Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
SEPARATE ACCOUNT FP
of
THE EQUITABLE LIFE ASSURANCE James M. Benson, President
SOCIETY OF THE UNITED STATES The Equitable Life Assurance Society of
(Exact Name of Trust) the United States
787 Seventh Avenue
THE EQUITABLE LIFE ASSURANCE New York, New York 10019
SOCIETY OF THE UNITED STATES (Name and Address of Agent for Service)
(Exact Name of Depositor)
1290 Avenue of the Americas
New York, New York 10104
(Address of Depositor's Principal
Executive Offices)
---------------------------------------
Telephone Number, Including Area Code: (212) 554-1234
----------------------------------------
Please send copies of all communications to:
MARY P. BREEN, ESQ. with a copy to:
Vice President and Associate General Counsel THOMAS C. LAUERMAN
The Equitable Life Assurance Freedman, Levy, Kroll & Simonds
Society of the United States 1050 Connecticut Avenue, N.W., Suite 825
787 Seventh Avenue Washington, D.C. 20036
New York, New York 10019
----------------------------------------
Securities Being Registered: Units of Interest in Separate Account FP
- --------------------------------------------------------------------------------
Approximate date of proposed public offering: As soon as practicable after the
effective date of the Registration Statement.
An indefinite amount of the Registrant's securities has been registered pursuant
to a declaration, under Rule 24f-2 under the Investment Company Act of 1940, set
out in the Form S-6 Registration Statement contained in File No. 2-98590. The
Registrant filed a Rule 24f-2 Notice for the December 31, 1995 fiscal year end
on February 27, 1996.
The registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until this
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE>
SEPARATE ACCOUNT FP OF
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Reconciliation and Tie
----------------------
Incentive Life COLI II(SM)
Items of
Form N-8B-2* Captions in Prospectus
- ------------ ----------------------
1 Summary Of Incentive Life COLI II(SM) Features - Putting
Money Into The Policy.
2 Part 1: The Company That Issues Incentive Life COLI II(SM).
3 Inapplicable.
4 Part 3: Distribution; Part 1: Equitable.
5, 6 Part 1: The Separate Account.
7 Inapplicable.**
8 Inapplicable.**
9 Part 3: Legal Proceedings.
10(a) Part 3: Your Beneficiary, Assigning Your Policy.
10(b) Part 2: How We Determine The Unit Value; Part 3: Dividends.
10(c), 10(d) Part 2: Death Benefits; Decreasing The Face Amount;
Maturity Benefit; Transfers Of Policy Account Value;
Telephone Transfers; Borrowing From Your Policy Account;
Partial Withdrawals And Surrender; Part 3: Your Payment
Options; Assigning Your Policy; When We Pay Policy
Proceeds.
- ----------
*Registrants include this Reconciliation and Tie in their Registration
Statement in compliance with Instruction 4 as to the Prospectus as set out in
Form S-6. Separate Account FP is an investment company registered under the
Investment Company Act of 1940 on a Form N-8B-2 Registration Statement (File
No. 811-4388). Pursuant to Sections 8 and 30(b)(1) of the Investment Company
Act of 1940, Rule 30a-1 under the Act, and Forms N-8B-2 and N-SAR under that
Act, the Account keeps its Form N-8B-2 Registration Statement current through
the filing of periodic reports required by the Securities and Exchange
Commission.
**Not required pursuant to either Instruction 1(a) as to the Prospectus as set
out in Form S-6 or the administrative practice of the Commission and its staff
of adapting the disclosure requirements of the Commission's registration
statement forms in recognition of the differences between variable life
insurance policies and other periodic payment plan certificates issued by
investment companies and between separate accounts organized as management
companies and unit investment trusts.
-1-
<PAGE>
<TABLE>
<CAPTION>
Items of
Form N-8B-2 Captions in Prospectus
- ----------- ----------------------
<S> <C>
10(e) Part 2: Your Policy Can Terminate; You May
Restore A Policy After It Terminates.
10(f) Part 3: Your Voting Privileges.
10(g)(1), 10(g)(2), 10(h)(1), Part 3: Our Right To Change How We Operate; Your Voting
10(h)(2) Privileges.
10(g)(3), 10(g)(4), 10(h)(3),
10(h)(4) Inapplicable.**
10(i) Part 1: The Separate Account And The Trust; Part 2:
Amounts In The Separate Account; Tax Effects.
11 Part 1: The Trust; Investment Policies Of The Trust's
Portfolios; The Separate Account.
12(a) Part 1: The Separate Account And The Trust - The Trust.
12(b) Inapplicable.
12(c) Part 1: The Trust.
12(d) Part 3: Distribution.
12(e) Inapplicable.**
13(a) Part 2: Supplemental Insurance On The Insured Person;
Transfers Of Policy Account Value; Partial
Withdrawals; Deductions and Charges.
13(b), 13(c), 13(g) Inapplicable.** (But see Part 4: Illustrations Of Policy
Benefits.)
13(d) Part 3: Special Circumstances.
13(e), 13(f) Inapplicable.
14 Part 2: Flexible Premiums; Policy Periods, Anniversaries, Dates And
Ages.
15 . Part 2: Flexible Premiums; Policy Periods, Anniversaries, Dates And
Ages.
16 Part 1: The Separate Account; Transfers Out Of The
Guaranteed Interest Division; Part 2: Amounts In The
Separate Account; Transfers Of Policy Account Value;
Repaying The Loan.
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Items of
Form N-8B-2 Captions in Prospectus
- ----------- ----------------------
<S> <C>
17(a), 17(b) Captions referenced under Items 10(c), 10(d) and 10(e)
above.
17(c) Inapplicable.**
18(a) Part 2: How We Determine The Unit Value.
18(b), 18(d) Inapplicable.
18(c) Part 2: How We Determine The Unit Value; Tax Effects - Our Taxes.
19 Part 3: Our Reports To Policyowners; Distribution; and Your Voting
Privileges.
20(a) Captions referenced under Items 10(g)(1), 10(g)(2), 10(h)(1),
and 10(h)(2).
20(b), 20(c), 20(d), 20(e), 20(f) Inapplicable.
21(a), 21(b) Part 2: Borrowing From Your Policy Account.
21(c) Inapplicable.**
22 Part 3: Limits On Our Right To Challenge The Policy.
23 Inapplicable.
24 Part 1; Part 2; Part 3.
25 Part 1: Equitable.
26(a), 26(b) Inapplicable.**
27 Part 1: Equitable; Part 3: Distribution.
28 Part 3: Management.
29 Part 1: Equitable.
30 Inapplicable.
31, 32, 33, 34 Inapplicable.**
35 Part 3: Regulation.
36 Inapplicable.**
37 Inapplicable.
38 Part 3: Distribution.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Items of
Form N-8B-2 Captions in Prospectus
- ----------- ----------------------
<S> <C>
39(a) Part 1: Equitable.
39(b) Part 3: Distribution.
40(a) Inapplicable.** (But see Part 3: Distribution.)
40(b) Inapplicable.
41(a) Part 1: Equitable; Part 3:
Distribution.
41(b), 41(c), 42 Inapplicable.**
43 Inapplicable.
44(a)(1) Part 2: How We Determine The Unit Value.
44(a)(2) Part 1: The Separate Account: Transfers Out Of The Guaranteed
Interest Division; Part 2: Death Benefits; Maturity Benefit;
Amounts In The Separate Account; How We Determine The
Unit Value; Transfers Of Policy Account Value; Telephone
Transfers; Borrowing From Your Policy Account; Partial
Withdrawals; Surrender For Net Cash Surrender Value; Policy Periods,
Anniversaries, Dates And Ages; Part 3: When We Pay Policy Proceeds.
44(a)(3) Captions referenced under Item 44(a)(2) and Part 2: Your
Policy Account Value.
44(a)(4) Part 2: Our Taxes.
44(a)(5) Part 2: Supplemental Insurance On The Insured Person;
Deductions From Premiums.
44(a)(6) Part 2: Your Policy Account Value; Amounts In The Separate
Account; How We Determine The Unit Value; Part 4:
Illustrations Of Policy Benefits.
44(b) Inapplicable.**
44(c) Part 3: Special Circumstances.
45 Inapplicable.
46(a) Captions referenced under Item 44(a) above.
46(b) Inapplicable.**
47, 48, 49 Inapplicable.
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Items of
Form N-8B-2 Captions in Prospectus
- ----------- ----------------------
<S> <C>
50 Part 1: The Separate Account.
51(a) - (j) Inapplicable.**
52(a), 52(c) Part 3: Our Right To Change How We Operate.
