 66.6
======== ====== ====== ========
</TABLE>
For publicly traded fixed maturities and equity securities, estimated fair
value is determined using quoted market prices. For fixed maturities without
a readily ascertainable market value, EVLICO has determined an estimated
fair value using a discounted cash flow approach, including provisions for
credit risk, generally based upon the assumption that such securities will
be held to maturity. Estimated fair value for equity securities,
substantially all of which do not have a readily ascertainable market value,
has been determined by EVLICO. 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, 1994 and 1993,
respectively, securities without a readily ascertainable market value having
an amortized cost of $1,529.5 million and $1,738.7 million, respectively,
had estimated fair values of $1,469.5 million and $1,835.8 million,
respectively.
F-8
<PAGE>
The contractual maturity of bonds at December 31, 1994 are shown below:
<TABLE>
<CAPTION>
HELD TO MATURITY AVAILABLE FOR SALE
------------------------ ------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST FAIR VALUE COST FAIR VALUE
--------- ---------- --------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Due in one year or less ........ $ 74.9 $ 75.3 $ 136.2 $ 137.3
Due in years two through five... 756.5 739.0 593.3 579.7
Due in years six through ten.... 795.9 743.9 798.8 724.5
Due after ten years ............ 381.2 346.6 479.0 438.6
Mortgage-backed securities ..... -- -- 221.9 206.0
-------- -------- -------- --------
Total .......................... $2,008.5 $1,904.8 $2,229.2 $2,086.1
======== ======== ======== ========
</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 pre-payment penalties.
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1994 1993 1992
------ ------- ------
(IN MILLIONS)
<S> <C> <C> <C>
Balances, beginning of year ........................ $ 87.3 $ 147.2 $100.7
Additions charged to income ........................ 12.7 44.4 75.0
Deductions for writedowns and asset dispositions.... (31.5) (104.3) (28.5)
------ ------- ------
Balances, End of Year .............................. $ 68.5 $ 87.3 $147.2
====== ======= ======
Balances, end of year comprise:
Mortgage loans on real estate ................... $ 24.0 $ 46.7 $ 60.2
Equity real estate .............................. 44.5 40.6 25.1
Fixed maturities ................................ -- -- 61.9
------ ------- ------
Total .............................................. $ 68.5 $ 87.3 $147.2
====== ======= ======
</TABLE>
Deductions for writedowns and asset dispositions for 1993 include a $20.2
million writedown of fixed maturity investments at December 31, 1993 as a
result of adopting a new accounting statement for the valuation of these
investments that requires specific writedowns instead of valuation
allowances.
At December 31, 1994, 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 $12.4 million of fixed
maturities and $5.4 million of mortgage loans on real estate.
EVLICO'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. EVLICO
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 an NAIC (National
Association of Insurance Commissioners) designation of 3 (medium grade), 4
or 5 (below investment grade) or 6 (in or near default). At December 31,
1994, approximately 10.6% of the $4,127.1 million aggregate amortized cost
of bonds held by EVLICO were considered to be other than investment grade.
During 1993, EVLICO sold $250.0 million of primarily privately placed below
investment grade fixed maturities to EQ Asset Trust 1993, (the "Trust"), a
limited purpose business trust, wholly owned by the Holding Company.
In addition to its holding of corporate high yield securities, EVLICO is an
equity investor in limited partnership interests which invest primarily in
securities considered to be other than investment grade.
EVLICO has restructured or modified the terms of certain fixed maturity
investments. The fixed maturity portfolio, based on amortized cost, includes
$13.3 million and $23.1 million at December 31, 1994 and 1993, respectively,
of such restructured securities. These amounts include fixed maturities
which are in default as to principal and/or interest payments, are to be
restructured pursuant to commenced negotiations or where the borrowers went
into bankruptcy subsequent to acquisition (collectively, "problem fixed
maturities") of $5.6 million and $12.4 million at December 31, 1994 and
1993, respectively. Gross interest income that would have been recorded in
accordance with the original terms of restructured fixed maturities amounted
to $1.1 million, $2.2 million and $13.7 million in 1994, 1993 and 1992,
respectively. Gross interest income on these fixed maturities included in
net investment income aggregated $1.0 million, $1.5 million and $11.3
million in 1994, 1993 and 1992, respectively.
F-9
<PAGE>
At December 31, 1994 and 1993, 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 $35.2 million (3.9% of total mortgage loans on real
estate) and $108.6 million (9.8% 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 $130.8 million and $147.9
million at December 31, 1994 and 1993, respectively. These amounts include
$0.0 million and $19.8 million of problem mortgage loans on real estate at
December 31, 1994 and 1993, 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 $12.3 million,
$13.9 million and $14.1 million in 1994, 1993 and 1992, respectively. Gross
interest income on these loans included in net investment income aggregated
$11.4 million, $11.5 million and $12.3 million in 1994, 1993 and 1992,
respectively.
EVLICO's investment in equity real estate is through direct ownership and
through investments in real estate joint ventures. At December 31, 1994 and
1993, the carrying value of equity real estate available for sale amounted
to $138.4 million and $92.2 million, respectively. At December 31, 1994 and
1993, EVLICO owned $230.5 million and $190.9 million, respectively, of real
estate acquired in satisfaction of debt.
Depreciation on 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 $51.1 million and
$39.1 million at December 31, 1994 and 1993, respectively. Depreciation
expense on real estate totaled $12.7 million, $11.6 million and $5.9 million
for the years ended December 31, 1994, 1993 and 1992, respectively.
4. JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information of real estate joint ventures (12
and 14 individual ventures as of December 31, 1994 and 1993, respectively)
and of other limited partnership interests accounted for under the equity
method, in which EVLICO has an investment of $10.0 million or greater and an
equity interest of 10% or greater is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993
-------- --------
(IN MILLIONS)
<S> <C> <C>
FINANCIAL POSITION
Investments in real estate, at depreciated cost ................................. $1,047.0 $1,034.6
Investments in securities, generally at estimated fair value .................... 3,061.2 3,623.6
Cash and cash equivalents ....................................................... 46.4 98.1
Other assets .................................................................... 261.9 486.4
-------- --------
Total assets .................................................................... 4,416.5 5,242.7
-------- --------
Funds borrowed -- third party ................................................... 1,233.6 1,254.6
Other liabilities ............................................................... 611.0 674.8
-------- --------
Total liabilities ............................................................... 1,844.6 1,929.4
-------- --------
Partners' Capital ............................................................... $2,571.9 $3,313.3
======== ========
Equity in partners' capital included above ...................................... $ 327.3 $ 375.4
Equity in limited partnership interests not included above ...................... 50.4 57.6
Excess of equity in partners' capital over investment cost and equity earnings... 3.7 --
Negative equity in certain joint ventures presented as other liabilities ........ -- .8
-------- --------
Carrying Value .................................................................. $ 381.4 $ 433.8
======== ========
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures ...................................... $ 180.1 $ 136.6 $ 183.1
Revenues of other limited partnership interests ............................. 102.5 318.9 150.3
Interest expense -- third party ............................................. (88.1) (79.7) (12.1)
Other expenses .............................................................. (172.4) (132.7) (156.1)
------- ------- -------
Net Earnings ................................................................ $ 22.1 $ 243.1 $ 165.2
======= ======= =======
Equity in net earnings included above ....................................... $ 11.7 $ 34.0 $ 26.1
Equity in net earnings of limited partnership interests not included above... 6.3 12.0 15.8
Excess of earnings in joint ventures over equity ownership percentage and
amortization of differences in bases ..................................... (1.1) (.1) (.1)
------- ------- -------
Total Equity in Net Earnings ................................................ $ 16.9 $ 45.9 $ 41.8
======= ======= =======
</TABLE>
F-10
<PAGE>
5. NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities ..................... $331.4 $319.9 $310.1
Mortgage loans on real estate ........ 86.7 105.7 132.5
Equity real estate ................... 67.0 69.8 23.0
Policy loans ......................... 79.5 76.1 70.9
Other equity investments ............. 13.4 38.5 32.8
Other investment income .............. 24.5 17.0 36.9
------ ------ ------
Gross investment income .............. 602.5 627.0 606.2
Investment expenses .................. 75.7 69.4 31.7
------ ------ ------
Net Investment Income ................ $526.8 $557.6 $574.5
====== ====== ======
</TABLE>
Investment (losses) gains, net, including changes in valuation allowances,
are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities ..................... $ (6.8) $ 45.1 $ 2.6
Mortgage loans on real estate ........ (13.3) (32.0) (38.8)
Equity real estate ................... (5.3) (13.4) (21.0)
Other equity investments ............. 20.8 1.8 3.2
------ ------ ------
Investment (Losses) Gains, Net ....... $ (4.6) $ 1.5 $(54.0)
====== ====== ======
</TABLE>
Gross gains of $42.6 million, $66.2 million and $34.3 million and gross
losses of $41.2 million, $66.5 million and $31.3 million were realized on
sales of investments in fixed maturities for the years ended December 31,
1994, 1993 and 1992, respectively. In addition, writedowns of fixed
maturities amounted to $8.2 million, $1.4 million and $5.6 million for the
years ended December 31, 1994, 1993 and 1992, respectively.
For the year ended December 31, 1994, proceeds received on sales of fixed
maturities classified as available for sale amounted to $2,065.1 million.
Gross gains of $21.2 million and gross losses of $28.1 million were realized
on these sales. The increase in unrealized investment losses related to
fixed maturities classified as available for sale for the year ended
December 31, 1994 amounted to $215.2 million.
During the year ended December 31, 1994, one security classified as held to
maturity was sold and two securities so classified were transferred to the
available for sale portfolio. These actions were taken as a result of a
significant deterioration in creditworthiness. The amortized cost of the
security sold was $9.9 million with a related investment gain of $.4 million
recognized; the aggregate amortized cost of the securities transferred was
$13.2 million with gross unrealized investment losses of $4.0 million
charged to consolidated shareholder's equity.
F-11
<PAGE>
The unrealized investment (losses) gains, included in the consolidated
balance sheets as a component of equity, and the changes for the
corresponding years are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
------- ------ -----
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year ........................................ $ 22.3 $ 11.1 $ 7.7
Changes in unrealized investment (losses) gains ................... (241.8) 3.4 5.1
Effect of adopting SFAS No. 115 ................................... -- 72.2 --
Changes in unrealized investment (gains) losses attributable to:
Deferred policy acquisition costs .............................. 95.8 (58.2) --
Deferred Federal income taxes .................................. 51.1 (6.2) (1.7)
------- ------ -----
Balance, End of Year .............................................. $ (72.6) $ 22.3 $11.1
======= ====== =====
Balance, end of year comprises:
Unrealized investment (losses) gains on:
Fixed maturities ............................................. $(148.4) $ 66.8 $(3.5)
Other equity investments ..................................... .7 25.6 20.3
Other ........................................................ (1.7) -- --
------- ------ -----
Total .......................................................... (149.4) 92.4 16.8
Amounts of unrealized investment (gains) losses attributable to:
Deferred policy acquisition costs ............................ 37.6 (58.2) --
Deferred Federal income taxes ................................ 39.2 (11.9) (5.7)
------- ------ -----
Total ............................................................. $ (72.6) $ 22.3 $11.1
======= ====== =====
</TABLE>
6. FEDERAL INCOME TAXES
A summary of the Federal income tax expense (benefit) in the consolidated
statements of earnings is shown below:
1994 1993 1992
------ ------ ------
(IN MILLIONS)
Federal income tax expense (benefit):
Current .......................... $ (1.4) $ (3.4) $(11.3)
Deferred ......................... 26.4 23.9 (10.3)
------ ------ ------
Total ............................... $(25.0) $(20.5) $(21.6)
====== ====== ======
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings (loss)
from operations before Federal income taxes by the expected Federal income
tax rate (35% for 1994 and 1993 and 34% for 1992).