52(b), 52(d) Inapplicable.
53(a) Part 2: Our Taxes.
53(b), 54 Inapplicable.
55 Inapplicable.**
56 - 59 Inapplicable.**
</TABLE>
15241/brd-1.doc
-5-
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
IL PROTECTOR(SM)
IL COLI II(SM)
IL COLI
INCENTIVE LIFE PLUS(SM)
SURVIVORSHIP 2000
SPECIAL OFFER POLICY
INCENTIVE LIFE 2000
CHAMPION 2000
SP-FLEX
INCENTIVE LIFE
PROSPECTUS SUPPLEMENT DATED JANUARY 1, 1997
This supplement updates certain information in the Prospectus you received for
the variable life insurance policy you purchased from Equitable Variable Life
Insurance Company ("Equitable Variable")*. If your prospectus is dated 1995 or
earlier, we also mailed to you a prospectus supplement dated May 1, 1996.
Capitalized terms used in this supplement have the same meanings as in the
Prospectus. You should keep this supplement with your Prospectus and any May 1,
1996 supplement. We will send you another copy of any Prospectus or supplement,
without charge, on written request.
On January 1, 1997, Equitable Variable, a wholly-owned subsidiary of The
Equitable Life Assurance Society of the United States ("Equitable") was merged
with and into Equitable. As a result of this merger, all of Equitable Variable's
assets, including the assets of Equitable Variable's Separate Account FP, became
the assets of Equitable, and all of Equitable Variable's obligations, including
your policy, were assumed by Equitable. The merger did not affect any policy
values, premiums, investment options or other terms and conditions of your
policy in any way. Policy Account values allocated to the Separate Account Funds
continue after the merger without change or interruption.
Management. A list of our directors and, to the extent they are responsible for
variable life insurance operations, our principal officers and a brief statement
of their business experience for the past five years is contained in Appendix A
to this supplement.
Financial Statements. The financial statements of Separate Account FP and
Equitable included in this prospectus supplement have been audited for the years
ended December 31, 1995, 1994 and 1993 by the accounting firm of Price
Waterhouse LLP, independent accountants, as stated in their reports. The
financial statements of Separate Account FP and Equitable for the years ended
December 31, 1995, 1994 and 1993 included in this prospectus supplement have
been so included in reliance on the reports of Price Waterhouse LLP, given on
the authority of such firm as experts in accounting and auditing. The financial
statements of Separate Account FP and Equitable for the periods ended September
30, 1996 and 1995 included in this prospectus supplement are unaudited.
The financial statements of Equitable contained in this prospectus supplement
should be considered only as bearing upon the ability of Equitable to meet its
obligations under the policies. They should not be considered as bearing upon
the investment experience of the funds in the Separate Account. The financial
statements of Separate Account FP include periods prior to the merger when
Separate Account FP was part of Equitable Variable.
- -------------------
*This supplement updates certain information contained in the IL Protector
Prospectus dated July 25, 1996; the IL COLI II Prospectus dated July 24, 1996;
the Incentive Life Plus Prospectuses dated December 19, 1994, May 1, 1995,
September 15, 1995 and May 1, 1996; the IL COLI supplements thereto dated
September 15, 1995 and May 1, 1996, and the Special Offer Policy supplements
thereto dated May 1, 1995, September 15, 1995 and May 1, 1996; the Survivorship
2000 Prospectuses dated August 18, 1992 and May 1, 1993, 1994, 1995 and 1996;
the Incentive Life 2000 Prospectuses dated November 27, 1991 and May 1, 1993 and
1994, and the Special Offer Policy supplements thereto dated November 27, 1991,
January 29, 1993, May 1, 1993, May 1, 1994, and May 1, 1995; the Champion 2000
Prospectuses dated November 27, 1991 and May 1, 1993 and 1994; the SP-FLEX
Prospectuses dated September 30 and August 24, 1987; and the Incentive Life
Prospectuses dated August 29, 1989, February 27, 1991 and May 1, 1990, 1993 and
1994.
EVM-103
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditor's Report.......................................................................................... FSA-2
Financial Statements:
Statement of Assets and Liabilities, December 31, 1995.......................................................... FSA-3
Statement of Operations for the Years Ended December 31, 1995, 1994 and 1993.................................... FSA-4
Statement of Changes in Net Assets for the Years Ended December 31, 1995, 1994 and 1993......................... FSA-8
Notes to Financial Statements................................................................................... FSA-12
Interim Financial Statements:
Statement of Assets and Liabilities, September 30, 1996 (unaudited)............................................. FSA-20
Statement of Operations for the Nine Months Ended September 30, 1996 and 1995 (unaudited)....................... FSA-21
Statement of Changes in Net Assets for the Nine Months Ended September 30, 1996 and 1995 (unaudited)............ FSA-24
Notes to Interim Financial Statements (unaudited)............................................................... FSA-27
</TABLE>
FSA-1
<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 statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of Money Market Division,
Intermediate Government Securities Division, Quality Bond Division, High Yield
Division, Growth and Income Division, Equity Index Division, Common Stock
Division, Global Division, International Division, Aggressive Stock Division,
Conservative Investors Division, Balanced Division and Growth Investors
Division, separate investment divisions of Equitable Variable Life Insurance
Company ("Equitable Variable Life") Separate Account FP at December 31, 1995 and
the results of each of their operations and changes in each of their net assets
for each of the periods indicated, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Equitable Variable Life's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of shares in The Hudson River Trust at
December 31, 1995 with the transfer agent, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
New York, NY
February 7, 1996, except as to Note 8 which is as of September 19, 1996
FSA-2
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE
MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY
MARKET SECURITIES BOND YIELD INCOME 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 7)
Cost: $207,548,119..... $207,638,095
37,536,467..... $37,681,989
141,011,715..... $138,906,039
68,700,148..... $72,524,129
17,021,456..... $19,144,802
59,443,291..... $71,895,056
Receivable for sales of
shares of The Hudson
River Trust........... -- -- -- -- -- --
Receivable for policy-
related transactions.. 1,030,719 472,227 195,736 671,870 272,371 214,843
------------ ----------- ------------ ----------- ----------- -----------
Total Assets............ 208,668,814 38,154,216 139,101,775 73,195,999 19,417,173 72,109,899
------------ ----------- ------------ ----------- ----------- -----------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. 1,021,043 488,551 195,429 740,734 272,227 214,856
Payable for policy-
related transactions.. -- -- -- -- -- --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 514,240 516,621 618,900 524,303 526,633 271,428
------------ ----------- ------------ ----------- ---------- -----------
Total Liabilities....... 1,535,283 1,005,172 814,329 1,265,037 798,860 486,284
------------ ----------- ------------ ----------- ---------- -----------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS......... $207,133,531 $37,149,044 $138,287,446 $71,930,962 $18,618,313 $71,623,615
============ =========== ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
COMMON AGGRESSIVE
STOCK GLOBAL INTERNATIONAL STOCK
DIVISION DIVISION DIVISION DIVISION
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 7)
Cost: $966,230,780...... $1,148,055,059
297,303,481...... $333,829,077
11,991,226...... $12,659,132
475,758,260...... $556,029,378
Receivable for sales of
shares of The Hudson
River Trust........... -- -- -- --
Receivable for policy-
related transactions.. 233,000 421,042 137,166 800,569
-------------- ------------ ----------- ------------
Total Assets............ 1,148,288,059 334,250,119 12,796,298 556,829,947
-------------- ------------ ----------- ------------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. 679,729 246,368 143,511 1,121,615
Payable for policy-
related transactions.. -- -- -- --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 1,023,056 506,731 220,849 520,201
-------------- ------------ ----------- ------------
Total Liabilities....... 1,702,785 753,099 364,360 1,641,816
-------------- ------------ ----------- ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS....... $1,146,585,274 $333,497,020 $12,431,938 $555,188,131
============== ============ =========== ============
</TABLE>
See Notes to Financial Statements.
ASSET ALLOCATION SERIES
--------------------------------------------
CONSERVATIVE GROWTH
INVESTORS BALANCED INVESTORS
DIVISION DIVISION DIVISION
------------ ------------ ------------
ASSETS
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 7)
Cost: $162,300,470...... $172,662,590
356,282,500...... $399,379,687
474,917,898...... $556,703,771
Receivable for sales of
shares of The Hudson
River Trust........... 76,736 -- --
Receivable for policy-
related transactions.. -- -- 191,779
------------ ------------ ------------
Total Assets............ 172,739,326 399,379,687 556,895,550
------------ ------------ ------------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. -- 179,701 414,996
Payable for policy-
related transactions.. 81,465 47,918 --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 570,762 586,859 602,888
------------ ------------ ------------
Total Liabilities....... 652,227 814,478 1,017,884
------------ ------------ ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS....... $172,087,099 $398,565,209 $555,877,666
============ ============ ============
See Notes to Financial Statements.
FSA-3
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
MONEY MARKET DIVISION INTERMEDIATE GOVERNMENT SECURITIES DIVISION
------------------------------------ -------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------ --------------------------------------
1995 1994 1993 1995 1994 1993
---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust....... $9,225,401 $5,368,883 $4,163,389 $2,010,283 $ 5,671,984 $14,930,827
Expenses (Note 3):
Mortality and expense risk charges.......... 954,556 826,379 834,113 197,721 527,675 1,470,325
---------- ---------- ---------- ---------- ----------- -----------
NET INVESTMENT INCOME........................... 8,270,845 4,542,504 3,329,276 1,812,562 5,144,309 13,460,502
---------- ---------- ---------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 3,999,846
Realized gain distribution from
The Hudson River Trust.................... -- -- -- -- -- 11,449,074
---------- ---------- ---------- ---------- ----------- -----------
NET REALIZED GAIN (LOSS)........................ (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920
Unrealized appreciation/depreciation on
investments:
Beginning of period......................... 32,760 (14,267) (224,885) (2,736,863) (1,617,237) 1,966,231
End of period............................... 89,976 32,760 (14,267) 145,522 (2,736,863) (1,617,237)
---------- ---------- ---------- ---------- ----------- -----------
Change in unrealized appreciation/depreciation
during the period........................... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468)
---------- ---------- ---------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS................................ (375,131) 142,557 (129,136) 2,071,617 (11,283,602) 11,865,452
---------- ---------- ---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................... $7,895,714 $4,685,061 $3,200,140 $3,884,179 $(6,139,293) $25,325,954
========== ========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
QUALITY BOND DIVISION
-------------------------------------------
OCTOBER 1*
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------- ------------
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust....... $ 7,958,285 $ 8,123,722 $ 1,221,840
Expenses (Note 3):
Mortality and expense risk charges.......... 767,627 689,178 163,308
----------- ------------ ------------
NET INVESTMENT INCOME........................... 7,190,658 7,434,544 1,058,532
----------- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments......... (632,666) (410,697) (106)
Realized gain distribution from
The Hudson River Trust.................... -- -- 130,973
----------- ------------ ------------
NET REALIZED GAIN (LOSS)........................ (632,666) (410,697) 130,867
Unrealized appreciation/depreciation on
investments:
Beginning of period......................... (15,521,200) (1,886,621) --
End of period............................... (2,105,676) (15,521,200) (1,886,621)
----------- ------------ -----------
Change in unrealized appreciation/depreciation
during the period........................... 13,415,524 (13,634,579) (1,886,621)
----------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS................................ 12,782,858 (14,045,276) (1,755,754)
----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................... $19,973,516 $ (6,610,732) $ (697,222)
=========== ============ ===========
</TABLE>
See Notes to Financial Statements.
* Commencement of Operations
FSA-4
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
HIGH YIELD DIVISION
----------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust................. $ 6,518,568 $ 4,578,946 $4,488,259
Expenses (Note 3):
Mortality and expense risk charges.................... 371,369 305,522 285,992
----------- ----------- ----------
NET INVESTMENT INCOME..................................... 6,147,199 4,273,424 4,202,267
----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments................... (179,454) (328,199) 107,852
Realized gain distribution from
The Hudson River Trust.............................. -- -- 1,030,687
----------- ----------- ----------
NET REALIZED GAIN (LOSS).................................. (179,454) (328,199) 1,138,539
Unrealized appreciation/depreciation on investments:
Beginning of period................................... (873,103) 4,734,999 763,746
End of period......................................... 3,823,981 (873,103) 4,734,999
----------- ----------- ----------
Change in unrealized appreciation/depreciation
during the period..................................... 4,697,084 (5,608,102) 3,971,253
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 4,517,630 (5,936,301) 5,109,792
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS......................................... $10,664,829 $(1,662,877) $9,312,059
=========== =========== ==========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION
--------------------------------------- --------------------------
OCTOBER 1* APRIL 1*
TO YEAR ENDED TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------ ------------- ----------- -------------
1995 1994 1993 1995 1994
---------- --------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust................. $ 380,677 $ 108,492 $ 3,394 $ 964,775 $ 596,180
Expenses (Note 3):
Mortality and expense risk charges.................... 69,716 19,204 1,833 289,199 152,789
---------- --------- ------- ----------- ---------
NET INVESTMENT INCOME..................................... 310,961 89,288 1,561 675,576 443,391
---------- --------- ------- ----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments................... 2,791 (11,709) (134) 3,060 (6,949)
Realized gain distribution from
The Hudson River Trust.............................. -- -- -- 536,890 134,154
---------- --------- ------- ----------- ---------
NET REALIZED GAIN (LOSS).................................. 2,791 (11,709) (134) 539,950 127,205
Unrealized appreciation/depreciation on investments:
Beginning of period................................... (141,585) (904) -- (399,286) --
End of period......................................... 2,123,346 (141,585) (904) 12,451,765 (399,286)
---------- --------- ------- ----------- ---------
Change in unrealized appreciation/depreciation
during the period..................................... 2,264,931 (140,681) (904) 12,851,051 (399,286)
---------- --------- ------- ----------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 2,267,722 (152,390) (1,038) 13,391,001 (272,081)
---------- --------- ------- ----------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS......................................... $2,578,683 $ (63,102) $ 523 $14,066,577 $ 171,310
========== ========= ======= =========== =========
</TABLE>
See Notes to Financial Statements.
* Commencement of Operations
FSA-5
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK DIVISION GLOBAL STOCK DIVISION
-------------------------------------------- -----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------------- -----------------------------------------
1995 1994 1993 1995 1994 1993
------------ ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson
River Trust.................... $ 14,259,262 $ 11,755,355 $ 10,311,886 $ 5,152,442 $ 2,768,605 $ 1,060,406
Expenses (Note 3):
Mortality and expense risk
charges........................ 6,050,368 4,741,008 4,005,102 1,743,898 1,211,620 466,897
------------ ------------ ------------ ----------- ----------- -----------
NET INVESTMENT INCOME................ 8,208,894 7,014,347 6,306,784 3,408,544 1,556,985 593,509
------------ ------------ ------------ ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on
investments.................... 16,793,683 292,144 4,176,629 3,049,444 3,347,704 1,333,766
Realized gain distribution from
The Hudson River Trust......... 63,838,178 43,936,280 85,777,775 9,214,950 4,821,242 11,642,904
------------ ------------ ------------ ----------- ----------- -----------
NET REALIZED GAIN (LOSS)............. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670
Unrealized appreciation
(depreciation) on investments:
Beginning of period.............. (2,048,649) 71,350,568 22,647,989 3,130,280 7,062,877 2,783,724
End of period.................... 181,824,279 (2,048,649) 71,350,568 36,525,596 3,130,280 7,062,877
------------ ------------ ------------ ----------- ----------- -----------
Change in unrealized appreciation/
depreciation during the period... 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153
------------ ------------ ------------ ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.............. 264,504,789 (29,170,793) 138,656,983 45,659,710 4,236,349 17,255,823
------------ ------------ ------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.......... $272,713,683 $(22,156,446) $144,963,767 $49,068,254 $ 5,793,334 $17,849,332
============ ============ ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
INTERNATIONAL
DIVISION AGGRESSIVE STOCK DIVISION
-------------- --------------------------------------------
APRIL 3*
TO
DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------- --------------------------------------------
1995 1995 1994 1993
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson
River Trust.................... $195,500 $ 1,268,689 $ 400,102 $ 766,228
Expenses (Note 3):
Mortality and expense risk
charges........................ 36,471 2,702,978 1,944,639 1,757,109
-------- ------------ ------------ ------------
NET INVESTMENT INCOME................ 159,029 (1,434,289) (1,544,537) (990,881)
-------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on
investments.................... (790) 11,560,966 (6,075,250) 35,696,507
Realized gain distribution from
The Hudson River Trust......... 51,741 61,903,470 -- 25,339,962
-------- ------------ ------------ ------------
NET REALIZED GAIN (LOSS)............. 50,951 73,464,436 (6,075,250) 61,036,469
Unrealized appreciation
(depreciation) on investments:
Beginning of period.............. -- 30,761,318 35,185,988 53,885,737
End of period.................... 667,906 80,271,118 30,761,318 35,185,988
-------- ------------ ------------ ------------
Change in unrealized appreciation/
depreciation during the period... 667,906 49,509,800 (4,424,670) (18,699,749)
-------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.............. 718,857 122,974,236 (10,499,920) 42,336,720
-------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.......... $877,886 $121,539,947 $(12,044,457) $ 41,345,839
======== ============ ============ ============
</TABLE>
See Notes to Financial Statements.