The sources of the difference and the tax effects of each are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- ------
(IN MILLIONS)
<S> <C> <C> <C>
Expected Federal income tax expense (benefit).... $25.3 $16.6 $(21.4)
Tax rate adjustment ............................. -- 4.0 --
Other ........................................... (.3) (.1) (.2)
----- ----- ------
Federal Income Tax Expense (Benefit) ............ $25.0 $20.5 $(21.6)
===== ===== ======
</TABLE>
The components of the net deferred income tax liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------------- ---------------------
ASSETS LIABILITIES ASSETS LIABILITIES
------ ----------- ------ -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Deferred policy acquisition costs, reserves and reinsurance................ $ -- $250.6 $ -- $262.0
Investments................................................................ 38.4 -- 13.4 --
Compensation and related benefits.......................................... 52.2 -- 48.8 --
Other...................................................................... 25.6 -- 37.3 --
------ ------ ----- ------
Total...................................................................... $116.2 $250.6 $99.5 $262.0
====== ====== ===== ======
</TABLE>
F-12
<PAGE>
The deferred Federal income tax expense (benefit) 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>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------ ----- ------
(IN MILLIONS)
<S> <C> <C> <C>
Deferred policy acquisition costs, reserves and reinsurance.... $(11.4) $(6.8) $ 1.8
Investments ................................................... 26.1 11.4 (18.6)
Compensation and related benefits ............................. (2.8) 1.9 --
Other ......................................................... 14.5 17.4 6.5
------ ----- ------
Deferred Federal Income Tax Expense (Benefit) ................. $ 26.4 $23.9 $(10.3)
====== ===== ======
</TABLE>
At December 31, 1994, EVLICO had net operating loss carryforwards for tax
purposes approximating $62.7 million which expire in 2002 through 2007.
These loss carryforwards are available to offset future tax payments to
Equitable Life under the tax sharing agreement.
7. REINSURANCE AGREEMENTS
EVLICO cedes reinsurance to other insurance companies. EVLICO evaluates the
financial condition of its reinsurers to minimize its exposure to
significant losses from reinsurer insolvencies. The effect of reinsurance is
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1994 1993
----- -----
(IN MILLIONS)
<S> <C> <C>
Direct premiums ...................................................... $40.2 $47.0
Reinsurance ceded .................................................... (.1) (.1)
----- -----
Premiums ............................................................. $40.1 $46.9
===== =====
Universal Life and Investment-type Product Policy Fee Income Ceded.... $24.9 $26.0
===== =====
Policyholders' Benefits Ceded ........................................ $ 8.3 $14.5
===== =====
</TABLE>
EVLICO reinsures mortality risks in excess of $5.0 million on any single
life. EVLICO also reinsures the entire risk on certain substandard
underwriting risks as well as in certain other cases.
8. RELATED PARTY TRANSACTIONS
Under a cost sharing agreement, EVLICO reimburses Equitable Life for its use
of Equitable Life's personnel, property and facilities in carrying out
certain of its operations. Reimbursement for intercompany services is based
on the allocated cost of the services provided. The incurred balances of
these intercompany transactions, which are included in other operating costs
and expenses are as follows:
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
------ ------ ------
(IN MILLIONS)
Personnel and facilities .......... $257.9 $252.7 $273.7
Agent commissions and fees ........ 122.6 103.0 101.2
These cost allocations include various employee related obligations for
pensions and postretirement benefits. At December 31, 1994, EVLICO recorded
as a reduction of shareholder's equity its allocated portion of an
additional minimum pension liability of $1.2 million, net of related Federal
income taxes, representing the excess of the accumulated benefit obligation
over the fair value of plan assets and accrued pension liability.
During 1994, 1993 and 1992, Equitable Life restructured certain operations
in connection with cost reduction programs. EVLICO recorded provisions of
$6.9 million, $17.3 million and $9.5 million in 1994, 1993 and 1992,
respectively, relating primarily to allocated lease obligations (net of
sub-lease rentals) and severance liabilities.
EVLICO incurred investment advisory and asset management fee expenses of
$19.2 million, $16.0 million and $15.6 million during 1994, 1993 and 1992,
respectively.
EVLICO and Equitable Life have an agreement whereby certain Equitable Life
policyholders may purchase EVLICO's policies without presenting evidence of
insurability. Under the agreement, Equitable Life pays EVLICO a conversion
charge for the extra mortality risk associated with issuing these policies.
EVLICO received payments of $3.2 million, $3.1 million and $3.9 million in
1994, 1993 and 1992, respectively, which were reported as other income.
F-13
<PAGE>
On August 31, 1993, EVLICO sold $250.0 million of primarily privately placed
below investment grade fixed maturities to the Trust. EVLICO realized a $1.1
million gain, net of related deferred policy acquisition costs and deferred
Federal income taxes. In conjunction with this transaction, EVLICO received
$75.4 million of Class B notes issued by the Trust. These notes have
interest rates ranging from 6.85% to 9.45%. The Class B notes are classified
as other invested assets on the consolidated balance sheets.
Net amounts payable to Equitable Life were $226.7 million and $195.4 million
at December 31, 1994 and 1993, respectively.
9. DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives--EVLICO primarily uses derivatives for asset/liability risk
management and for hedging individual securities. Derivatives mainly are
utilized to reduce EVLICO's exposure to interest rate fluctuations.