*Commencement of Operations
FSA-6
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONCLUDED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
---------------------------------------------------------------------------------
CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION
-------------------------------------- ----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------- ----------------------------------------
1995 1994 1993 1995 1994 1993
----------- ----------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust....... $ 8,169,109 $ 6,205,574 $4,088,977 $12,276,328 $ 10,557,487 $10,062,862
Expenses (Note 3):
Mortality and expense risk charges.......... 921,294 750,164 551,610 2,237,982 2,103,510 2,047,811
----------- ----------- ---------- ----------- ------------ -----------
NET INVESTMENT INCOME........................... 7,247,815 5,455,410 3,537,367 10,038,346 8,453,977 8,015,051
----------- ----------- ---------- ----------- ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments......... (378,551) (421,501) 91,739 (2,466,524) 858,164 1,446,919
Realized gain distribution from
The Hudson River Trust.................... 1,068,272 -- 4,651,717 10,894,130 -- 20,280,817
----------- ----------- ---------- ----------- ------------ -----------
NET REALIZED GAIN (LOSS)........................ 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736
Unrealized appreciation (depreciation) on
investments:
Beginning of period......................... (8,767,697) 1,915,037 2,223,612 (2,878,875) 37,960,661 30,072,900
End of period............................... 10,362,120 (8,767,697) 1,915,037 43,097,187 (2,878,875) 37,960,661
----------- ----------- ---------- ----------- ------------ -----------
Change in unrealized appreciation/depreciation
during the period........................... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761
----------- ----------- ---------- ----------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS................................ 19,819,538 (11,104,236) 4,434,881 54,403,668 (39,981,372) 29,615,497
----------- ----------- ---------- ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................... $27,067,353 $(5,648,826) $7,972,248 $64,442,014 $(31,527,395) $37,630,548
=========== =========== ========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-------------------------------------------
GROWTH INVESTORS DIVISION
-------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust......... $ 15,855,901 $ 10,663,204 $ 5,922,228
Expenses (Note 3):
Mortality and expense risk charges............ 2,796,354 1,995,747 1,274,117
------------ ------------ -----------
NET INVESTMENT INCOME............................. 13,059,547 8,667,457 4,648,111
------------ ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments........... 1,752,185 241,591 52,392
Realized gain distribution from
The Hudson River Trust...................... 7,421,853 -- 14,624,517
------------ ------------ -----------
NET REALIZED GAIN (LOSS).......................... 9,174,038 241,591 14,676,909
Unrealized appreciation (depreciation) on
investments:
Beginning of period........................... (770,693) 20,567,604 12,746,740
End of period................................. 81,785,873 (770,693) 20,567,604
------------ ------------ -----------
Change in unrealized appreciation/depreciation
during the period............................. 82,556,566 (21,338,297) 7,820,864
------------ ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS.................................. 91,730,604 (21,096,706) 22,497,773
------------ ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................. $104,790,151 $(12,429,249) $27,145,884
============ ============ ===========
</TABLE>
See Notes to Financial Statements.
FSA-7
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET DIVISION SECURITIES DIVISION
------------------------------------------ -------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------ -------------------------------------------
1995 1994 1993 1995 1994 1993
------------ ------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............. $ 8,270,845 $ 4,542,504 $ 3,329,276 $ 1,812,562 $ 5,144,309 $ 13,460,502
Net realized gain (loss).......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920
Change in unrealized appreciation/
depreciation on investments..... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468)
------------ ------------ ------------ ----------- ------------- -------------
Net increase (decrease)
from operations................. 7,895,714 4,685,061 3,200,140 3,884,179 (6,139,293) 25,325,954
------------ ------------ ------------ ----------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)............. 96,773,056 82,536,703 64,845,505 11,016,347 18,915,140 26,598,113
Benefits and other policy-related
transactions (Note 3)........... (39,770,849) (32,432,771) (31,747,197) (6,286,070) (5,813,181) (7,539,335)
Net transfers among divisions..... 4,776,165 (25,466,044) (50,510,704) 953,149 (125,116,319) (180,916,946)
------------ ------------ ------------ ----------- ------------- -------------
Net increase (decrease) from
policy-related transactions..... 61,778,372 24,637,888 (17,412,396) 5,683,426 (112,014,360) (161,858,168)
------------ ------------ ------------ ----------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4)...... (36,640) (24,067) 92,890 (72,636) 15,335 (69,330)
------------ ------------ ------------ ----------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS... 69,637,446 29,298,882 (14,119,366) 9,494,969 (118,138,318) (136,601,544)
NET ASSETS, BEGINNING OF PERIOD..... 137,496,085 108,197,203 122,316,569 27,654,075 145,792,393 282,393,937
------------ ------------ ------------ ----------- ------------- -------------
NET ASSETS, END OF PERIOD........... $207,133,531 $137,496,085 $108,197,203 $37,149,044 $ 27,654,075 $ 145,792,393
============ ============ ============ =========== ============= =============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
QUALITY BOND DIVISION
-------------------------------------------
OCTOBER 1*
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------- -----------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............. $ 7,190,658 $ 7,434,544 $ 1,058,532
Net realized gain (loss).......... (632,666) (410,697) 130,867
Change in unrealized appreciation/
depreciation on investments..... 13,415,524 (13,634,579) (1,886,621)
------------ ------------ -----------
Net increase (decrease)
from operations................. 19,973,516 (6,610,732) (697,222)
------------ ------------ -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)............. 2,516,135 850,240 181,283
Benefits and other policy-related
transactions (Note 3)........... (3,189,044) (2,891,278) (441,626)
Net transfers among divisions..... 2,462,969 25,765,197 100,786,909
------------ ------------ -----------
Net increase (decrease) from
policy-related transactions..... 1,790,060 23,724,159 100,526,566
------------ ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4)...... (712,602) 255,654 38,047
------------ ------------ -----------
INCREASE (DECREASE) IN NET ASSETS... 21,050,974 17,369,081 99,867,391
NET ASSETS, BEGINNING OF PERIOD..... 117,236,472 99,867,391 --
------------ ------------ -----------
NET ASSETS, END OF PERIOD........... $138,287,446 $117,236,472 $99,867,391
============ ============ ===========
</TABLE>
See Notes to Financial Statements.
*Commencement of Operations
FSA-8
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
HIGH YIELD DIVISION
------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................... $ 6,147,199 $ 4,273,424 $ 4,202,267
Net realized gain (loss)................................ (179,454) (328,199) 1,138,539
Change in unrealized appreciation/
depreciation on investments........................... 4,697,084 (5,608,102) 3,971,253
----------- ------------ -----------
Net increase (decrease) from operations................. 10,664,829 (1,662,877) 9,312,059
----------- ------------ -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)................................... 15,333,474 14,287,345 10,787,763
Benefits and other policy-related
transactions (Note 3)................................. (8,211,013) (7,162,537) (5,179,424)
Net transfers among divisions........................... 4,789,450 (11,048,174) 1,006,671
----------- ------------ -----------
Net increase (decrease) from policy-related
transactions.......................................... 11,911,911 (3,923,366) 6,615,010
----------- ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE
VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (100,679) 16,028 (31,889)
----------- ------------ -----------
INCREASE (DECREASE) IN NET ASSETS......................... 22,476,061 (5,570,215) 15,895,180
NET ASSETS, BEGINNING OF PERIOD........................... 49,454,901 55,025,116 39,129,936
----------- ------------ -----------
NET ASSETS, END OF PERIOD................................. $71,930,962 $ 49,454,901 $55,025,116
=========== ============ ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION
------------------------------------- --------------------------
OCTOBER 1* APRIL 1*
TO YEAR ENDED TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------- ----------- ----------- -----------
1995 1994 1993 1995 1994
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................... $ 310,961 $ 89,288 $ 1,561 $ 675,576 $ 443,391
Net realized gain (loss)................................ 2,791 (11,709) (134) 539,950 127,205
Change in unrealized appreciation/
depreciation on investments........................... 2,264,931 (140,681) (904) 12,851,051 (399,286)
----------- ---------- -------- ----------- -----------
Net increase (decrease) from operations................. 2,578,683 (63,102) 523 14,066,577 171,310
----------- ---------- -------- ----------- -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)................................... 6,464,035 2,953,965 182,381 10,308,871 690,540
Benefits and other policy-related
transactions (Note 3)................................. (1,385,132) (481,430) (6,581) (2,111,532) (472,818)
Net transfers among divisions........................... 5,274,221 3,033,230 279,153 18,305,589 30,736,505
----------- ---------- -------- ----------- -----------
Net increase (decrease) from policy-related
transactions.......................................... 10,353,124 5,505,765 454,953 26,502,928 30,954,227
----------- ---------- -------- ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE
VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (221,877) 6,113 4,131 (71,293) (134)
----------- ---------- -------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS......................... 12,709,930 5,448,776 459,607 40,498,212 31,125,403
NET ASSETS, BEGINNING OF PERIOD........................... 5,908,383 459,607 -- 31,125,403 --
----------- ---------- -------- ----------- -----------
NET ASSETS, END OF PERIOD................................. $18,618,313 $5,908,383 $459,607 $71,623,615 $31,125,403
=========== ========== ======== =========== ===========
</TABLE>
See Notes to Financial Statements.
*Commencement of Operations
FSA-9
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK DIVISION GLOBAL STOCK DIVISION
-------------------------------------------- ------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------------- ------------------------------------------
1995 1994 1993 1995 1994 1993
-------------- ------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
FROM OPERATIONS:
Net investment income..... $ 8,208,894 $ 7,014,347 $ 6,306,784 $ 3,408,544 $ 1,556,985 $ 593,509
Net realized gain (loss).. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670
Change in unrealized
appreciation/
depreciation on
investments............. 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153
-------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from operations......... 272,713,683 (22,156,446) 144,963,767 49,068,254 5,793,334 17,849,332
-------------- ------------ ------------ ------------ ------------ ------------
FROM POLICY-RELATED
TRANSACTIONS:
Net premiums (Note 3)..... 216,068,996 171,525,812 124,210,476 92,666,618 77,766,997 25,508,452
Benefits and other
policy-related
transactions (Note 3)... (118,456,643) (93,481,219) (77,837,895) (37,507,499) (23,371,745) (8,931,159)
Net transfers among
divisions............... (34,354,864) 19,730,410 (9,498,455) (12,472,104) 47,610,957 59,544,080
-------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from policy-related
transactions............ 63,257,489 97,775,003 36,874,126 42,687,015 102,006,209 76,121,373
-------------- ------------ ------------ ------------ ------------ ------------
NET (INCREASE) DECREASE IN
AMOUNT RETAINED BY
EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP
(Note 4).................. (392,099) 44,948 (124,376) (96,720) (17,737) 4,085
-------------- ------------ ------------ ------------ ------------ ------------
INCREASE IN NET ASSETS...... 335,579,073 75,663,505 181,713,517 91,658,549 107,781,806 93,974,790
NET ASSETS, BEGINNING OF
PERIOD.................... 811,006,201 735,342,696 553,629,179 241,838,471 134,056,665 40,081,875
-------------- ------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF
PERIOD.................... $1,146,585,274 $811,006,201 $735,342,696 $333,497,020 $241,838,471 $134,056,665
============== ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
INTERNATIONAL
DIVISION AGGRESSIVE STOCK DIVISION
----------- ------------------------------------------
APRIL 3*
TO
DECEMBER 31, YEAR ENDED DECEMBER 31,
----------- ------------------------------------------
1995 1995 1994 1993
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
FROM OPERATIONS:
Net investment income..... $ 159,029 $ (1,434,289) $ (1,544,537) $ (990,881)
Net realized gain (loss).. 50,951 73,464,436 (6,075,250) 61,036,469
Change in unrealized
appreciation/
depreciation on
investments............. 667,906 49,509,800 (4,424,670) (18,699,749)
----------- ------------ ------------ ------------
Net increase (decrease)
from operations......... 877,886 121,539,947 (12,044,457) 41,345,839
----------- ------------ ------------ ------------
FROM POLICY-RELATED
TRANSACTIONS:
Net premiums (Note 3)..... 2,028,670 121,962,483 101,932,221 77,930,596
Benefits and other
policy-related
transactions (Note 3)... (339,723) (63,165,185) (48,604,650) (39,462,340)
Net transfers among
divisions............... 9,885,952 19,367,834 4,346,636 (73,890,214)
----------- ------------ ------------ ------------
Net increase (decrease)
from policy-related
transactions............ 11,574,899 78,165,132 57,674,207 (35,421,958)
----------- ------------ ------------ ------------
NET (INCREASE) DECREASE IN
AMOUNT RETAINED BY
EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP
(Note 4).................. (20,847) (188,813) 35,791 (2,220)
----------- ------------ ------------ ------------
INCREASE IN NET ASSETS...... 12,431,938 199,516,266 45,665,541 5,921,661
NET ASSETS, BEGINNING OF
PERIOD.................... 0 355,671,865 310,006,324 304,084,663
----------- ------------ ------------ ------------
NET ASSETS, END OF
PERIOD.................... $12,431,938 $555,188,131 $355,671,865 $310,006,324
=========== ============ ============ ============
</TABLE>
See Notes to Financial Statements.
*Commencement of Operations
FSA-10
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-----------------------------------------------------------------------------------------
CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION
------------------------------------------- ------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------- ------------------------------------------
1995 1994 1993 1995 1994 1993
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.............. $ 7,247,815 $ 5,455,410 $ 3,537,367 $ 10,038,346 $ 8,453,977 $ 8,015,051
Net realized gain (loss)........... 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736
Change in unrealized appreciation/
depreciation on investments...... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from operations.................. 27,067,353 (5,648,826) 7,972,248 64,442,014 (31,527,395) 37,630,548
------------ ------------ ------------ ------------ ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3).............. 41,419,959 48,492,315 43,782,002 63,451,955 70,116,900 67,351,402
Benefits and other policy-related
transactions (Note 3)............ (22,866,003) (21,612,430) (17,644,077) (48,742,571) (45,655,363) (44,497,967)
Net transfers among divisions...... (3,379,296) (2,076,793) 6,165,330 (18,908,540) (19,954,097) (6,834,099)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) from
policy-related transactions...... 15,174,660 24,803,092 32,303,255 (4,199,156) 4,507,440 16,019,336
------------ ------------ ------------ ------------ ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE
IN SEPARATE ACCOUNT FP (Note 4).... (95,412) 22,600 18,535 (93,214) 47,322 256,506
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS.... 42,146,601 19,176,866 40,294,038 60,149,644 (26,972,633) 53,906,390
NET ASSETS, BEGINNING OF PERIOD...... 129,940,498 110,763,632 70,469,594 338,415,565 365,388,198 311,481,808
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF PERIOD............ $172,087,099 $129,940,498 $110,763,632 $398,565,209 $338,415,565 $365,388,198
============ ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
--------------------------------------------
GROWTH INVESTORS DIVISION
--------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.............. $ 13,059,547 $ 8,667,457 $ 4,648,111
Net realized gain (loss)........... 9,174,038 241,591 14,676,909
Change in unrealized appreciation/
depreciation on investments...... 82,556,566 (21,338,297) 7,820,864
------------ ------------ ------------
Net increase (decrease)
from operations.................. 104,790,151 (12,429,249) 27,145,884
------------ ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3).............. 155,616,059 139,140,391 105,136,825
Benefits and other policy-related
transactions (Note 3)............ (68,357,709) (54,863,821) (36,431,873)
Net transfers among divisions...... (3,269,896) 20,294,785 30,908,183
------------ ------------ ------------
Net increase (decrease) from
policy-related transactions...... 83,988,454 104,571,355 99,613,135
------------ ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE
IN SEPARATE ACCOUNT FP (Note 4).... (120,493) 15,372 (27,455)
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS.... 188,658,112 92,157,478 126,731,564
NET ASSETS, BEGINNING OF PERIOD...... 367,219,554 275,062,076 148,330,512
------------ ------------ ------------
NET ASSETS, END OF PERIOD............ $555,877,666 $367,219,554 $275,062,076
============ ============ ============
</TABLE>
See Notes to Financial Statements.