Accounting for interest swap transactions is on an accrual basis. Gains and
losses related to hedge transactions are amortized as yield adjustments for
the remaining life of the underlying hedged item. Income and expense
resulting from derivative activities are reflected in net investment income.
The notional amount of matched interest rate swaps outstanding at December
31, 1994 was $704.7 million. The average unexpired terms at December 31,
1994 is 3.0 years. At December 31, 1994, the cost of terminating outstanding
matched swaps in a loss position was $34.2 million and the unrealized gain
on outstanding matched swaps in a gain position was $4.9 million. EVLICO has
no intention of terminating these contracts prior to maturity.
Fair Value of Financial Instruments--EVLICO 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 timing, 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 EVLICO'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 EVLICO was not
material at December 31, 1994 and 1993.
Fair value for mortgage loans on real estate is 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.
The estimated fair values for single premium deferred annuities ("SPDA") are
estimated using projected cash flows discounted at current offering rates.
The estimated fair values for supplementary contracts not involving life
contingencies ("SCNILC") and annuities certain are derived using discounted
cash flows based upon the estimated current offering rate.
The following table discloses carrying value and estimated fair value for
financial instruments not otherwise disclosed in Note 3:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1994 1993
---------------------- ----------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
-------- -------- -------- --------
(IN MILLIONS)
Consolidated Financial Instruments:
----------------------------------
<S> <C> <C> <C> <C>
Mortgage loans on real estate ...... $ 888.5 $ 865.3 $1,059.5 $1,101.7
Other joint ventures ............... 196.4 196.4 240.7 240.7
Policy loans ....................... 1,185.2 1,138.7 1,087.3 1,155.3
Policyholders' account balances:
SPDA ............................ 1,744.3 1,732.7 2,129.5 2,143.0
Annuity certain and SCNILC ...... 159.0 151.3 157.4 160.6
</TABLE>
10. COMMITMENTS AND CONTINGENT LIABILITIES
EVLICO is the obligor under certain structured settlement agreements which
it has entered into with unaffiliated insurance companies and beneficiaries.
To satisfy its obligations under these agreements, EVLICO has purchased
single premium annuities from Equitable Life and directed Equitable Life to
make payments directly to the beneficiaries. A contingent liability exists
with respect to these agreements should Equitable Life be unable to meet its
obligations. Management believes the need to satisfy such obligations is
remote.
EVLICO had outstanding commitments of $1.3 million at December 31, 1994
under existing loan or loan commitment agreements.
F-14
<PAGE>
11. LITIGATION
EVLICO is a defendant in connection with various legal actions and
proceedings of a character normally incident to its business. Some of the
actions and proceedings have been brought on behalf of various alleged
classes of claimants and certain of these claimants seek damages of
unspecified amounts. While the ultimate outcome of such litigation cannot be
predicted with certainty, management believes, after consultation with
counsel responsible for such litigation, that the resolution of these
actions and proceedings will not result in losses that would have a material
effect on the consolidated financial statements.
12. STATUTORY FINANCIAL INFORMATION
EVLICO is restricted as to the amounts it may pay as dividends to Equitable
Life. Under the New York Insurance Law, the New York 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. The New York Insurance Department has established informal
guidelines for the Superintendent's determinations which focus upon, among
other things, the overall financial condition and profitability of the
insurer under statutory accounting practices. For the years ended December
31, 1994, 1993 and 1992, statutory earnings (loss) totaled $27.3 million,
$(88.4) million and $(32.7) million, respectively. No amounts are expected
to be available for dividends from EVLICO to Equitable Life in 1995.
At December 31, 1994, EVLICO, in accordance with various government and
state regulations, had $3.4 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 EVLICO's net change in
statutory 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 (loss) and shareholder's equity
on a GAAP basis.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
Net change in statutory surplus and capital stock ............................. $ 64.8 $ 184.4 $ 39.7
Change in asset valuation reserves ............................................ 18.5 26.0 10.6
-------- -------- --------
Net change in statutory surplus, capital stock and asset valuation reserves.... 83.3 210.4 50.3
Adjustments:
Future policy benefits and policyholders' account balances ................. (13.5) (22.5) (46.2)
Initial fee liability ...................................................... (20.3) (11.6) (13.3)
Deferred policy acquisition costs .......................................... 34.7 62.2 131.5
Deferred Federal income taxes .............................................. (20.2) (23.9) 120.3
Valuation of investments ................................................... 27.4 33.8 (27.8)
Limited risk reinsurance ................................................... .1 (5.4) (41.7)
Contribution from Equitable Life ........................................... (50.0) (250.0) (100.0)
Other, net ................................................................. (5.5) 33.8 (136.7)
-------- -------- --------
Net Earnings (Loss) ........................................................... $ 36.0 $ 26.8 $ (63.6)
======== ======== ========
Statutory surplus and capital stock ........................................... $ 777.6 $ 712.7 $ 528.3
Asset valuation reserves ...................................................... 88.3 69.8 43.8
-------- -------- --------
Statutory surplus, capital stock and asset valuation reserves ................. 865.9 782.5 572.1
Adjustments:
Future policy benefits and policyholders' account balances ................. (354.5) (341.1) (318.6)
Initial fee liability ...................................................... (200.5) (180.3) (168.7)
Deferred policy acquisition costs .......................................... 2,077.1 1,946.7 1,942.7
Deferred Federal income taxes .............................................. (134.4) (159.5) (136.0)
Valuation of investments ................................................... (156.5) 57.4 (105.3)
Limited risk reinsurance ................................................... (378.6) (378.7) (373.3)
Post retirement and other pension liabilities .............................. (105.8) (122.7) (132.4)
Other, net ................................................................. (163.8) (151.6) (109.5)
-------- -------- --------
Shareholder's Equity .......................................................... $1,448.9 $1,452.7 $1,171.0
======== ======== ========
</TABLE>
13. SUPPLEMENTAL CASH FLOW INFORMATION
For the years ended December 31, 1994, 1993 and 1992, respectively, real
estate of $59.0 million, $92.1 million and $17.5 million was acquired in
satisfaction of debt.