FSA-11
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. General
Equitable Variable Life Insurance Company (Equitable Variable Life), a
wholly-owned subsidiary of The Equitable Life Assurance Society of the
United States (Equitable Life), established Separate Account FP (the
Account) as a unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. The Account
consists of thirteen 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,
the Equity Index Division and the International 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, Incentive Life
Plus,(TM) flexible premium 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.
Incentive Life policies offered with the prospectus dated September 15,
1995, are referred to as Incentive Life Plus Second Series. Incentive Life
Plus policies issued with a prior prospectus are referred to as Incentive
Life Plus Original Series. 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.
Policyowners may allocate amounts in their individual accounts to the
Divisions of the Account and/or (except for SP-Flex policies) to the
guaranteed interest division of Equitable Variable Life's General Account.
Net transfers to the guaranteed interest division of the General Account and
other Separate Accounts of $6,569,372, $35,120,632 and $125,668,098 for the
years ended 1995, 1994 and 1993, 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 Life'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. Significant Accounting Policies
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Investments are made in shares of the Trust and are valued at the net asset
values per share of the respective Portfolios. The net asset value is
determined by the Trust using the market or fair value of the underlying
assets of the Portfolio.
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 Life. Under the provisions of the Policies,
Equitable Variable Life 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 Life pays no tax on investment income and capital gains reflected
in variable life insurance policy reserves. However, Equitable Variable Life
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. Asset Charges
Under the Policies, Equitable Variable Life 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, Incentive Life Plus Second Series and
Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship
2000 policyowners, and 0.85% for SP-Flex policyowners. Incentive Life Plus
Original Series deducts this charge from the Policy Account. Under SP-Flex,
Equitable Variable Life 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.
FSA-12
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Under Incentive Life, Incentive Life Plus and the Series 2000 Policies,
mortality and administrative costs are charged in a different manner than
SP-Flex policies (see Notes 4 and 5).
Before amounts are allocated to the Account for Incentive Life, Incentive
Life Plus and the Series 2000 Policies, Equitable Variable Life deducts a
charge for taxes and either an initial policy fee (Incentive Life) or a
premium sales charge (Incentive Life Plus and Series 2000 Policies) from
premiums. Under SP-Flex, the entire initial premium is allocated to the
Account. Before any additional premiums under SP-Flex are allocated to the
Account, an administrative charge is deducted.
The amounts attributable to Incentive Life, Incentive Life Plus and the
Series 2000 policyowners' accounts are charged monthly by Equitable Variable
Life 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.
4. Amounts Retained by Equitable Variable Life in Separate Account FP
The amount retained by Equitable Variable Life in the Account arises
principally from (1) contributions from Equitable Variable Life, 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 Life are not subject to
charges for mortality and expense risks or mortality and administrative
costs.
Amounts retained by Equitable Variable Life in the Account may be
transferred at any time by Equitable Variable Life to its General Account.
The following table shows the surplus contributions (withdrawals) by
Equitable Variable Life by investment division:
<TABLE>
<CAPTION>
INVESTMENT DIVISION 1995 1994 1993
------------------- ----------- ----------- ----------
<S> <C> <C> <C>
Common Stock $ (630,000) -- --
Money Market (250,000) -- $1,145,000
Balanced -- -- --
Aggressive Stock (350,000) -- --
High Yield (100,000) -- 330,000
Global (130,000) -- (6,895,000)
Conservative Investors -- -- 575,000
Growth Investors -- -- 130,000
Short-Term World Income -- $(5,165,329) --
Intermediate Government Securities (165,000) -- --
Growth & Income (685,000) -- 1,000,000
Quality Bond (4,800,000) -- 5,000,000
Equity Index -- 200,000 --
International 200,000 -- --
----------- ----------- ----------
$(6,910,000) $(4,965,329) $1,285,000
=========== =========== ==========
</TABLE>
5. Distribution and Servicing Agreements
Equitable Variable Life has entered into a Distribution and Servicing
Agreement with Equitable Life 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 Life.
Equitable Variable Life also has entered into an agreement with Equitable
Life under which Equitable Life 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.
6. Share Substitution
On February 22, 1994, Equitable Variable Life, 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 statements of operations and statements of changes in net
assets for the Intermediate Government Securities Portfolio is combined with
the Short-Term World Income Portfolio for periods prior to the merger on
February 22, 1994. The Short-Term World Income Division is not available for
future investment.
FSA-13
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
7. Investment Returns
The Separate Account rates of return attributable to Incentive Life,
Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000
policyowners are different than those attributable to Survivorship 2000,
Incentive Life Plus Original Series and to SP-Flex policyowners because
asset charges are deducted at different rates under each policy (see Note
3).
The tables on this page and 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 whose
policy 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.
RATES OF RETURN:
INCENTIVE LIFE,
- --------------
INCENTIVE LIFE 2000,
- --------------------
INCENTIVE LIFE PLUS SECOND SERIES
- ---------------------------------
AND CHAMPION 2000*
- -----------------
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.18 % 8.24 % 9.18 % 7.32 % 6.63 % 6.05 %
Net return................ 5.11 % 3.39 % 2.35 % 2.94 % 5.55 % 7.59 % 8.53 % 6.68 % 5.99 % 5.47 %
</TABLE>
APRIL 1(A) TO
INTERMEDIATE YEAR ENDED DECEMBER 31, DECEMBER 31,
GOVERNMENT -----------------------------------------------
SECURITIES DIVISION 1995 1994 1993 1992 1991
- ------------------- ---- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37)% 10.58 % 5.60 % 12.26 %
Net return................ 12.65 % (4.95)% 9.88 % 4.96 % 11.60 %
YEAR ENDED OCTOBER 1(A)
DECEMBER 31, DECEMBER 31,
----------------------------------
QUALITY BOND DIVISION 1995 1994 1993
- --------------------- ---- ---- ----
Gross return.............. 17.02 % (5.10)% (0.51)%
Net return................ 16.32 % (5.67)% (0.66)%
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 4.68 % --
Net return................ 19.20 % (3.37)% 22.41 % 11.64 % 23.72 % (1.71)% 4.50 % 9.08 % 4.05 % --
</TABLE>
YEAR ENDED OCTOBER 1(A) TO
DECEMBER 31, DECEMBER 31,
----------------------------------
GROWTH & INCOME DIVISION 1995 1994 1993
- ------------------------- ---- ---- ----
Gross return.............. 24.07 % (0.58)% (0.25)%
Net return................ 23.33 % (1.17)% (0.41)%
YEAR ENDED MARCH 31(A) TO
DECEMBER 31, DECEMBER 31,
-----------------------------------
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % 1.08 %
Net return................ 35.66 % 0.58 %
- -------------------------------
* Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992.
Sales of Incentive Life Plus Second Series commenced on September 15, 1995.
(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>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 32.45 % (2.14)% 24.84 % 3.22 % 37.88 % (8.12)% 25.59 % 22.43 % 7.49 % 15.65 %
Net return................ 31.66 % (2.73)% 24.08 % 2.60 % 37.06 % (8.67)% 24.84 % 21.70 % 6.84 % 15.01 %
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (13.27)%
Net return................ 18.11 % 4.60 % 31.33 % (1.10)% 29.77 % (6.63)% 26.17 % 10.22 % (13.45)%
</TABLE>
APRIL 3(A)
TO
DECEMBER 31,
INTERNATIONAL DIVISION 1995
- ---------------------- ----------
Gross return.............. 11.29 %
Net return................ 10.79 %
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 31.63 % (3.81)% 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % 7.31 % 35.88 %
Net return................ 30.85 % (4.39)% 16.05 % (3.74)% 85.75 % 7.51 % 42.64 % 0.53 % 6.66 % 35.13 %
</TABLE>
<TABLE>
<CAPTION>
JANUARY 26(A) TO
ASSET ALLOCATION SERIES YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------------------------------------------------------------------------------
BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.75 % (8.02)% 12.28 % (2.84)% 41.26 % 0.24 % 25.83 % 13.27 % (0.85)% 29.07 %
Net return................ 19.03 % (8.57)% 11.64 % (3.42)% 40.42 % (0.36)% 25.08 % 12.59 % (1.45)% 28.34 %
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 2(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE --------------------------------------------------------------------------------
INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989
- ------------------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 20.40 % (4.10)% 10.76 % 5.72 % 19.87 % 6.37 % 3.09 %
Net return................ 19.68 % (4.67)% 10.15 % 5.09 % 19.16 % 5.73 % 2.94 %
</TABLE>
<TABLE>
<CAPTION>
GROWTH INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989
- ------------------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 26.37 % (3.15)% 15.26 % 4.90 % 48.89 % 10.66 % 3.98 %
Net return................ 25.62 % (3.73)% 14.58 % 4.27 % 48.01 % 10.00 % 3.82 %
</TABLE>
- ----------------------------
* 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.