F-15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Equitable Variable Life Insurance
Company
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 Equitable
Variable Life Insurance Company and its subsidiaries ("EVLICO") at December 31,
1994 and 1993, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
These financial statements are the responsibility of EVLICO'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, EVLICO changed
its methods of accounting for postemployment benefits in 1994 and for investment
securities and for reinsurance in 1993.
PRICE WATERHOUSE LLP
New York, New York
February 8, 1995
F-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Equitable Variable Life Insurance Company:
We have audited the consolidated statements of earnings, shareholder's equity
and cash flows of Equitable Variable Life Insurance Company ("EVLICO") for the
year ended December 31, 1992. These consolidated financial statements are the
responsibility of EVLICO's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated results of operations and consolidated cash
flows of Equitable Variable Life Insurance Company for the year ended December
31, 1992 in conformity with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, in 1992 EVLICO
changed its method of accounting for foreclosed assets, income taxes and
postretirement benefits other than pensions.
DELOITTE & TOUCHE LLP
New York, New York
February 16, 1993
F-17
<PAGE>
COMMUNICATING PERFORMANCE DATA
In reports or other communications to policyowners or in advertising material,
we may describe general economic and market conditions affecting the Separate
Account and the Trust and may compare the performance or ranking of the Separate
Account Funds and Trust portfolios with (1) that of other insurance company
separate accounts or mutual funds included in the rankings prepared by Lipper
Analytical Services, Inc., Morningstar, Inc. or similar investment services that
monitor the performance of insurance company separate accounts or mutual funds,
(2) other appropriate indices of investment securities and averages for peer
universes of funds, or (3) data developed by us derived from such indices or
averages. Advertisements or other communications furnished to present or
prospective policyowners may also include evaluations of a Separate Account Fund
or Trust portfolio by financial publications that are nationally recognized such
as Barron's, Morningstar's Variable Annuities / Life, Business Week, Forbes,
Fortune, Institutional Investor, Money, Kiplinger's Personal Finance, Financial
Planning, Investment Adviser, Investment Management Weekly, Money Management
Letter, Investment Dealers Digest, National Underwriter, Pension & Investments,
USA Today, Investor's Daily, The New York Times, The Wall Street Journal, the
Los Angeles Times and the Chicago Tribune.
Performance data for peer universes of funds with similar investment objectives
are compiled by Lipper Analytical Services, Inc. (Lipper) in its Lipper Variable
Insurance Products Performance Analysis Service (Lipper Survey) and Morningstar,
Inc. in the Morningstar Variable Annuity / Life Report (Morningstar Report).
The Lipper Survey records performance data as reported to it by over 800 funds
underlying variable annuity and life insurance products. The Lipper Survey
divides these actively managed funds into 25 categories by portfolio objectives.
The Lipper Survey contains two different universes, which differ in terms of the
types of fees reflected in performance data. The "Separate Account" universe
reports performance data net of investment management fees, direct operating
expenses and asset-based charges applicable under variable insurance and annuity
contracts. The "Mutual Fund" universe reports performance net only of investment
management fees and direct operating expenses, and therefore reflects
asset-based charges that relate only to the underlying mutual fund.
The Morningstar Report consists of nearly 700 variable life and annuity funds,
all of which report their data net of investment management fees, direct
operating expenses and separate account level charges.
LONG-TERM MARKET TRENDS
As a tool for understanding how different investment strategies may affect
long-term results, it may be useful to consider the historical returns on
different types of assets. The following chart presents historical return trends
for various types of securities. The information presented, while not directly
related to the performance of the Funds of the Separate Account or the Trust
portfolios, may help to provide a perspective on the potential returns of
different asset classes over different periods of time. By combining this
information with your knowledge of your own financial needs, you may be able to
better determine how you wish to allocate your Incentive Life Plus premiums.
Historically, the investment performance of common stocks over the long term has
generally been superior to that of long or short-term debt securities, although
common stocks have been subject to more dramatic changes in value over short
periods of time. The Common Stock Fund of the Separate Account may, therefore,
be a desirable selection for policyowners who are willing to accept such risks.
Policyowners who have a need to limit short-term risk, may find it preferable to
allocate a smaller percentage of their net premiums to those funds that invest
primarily in common stock. Any investment in securities, whether equity or debt,
involves varying degrees of potential risk, in addition to offering varying
degrees of potential reward.
The chart on page A-2 illustrates the average annual compound rates of return
over selected time periods between December 31, 1925 and December 31, 1994 for
common stocks, long-term government bonds, long-term corporate bonds,
intermediate-term government bonds and Treasury Bills. The Consumer Price Index
is shown as a measure of inflation for comparison purposes. The average annual
returns assume the reinvestment of dividends, capital gains and interest.
The information presented is an historical record of unmanaged groups of
securities and is neither an estimate nor a guarantee of future results. In
addition, investment management fees and expenses and charges associated with a
variable life insurance policy, are not reflected.
The rates of return illustrated do not represent returns of the Separate Account
or the Trust and do not constitute a representation that the performance of the
Separate Account funds or the Trust portfolios will correspond to rates of
return such as those illustrated in the chart. For a comparative illustration of
performance results of The Hudson River Trust, see page A-1 of the Trust's
prospectus.