RATES OF RETURN:
SURVIVORSHIP 2000
- -----------------
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992
- --------------------- ---- ---- ---- ----
Gross return.............. 5.74 % 4.02 % 3.00 % 1.11 %
Net return................ 4.80 % 3.08 % 2.04 % 0.77 %
INTERMEDIATE GOVERNMENT
SECURITIES DIVISION 1995 1994 1993 1992
- ------------------- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37)% 10.58 % 0.90 %
Net return................ 12.31 % (5.23)% 9.55 % 0.56 %
- ----------
(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-15
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
OCTOBER 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------------------------
QUALITY BOND DIVISION 1995 1994 1993
- --------------------- ---- ---- ----
Gross return.............. 17.02 % (5.10)% (0.51)%
Net return................ 15.97 % (5.95)% (0.73)%
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992
- ------------------- ---- ---- ---- ----
Gross return.............. 19.92 % (2.79)% 23.15 % 1.84 %
Net return................ 18.84 % (3.66)% 22.04 % 1.50 %
OCTOBER 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------
GROWTH & INCOME DIVISION 1995 1994 1993
- ------------------------ ---- ---- ----
Gross return.............. 24.07 % (0.58)% (0.25)%
Net return................ 22.96 % (1.47)% (0.48)%
YEAR ENDED MARCH 1(A) TO
DECEMBER 31, DECEMBER 31,
------------------------------
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % 1.08 %
Net return................ 35.26 % 0.33 %
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992
- --------------------- ---- ---- ---- ----
Gross return.............. 32.45 % (2.14)% 24.84 % 5.28 %
Net return................ 31.26 % (3.02)% 23.70 % 4.93 %
GLOBAL DIVISION
- ---------------
Gross return.............. 18.81 % 5.23 % 32.09 % 4.87 %
Net return................ 17.75 % 4.29 % 30.93 % 4.52 %
APRIL 3(A) TO
DECEMBER 31,
----------------
INTERNATIONAL DIVISION 1995
- ---------------------- ----
Gross return.............. 11.29 %
Net return................ 10.55 %
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992
- ------------------------- ---- ---- ---- ----
Gross return.............. 31.63 % (3.81)% 16.77 % 11.49 %
Net return................ 30.46 % (4.68)% 15.70 % 11.11 %
ASSET ALLOCATION SERIES
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS --------------------------------------------------
DIVISION 1995 1994 1993 1992
- -------- ---- ---- ---- ----
Gross return.............. 20.40 % (4.10)% 10.76 % 1.38 %
Net return................ 19.32 % (4.96)% 9.81 % 1.04 %
BALANCED DIVISION 1995 1994 1993 1992
- ----------------- ---- ---- ---- ----
Gross return.............. 19.75 % (8.02)% 12.28 % 5.37 %
Net return................ 18.68 % (8.84)% 11.30 % 5.02 %
GROWTH INVESTORS DIVISION 1995 1994 1993 1992
- ------------------------- ---- ---- ---- ----
Gross return.............. 26.37 % (3.15)% 15.26 % 6.89 %
Net return................ 25.24 % (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-16
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31,1995
RATES OF RETURN:
INCENTIVE LIFE PLUS ORIGINAL SERIES*(B)
- ---------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------
1995
----
Money Market Division ........... 5.69%
Intermediate Government
Securities Division ............. 13.31%
Quality Bond Division ........... 17.13%
High Yield Division ............. 19.95%
Growth & Income Division ........ 24.38%
Equity Index Division ........... 36.53%
Common Stock Division ........... 33.07%
Global Division ................. 19.38%
APRIL 30 TO DECEMBER 31,
------------------------
1995
----
International Division .......... 11.29%
YEAR ENDED DECEMBER 31,
------------------------
1995
----
Aggressive Stock Division ....... 33.00%
ASSET ALLOCATION SERIES .........
YEAR ENDED DECEMBER 31,
------------------------
1995
----
Conservative Investors Division . 20.59%
Balanced Division ............... 20.32%
Growth Investors Division ....... 26.92%
- --------------------
*Sales of Incentive Life Plus Original Series commenced on January 6, 1995.
(b) There are no Separate Account asset charges for this policy and therefore
the gross and net rates of return are the same. The rate of return for the
period indicated is not an annual rate of return.
FSA-17
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31,1995
RATES OF RETURN:
SP-FLEX
- -------
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.17 % 8.24 % 9.18 % 7.32 % 2.15 %
Net return................ 3.86 % 2.17 % 1.13 % 1.71 % 4.29 % 6.30 % 7.24 % 5.41 % 1.62 %
</TABLE>
APRIL 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
INTERMEDIATE GOVERNMENT --------------------------------------------------
SECURITIES DIVISION 1995 1994 1993 1992 1991
- ------------------- ---- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37) % 10.58 % 5.60 % 12.10 %
Net return................ 11.31 % (6.08) % 8.57 % 3.71 % 10.59 %
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
-------------------------------
QUALITY BOND DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 17.02 % (2.20)%
Net return................ 14.94 % (2.35)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 1.95 %
Net return................ 17.79 % (4.52)% 20.96 % 10.30 % 22.25 % (2.89)% 3.26 % 7.78 % 1.39 %
</TABLE>
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
---------------------------------
GROWTH & INCOME DIVISION 1995 1994
- ------------------------ ---- ----
Gross return.............. 24.07 % (3.40)%
Net return................ 21.87 % (3.55)%
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % (2.54)%
Net return................ 34.06 % (2.69)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 32.45 % 2.14 % 24.84 % 3.23 % 37.87 % (8.12)% 25.59 % 22.43 % (22.57)%
Net return................ 30.10 % (3.88)% 22.60 % 1.38 % 35.43 % (9.76)% 23.36 % 20.26 % (23.00)%
GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (11.40)%
Net return................ 16.70 % 3.36 % 29.77 % (2.28)% 28.23 % (7.75)% 24.67 % 8.90 % (11.86)%
</TABLE>
APRIL 3(A) TO
DECEMBER 31,
-------------
INTERNATIONAL DIVISION 1995
- ---------------------- ----
Gross return.............. 11.29 %
Net return................ 9.82 %
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 31.63 % 3.81 % 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % (24.28)%
Net return................ 29.30 % (5.53)% 14.67 % (4.89)% 83.54 % 6.23 % 40.95 % (0.66)% (24.68)%
</TABLE>
- ------------------------------
(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-18
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
ASSET ALLOCATION SERIES
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS ---------------------------------------
DIVISION 1995 1994
- -------- ---- ----
Gross return.......... 20.40 % (1.83)%
Net return............ 18.26 % (1.98)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------------
BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 19.75 % (8.02)% 12.28 % (2.83)% 41.27 % 0.24 % 25.83 % 13.27 % (20.26)%
Net return............ 17.62 % (9.66)% 10.31 % (4.57)% 38.75 % (1.56)% 23.59 % 11.25 % (20.71)%
</TABLE>
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
GROWTH INVESTORS ------------------------------------
DIVISION 1995 1994
- -------- ---- ----
Gross return........... 26.37 % (3.16)%
Net return............. 24.12 % (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.
8. Subsequent Event
On September 19, 1996 the Board of Directors of Equitable Life approved an
Agreement and Plan of Merger by and between Equitable Life and Equitable
Variable Life (the "Merger Agreement"). The merger is expected to be
effective on January 1, 1997, subject to receipt of all necessary regulatory
approvals. On that date, and in accordance with the provisions of the Merger
Agreement, the separate existence of Equitable Variable Life will cease and
Equitable Life will survive the merger. From and after the effective date of
the merger, Equitable Life will be liable in place of Equitable Variable
Life for the liabilities and obligations of Equitable Variable Life,
including liabilities under policies and contracts issued by Equitable
Variable Life, and all of Equitable Variable Life's assets will become
assets of Equitable Life.