A-1
<PAGE>
AVERAGE ANNUAL RATES OF RETURN
<TABLE>
<CAPTION>
LONG-TERM LONG-TERM INTERMEDIATE- CONSUMER
COMMON GOVERNMENT CORPORATE TERM TREASURY PRICE
STOCKS BONDS BONDS BONDS BILLS INDEX
------ ----- ----- ----- ----- -----
FOR THE
FOLLOWING
PERIODS ENDING
12/31/94:
--------
<S> <C> <C> <C> <C> <C> <C>
1 year.................. 1.31 -7.77 -5.76 -5.14 3.90 2.78
3 years................. 6.26 5.62 5.28 4.19 3.43 2.81
5 years................. 8.69 8.34 8.36 7.46 4.73 3.51
10 years................. 14.40 11.86 11.57 9.40 5.76 3.59
20 years................. 14.58 9.42 10.00 9.25 7.29 5.45
30 years................. 9.95 6.96 7.31 7.84 6.66 5.36
40 years................. 10.66 5.62 6.14 6.58 5.63 4.40
50 years................. 11.92 4.99 5.34 5.59 4.69 4.35
60 years................. 11.48 4.81 5.21 5.19 3.92 4.10
Since 1926............... 10.19 4.83 5.41 5.09 3.69 3.13
Inflation Adjusted
Since 1926............... 6.85 1.65 2.22 1.91 0.55 --
-------------------------
<FN>
*Source: Ibbotson, Roger G. and Rex A. Sinquefield, STOCKS, BONDS, BILLS, AND
INFLATION (SBBI), 1982, updated in STOCKS, BONDS, BILLS, AND INFLATION 1995
YEARBOOK(TM), Ibbotson Associates, Inc., Chicago. All rights reserved.
Common Stocks (S&P 500)--Standard and Poor's Composite Index, an unmanaged
weighted index of the stock performance of 500 industrial, transportation,
utility and financial companies.
Long-term Government Bonds--Measured using a one-bond portfolio constructed
each year containing a bond with approximately a twenty year maturity and a
reasonably current coupon.
Long-term Corporate Bonds--For the period 1969-1994, represented by the Salomon
Brothers Long-Term, High-Grade Corporate Bond Index; for the period 1946-1968,
the Salomon Brothers' Index was backdated using Salomon Brothers' monthly yield
data and a methodology similar to that used by Salomon for 1969-1994; for the
period 1926-1945, the Standard and Poor's monthly High-Grade Corporate
Composite yield data were used, assuming a 4 percent coupon and a twenty year
maturity.
Intermediate-term Government Bonds--Measured by a one-bond portfolio
constructed each year containing a bond with approximately a five year
maturity.
U.S. Treasury Bills--Measured by rolling over each month a one-bill portfolio
containing, at the beginning of each month, the bill having the shortest
maturity not less than one month.
Inflation--Measured by the Consumer Price Index for all Urban Consumers
(CPI-U), not seasonally adjusted.
</FN>
</TABLE>
A-2
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SUPPLEMENT DATED SEPTEMBER 15, 1995
TO
INCENTIVE LIFE PLUS PROSPECTUS
DATED SEPTEMBER 15, 1995
This supplement modifies certain information in the Prospectus, dated September
15, 1995 (the "Prospectus") for Incentive Life Plus, a flexible premium variable
life insurance policy issued by Equitable Variable. Subject to the rules
discussed below, Equitable Variable will offer a modified version of its
Incentive Life Plus policy (the "Incentive Life COLI Policy") to qualified
offerees. This supplement describes the material differences between the
Incentive Life COLI Policy and the Incentive Life Plus policy described in the
Prospectus and is for use only in connection with offers of the Incentive Life
COLI Policy. Capitalized terms used in this Supplement have the same meanings as
in the Prospectus.
Under Equitable Variable's current rules, the Incentive Life COLI Policy will be
offered to corporations and partnerships that meet the following conditions at
issue:
o a minimum of five policies are issued, each on the life of a different
eligible insured person;
o the persons proposed to be insured under the policies are deemed by us to be
highly compensated individuals;
o the minimum initial premium under each of the policies must be remitted to
Equitable Variable by the employer;
o the aggregate annualized first year planned periodic premium for all policies
must be at least $150,000; and
o certain undertakings, which may be required by Equitable Variable in certain
situations, have been submitted to Equitable Variable.
Set forth below are modifications to the discussion in the Prospectus which are
appropriate with respect to the Incentive Life COLI Policy.
MINIMUM FACE AMOUNT. The minimum Face Amount for the Incentive Life COLI Policy
is $100,000.
CHANGES IN INSURANCE PROTECTION. There are no face amount increases under the
Incentive Life COLI Policy.
DEDUCTIONS AND CHARGES.
Additional Benefits. The additional benefits (certain extra charge, optional
benefits) described in the Incentive Life Plus prospectus on page 11 are not
available under the Incentive Life COLI Policy.
Deductions From Premium. Rather than deducting the Premium Sales Charge from
premiums, Equitable Variable will deduct the charge from the Policy Account at
the beginning of each policy month during the first ten policy years. The amount
deducted will be 1/2% of one "sales load target premium." The total amount
deducted, however, will not exceed 6% of cumulative premiums actually paid to
the date of deduction. The sales load target premium varies by issue age, sex
and tobacco user status of the insured person and the policy's Face Amount, and
is generally less than or equal to 75% of one annual whole life premium
calculated at 4% interest and guaranteed maximum cost of insurance and expense
charges.
Charges Against the Separate Account. There are no charges assessed against the
Separate Account under the Incentive Life COLI Policy, but a mortality and
expense risk charge is deducted from the Policy Account each month at a current
annual rate of .60% of the unloaned Policy Account value. The annual guaranteed
maximum rate is .90%.
Current cost of insurance rates during the first two policy years are generally
lower than the current cost of insurance rates for the Incentive Life Plus
policy. This relationship between the cost of insurance rates of the two
policies is not guaranteed.
The reduction in the current cost of insurance charge that begins in the tenth
policy year will grade up to an annual rate of .60% in the twenty-fifth policy
year and later. This cost of insurance charge reduction applies on a current
basis and is not guaranteed.
Surrender Charges. There is no Administrative Surrender Charge.
Subject to a maximum described below, the Premium Surrender Charge is equal to
24% of premiums paid in the first policy year, up to one surrender charge target
premium, and 3% of additional premiums paid through the fifteenth policy year.
In each of the first five policy years, the Premium Surrender Charge is reduced
by a percentage equal to: 100% in the first policy year; 80% in the second
policy year; 60% in the third policy year; 40% in the fourth policy year; and
20% in the fifth policy year. There is no Premium Surrender Charge after the
fifteenth policy year. The surrender charge target premium is less than or equal
to the SEC Guideline Annual Premium associated with this policy. The SEC
Guideline Annual Premium is the level annual amount that would be payable in
each policy year under certain assumptions defined by the SEC. These assumptions
include cost of insurance charges based on the 1980 Commissioner's Standard
Ordinary Mortality Tables, net investment earnings at an annual rate of 5%, and
the fees and charges associated with the policy.
We guarantee that the maximum Premium Surrender Charge will never be greater
than 66% of one target premium. Before the sixth policy year, the 66% maximum is
reduced by the same percentages described above. After the ninth policy year,
the 66% maximum begins to decrease by 11% per year on a monthly basis, until it
reaches zero at the end of the fifteenth policy year. Target premiums are
actuarially determined based on the age of the insured person and the Face
Amount of the policy.
VM 498
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SUPPLEMENT DATED SEPTEMBER 15, 1995
TO
INCENTIVE LIFE PLUS PROSPECTUS
DATED SEPTEMBER 15, 1995
This supplement modifies certain information in the Prospectus dated September
15, 1995 (the "Prospectus") for Incentive Life Plus, a flexible premium variable
life insurance policy issued by Equitable Variable. Terms used in this
Supplement have the same meanings as in the Prospectus.
Subject to the conditions discussed below, Equitable Variable will offer an
Endorsement to the Incentive Life Plus policy that will refund or waive all or a
portion of certain policy charges if the policy is surrendered for its net cash
surrender value within a limited time period (the "Endorsement").
Under Equitable Variable's current rules, the Endorsement will be offered where
the following conditions are met:
o a minimum of five policies are issued, each on the life of a different
insured person;
o the persons proposed to be insured are deemed by us to be highly compensated
individuals;
o the policies must have an average Face Amount of at least $500,000;
o the initial premium under each of the policies must be remitted to Equitable
Variable by the employer; and
o the aggregate annualized first year planned periodic premium for all policies
must be at least $150,000.
The Endorsement operates to reduce the difference between premiums paid and Cash
Surrender Value upon surrender in the early policy years, which, in turn, is
expected to reduce any charge against the employers' earnings when a policy is
accounted for under generally accepted accounting principles (GAAP).
Policyowners must rely on the advice of their own accountants, however, to
determine how the purchase of a policy, as modified by the Endorsement, will
affect their GAAP financial statements.
The Endorsement reduces the difference between premiums paid and Cash Surrender
Value by refunding all or a portion of the deductions from premiums (charge for
applicable taxes and Premium Sales Charge), and waiving all or a portion of the
Surrender Charges if the policy is surrendered in the early policy years. The
percentage of charges refunded or waived under the Endorsement are as follows:
SURRENDER IN PERCENT OF PREMIUM PERCENT OF SURRENDER
POLICY YEAR DEDUCTIONS REFUNDED CHARGES WAIVED
----------------- ------------------------ -----------------------
1 100% 100%
2 67% 80%
3 33% 60%
4 0% 40%
5 0% 20%
6 and later 0% 0%
For example, if a policy subject to the Endorsement were surrendered in the
first policy year, Equitable Variable would refund 100% of the charges that had
been deducted for premium tax and the Premium Sales Charge, and would waive 100%
of the Administrative Surrender Charge and the Premium Surrender Charge
otherwise payable at that time. Once the Endorsement terminates at the end of
the fifth policy year, however, there will be no refund of prior premium
deductions and the full amount of the Surrender Charges payable under the policy
will be assessed upon surrender.
The Endorsement only operates if the policy is surrendered in full. There is no
waiver of the Surrender Charges or refund of premium deductions if the policy
terminates or if the Face Amount is reduced. Nor is there a refund of prior
premium deductions for partial withdrawals.
The Endorsement does not affect the calculation of Cash Surrender Value or Net
Cash Surrender Value for purposes of determining limitations on loans and
partial withdrawals, or for determining whether a policy will terminate. See
BORROWING FROM YOUR POLICY ACCOUNT, PARTIAL WITHDRAWALS and YOUR POLICY CAN
TERMINATE in the Prospectus. We will not approve Face Amount increases while the
Endorsement is in effect.
VM 509
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SUPPLEMENT DATED SEPTEMBER 15, 1995
TO
INCENTIVE LIFE PLUS PROSPECTUS
DATED SEPTEMBER 15, 1995
This supplement modifies certain information in the Prospectus, dated September
15, 1995 (the "Prospectus") for Incentive Life Plus, a flexible premium variable
life insurance policy issued by Equitable Variable. Subject to the rules
discussed below, Equitable Variable will offer a modified version of its First
Series Incentive Life policy (the "Special Offer Policy") to qualified offerees.
This supplement describes the material differences between the Special Offer
Policy and the Incentive Life Plus policy described in the Prospectus and is for
use only in connection with offers of the Special Offer Policy.
Under Equitable Variable's current rules, the Special Offer Policy will be
offered where the following conditions are met:
o an employer-employee relationship is present;
o a minimum of five policies (26 in New York) are issued, each on the life of a
different eligible insured person;
o the persons proposed to be insured under the policies are deemed by us to be
highly compensated individuals;
o the initial Face Amount of each of the policies is $500,000 or greater;
o the minimum initial premium under each of the policies is remitted to
Equitable Variable by the employer; and
o certain undertakings, which may be required by Equitable Variable in certain
situations, have been submitted to Equitable Variable.
Set forth below are modifications to the discussion in the Prospectus which are
appropriate with respect to the Special Offer Policy.
o ADDING INTEREST IN THE GUARANTEED INTEREST ACCOUNT. The minimum guaranteed
interest rate is 4 1/2%. Interest credited to any loaned amounts in the
Guaranteed Interest Account is allocated to the unloaned portion of the
Guaranteed Interest Account at the end of each policy month.
o FLEXIBLE PREMIUMS. The entire initial net premium will be allocated to the
Separate Account's Money Market Fund until the Allocation Date. We have not
reserved the right to limit the amount of any premium payments which are in
addition to your planned premium.
o DEATH BENEFITS. There is no death benefit guarantee provision or 3-Year no
lapse guarantee provision in the Special Offer Policy, and accordingly, no
specified premiums or death benefit guarantee charge. The percentage
multiples under both Option A and B are lower than the percentage multiples
used for Incentive Life Plus at certain older ages. You should review your
policy to see the actual percentages.
o CHANGES IN INSURANCE PROTECTION. There is no automatic right to cancel a face
amount increase (although you could subsequently decrease the face amount).
The maximum charge for a face amount increase is $250 and there is no Premium
Sales Charge under the Special Offer Policy. In addition, we do not establish
additional surrender charges for Face Amount increases under the Special
Offer Policy.
o MATURITY BENEFITS. The Special Offer Policy matures on the policy anniversary
nearest the insured person's 95th birthday.
o ADDITIONAL BENEFITS MAY BE AVAILABLE. The following additional benefits are
available with the Special Offer Policy: disability waiver, accidental death
benefit, term insurance on an additional insured and children's term
insurance.
o CHARGE FOR TRANSFERS. We have reserved the right to make a charge of up to
$25 if you make more than four transfers of Policy Account value in a policy
year. Currently, we are charging $25 per transfer after the twelfth transfer.
If there is a charge, you may tell us how much of the charge to allocate to
your values in each of the funds of the Separate Account or to the unloaned
value in the Guaranteed Interest Account. If you do not provide specific
instructions, we will allocate the charge as described under HOW POLICY
ACCOUNT CHARGES ARE ALLOCATED in the Prospectus.
o BORROWING FROM YOUR POLICY ACCOUNT. You may borrow up to 100% of your
policy's Net Cash Surrender Value. There is no reduction in the current
difference between the policy loan interest rate and the rate credited on
loaned amounts in the Guaranteed Interest Account beginning in the
twenty-first policy year. The interest credited on loaned amounts will never
be less than 4-1/2%.
o PARTIAL WITHDRAWALS FROM YOUR POLICY ACCOUNT. We have not reserved the right
to decline a request for a partial withdrawal. However, any such request will
be subject to our approval and the conditions listed under PARTIAL
WITHDRAWALS FROM YOUR POLICY ACCOUNT in the Prospectus.
VM 512 Cat. #126787
1
<PAGE>
o DEDUCTIONS FROM YOUR PREMIUMS. A $250 administrative charge will be deducted
from your initial premium. There is no Premium Sales Charge under the Special
Offer Policy. Any change to the charge for applicable taxes will take effect
as soon as practicable after we receive notice of the change.
o DEDUCTIONS FROM YOUR POLICY ACCOUNT. A current monthly administrative charge
of $6 for all policy years will be deducted from your Policy Account. The
guaranteed maximum monthly charge is $8.
o CURRENT COST OF INSURANCE RATES are different than those under the Incentive
Life Plus policy. There is no reduction of the current cost of insurance
rates beginning in the tenth policy year.
o The GUARANTEED MAXIMUM COST OF INSURANCE RATES under the Special Offer Policy
are based on the rates applicable to males in the Commissioner's 1980
Standard Ordinary Male and Female Mortality Tables. As a result, a female
would have higher maximum rates under the Special Offer Policy than under the
Incentive Life Plus policy. Also, the guaranteed maximum cost of insurance
rates under the Special Offer Policy are higher for non-smokers as compared
to the guaranteed maximum non-smoker rates under the Incentive Life Plus
policy.
o MORTALITY AND EXPENSE RISK CHARGE. The mortality and expense risk charge for
the Special Offer Policy is deducted from the assets of the Separate Account
and, accordingly, reflected in the unit value. The charge is made at the
maximum guaranteed effective annual rate of .60% for all Special Offer
Policies.
o SURRENDER CHARGE. The maximum surrender charge under the Special Offer Policy
is 50% of one target premium. After the first six policy years, this maximum
surrender charge begins to decrease at 20% per year. After ten years there is
no surrender charge. Subject to the maximum, the surrender charge equals 30%
of premium payments made during the first policy year up to the amount of one
target premium and 9% of any additional premiums paid during the first ten
policy years. No additional surrender charges will be established following a
Face Amount increase and Face Amount increases will not result in any change
to the percentages described above. These surrender charges will be set forth
in the Special Offer Policy when issued.
Pro-rata surrender charges will only be imposed on Face Amount decreases for
the first five policy years. Moreover, this charge will not apply unless the
cumulative reduction in Face Amount for a policy exceeds 20% of the initial
Face Amount.
YOU MAY REINSTATE THE SPECIAL OFFER POLICY. You may reinstate the Special Offer
Policy within three years after it lapses if:
o you provide evidence that the insured person is still insurable, and
o you make a premium payment sufficient to keep the policy in force for three
months after the date it is reinstated.
The effective date of the reinstated policy will be the beginning of the policy
month which coincides with or follows the date we approve your reinstatement
application. Upon reinstatement, there will be no further surrender charges
applied against the policy. Previous loans will not be reinstated.
VM 512 Cat. #126787
2