FSA-19
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
FIXED INCOME SERIES EQUITY SERIES
------------------------------------------------------------------ -------------------------------
INTERMEDIATE
MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY COMMON
MARKET SECURITIES BOND YIELD INCOME INDEX STOCK
FUND FUND FUND FUND FUND FUND FUND
------------ ------------ -------------- ------------ ------------- --------------- --------------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C>
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 6)
Cost: $165,564,928....... $165,937,243
43,750,516....... $43,305,378
154,236,243....... $147,904,622
87,558,526....... $95,912,162
27,455,859....... $31,071,304
97,100,736....... $119,477,987
1,194,664,886....... $1,481,486,712
351,595,598.......
33,337,481.......
661,363,283.......
166,617,325.......
381,690,336.......
608,848,116.......
Receivable for shares of
The Hudson River
Trust ................ -- 25,723 95,980 -- -- -- --
Receivable for policy-
related transactions 3,827,870 -- -- -- 86,467 196,738 --
------------ ----------- ------------ ----------- ----------- ------------ --------------
Total Assets ............. 169,765,113 43,331,101 148,000,602 95,912,162 31,157,771 119,674,725 1,481,486,712
------------ ----------- ------------ ----------- ----------- ------------ --------------
LIABILITIES
Payable for purchases of
shares of The Hudson
River Trust .......... 3,912,050 -- -- 43,386 93,070 199,909 197,381
Payable for policy-
related transactions -- 43,270 154,723 3,328 -- -- 169,260
Amount retained by
Equitable Variable
in Separate Account
FP (Note 4) .......... 574,980 528,646 633,857 688,420 579,643 313,444 1,309,288
------------ ----------- ------------ ----------- ----------- ------------ --------------
Total Liabilities ........ 4,487,030 571,916 788,580 735,134 672,713 513,353 1,675,929
------------ ----------- ------------ ----------- ----------- ------------ --------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS ...... $165,278,083 $42,759,185 $147,212,022 $95,177,028 $30,485,058 $119,161,372 $1,479,810,783
============ =========== ============ =========== =========== ============ ==============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
EQUITY SERIES ASSET ALLOCATION SERIES
------------------------------------------- -------------------------------------------
AGGRESSIVE CONSERVATIVE GROWTH
GLOBAL INTERNATIONAL STOCK INVESTORS BALANCED INVESTORS
FUND FUND FUND FUND FUND FUND
-------------- ------------- ------------- ------------- -------------- --------------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 6)
Cost: $165,564,928.......
43,750,516.......
154,236,243.......
87,558,526.......
27,455,859.......
97,100,736.......
1,194,664,886.......
351,595,598....... $403,967,887
33,337,481....... $35,007,334
661,363,283....... $745,660,006
166,617,325....... $170,418,342
381,690,336....... $415,550,419
608,848,116....... $659,684,627
Receivable for shares of
The Hudson River
Trust ................ -- -- 3,329,166 98,112 207,444 --
Receivable for policy-
related transactions 368,849 120,728 -- -- -- --
------------ ----------- ------------ ------------ ------------ ------------
Total Assets ............. 404,336,736 35,128,062 748,989,172 170,516,454 415,757,863 659,684,627
------------ ----------- ------------ ------------ ------------ ------------
LIABILITIES
Payable for purchases of
shares of The Hudson
River Trust .......... 181,369 96,161 -- -- -- 250,106
Payable for policy-
related transactions -- -- 3,650,196 129,358 478,338 78,373
Amount retained by
Equitable Variable
in Separate Account
FP (Note 4) .......... 576,659 237,480 715,086 584,802 690,475 677,559
------------ ----------- ------------ ------------ ------------ ------------
Total Liabilities ........ 758,028 333,641 4,365,282 714,160 1,168,813 1,006,038
------------ ----------- ------------ ------------ ------------ ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS ...... $403,578,708 $34,794,421 $744,623,890 $169,802,294 $414,589,050 $658,678,589
============ =========== ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
FSA-20
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET FUND SECURITIES FUND
-------------------------- -------------------------
1996 1995 1996 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 6,300,108 $6,517,222 $1,696,840 $1,479,090
Expenses (Note 3):
Mortality and expense risk charges ............... 738,965 647,879 177,582 143,478
----------- ---------- ---------- ----------
NET INVESTMENT INCOME .................................... 5,561,143 5,869,343 1,519,258 1,335,612
----------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (149,139) (208,460) (408,620) (768,233)
Realized gain distribution from
The Hudson River Trust ........................ -- -- -- --
----------- ---------- ---------- ----------
NET REALIZED GAIN (LOSS) ................................. (149,139) (208,460) (408,620) (768,233)
----------- ---------- ---------- ----------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 89,976 32,760 145,522 2,736,863
End of period .................................... 372,315 (240,472) (445,138) (463,025)
----------- ---------- ---------- ----------
Change in unrealized appreciation (depreciation)
during the period ................................ 282,339 (273,232) (590,660) 2,273,838
----------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 133,200 (481,692) (999,280) 1,505,605
----------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING .....................
FROM OPERATIONS ...................................... $ 5,694,343 $5,387,651 $ 519,978 $2,841,217
=========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
QUALITY BOND FUND HIGH YIELD FUND
-------------------------- -------------------------
1996 1995 1996 1995
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $6,372,295 $ 6,057,328 $6,020,378 $4,515,142
Expenses (Note 3):
Mortality and expense risk charges ............... 639,290 564,909 365,819 266,220
---------- ----------- ---------- ----------
NET INVESTMENT INCOME .................................... 5,733,005 5,492,419 5,654,559 4,248,922
---------- ----------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (220,874) (377,247) 372,478 (275,035)
Realized gain distribution from
The Hudson River Trust ........................ -- -- 3,227,791 --
---------- ----------- ---------- ----------
NET REALIZED GAIN (LOSS) ................................. (220,874) (377,247) 3,600,269 (275,035)
---------- ----------- ---------- ----------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. (2,105,676) (15,521,200) 3,823,981 (873,103)
End of period .................................... (6,331,621) (6,084,645) 8,353,636 2,942,319
---------- ----------- ---------- ----------
Change in unrealized appreciation (depreciation)
during the period ................................ (4,225,945) 9,436,555 4,529,655 3,815,422
---------- ----------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (4,446,819) 9,059,308 8,129,924 3,540,387
---------- ----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING .....................
FROM OPERATIONS ...................................... $1,286,186 $14,551,727 $13,784,483 $7,789,309
========== =========== =========== ==========
</TABLE>
See Notes to Financial Statements.
FSA-21
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONTINUED)
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH & INCOME EQUITY INDEX
FUND FUND
------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 381,846 $ 257,323 $ 1,390,087 $ 651,968
Expenses (Note 3):
Mortality and expense risk charges ............... 105,544 45,104 415,358 191,805
---------- ---------- ----------- -----------
NET INVESTMENT INCOME .................................... 276,302 212,219 974,729 460,163
---------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (4,941) (1,023) (21,227) (9)
Realized gain distribution from
The Hudson River Trust ........................ 568,408 -- 338,110 --
---------- ---------- ----------- -----------
NET REALIZED GAIN (LOSS) ................................. 563,467 (1,023) 316,883 (9)
---------- ---------- ----------- -----------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 2,123,346 (141,585) 12,451,765 (399,286)
End of period .................................... 3,615,445 1,604,757 22,377,251 9,547,751
---------- ---------- ----------- -----------
Change in unrealized appreciation (depreciation)
during the period ................................ 1,492,099 1,746,342 9,925,486 9,947,037
---------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 2,055,566 1,745,319 10,242,369 9,947,028
---------- ---------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $2,331,868 $1,957,538 $11,217,098 $10,407,191
========== ========== =========== ===========
</TABLE>
See Notes to Financial Statements.
*Commencement of operations on April 3.
<TABLE>
<CAPTION>
COMMON STOCK GLOBAL STOCK
FUND FUND
----------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 9,004,982 $ 9,752,460 $ 4,146,524 $ 4,033,348
Expenses (Note 3):
Mortality and expense risk charges ............... 5,915,587 4,375,532 1,674,106 1,255,121
------------ ------------ ----------- -----------
NET INVESTMENT INCOME .................................... 3,089,395 5,376,928 2,472,418 2,778,227
------------ ------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. 5,062,716 14,917,528 2,370,310 2,236,458
Realized gain distribution from
The Hudson River Trust ........................ 61,461,578 -- 9,397,912 --
------------ ------------ ----------- -----------
NET REALIZED GAIN (LOSS) ................................. 66,524,294 14,917,528 11,768,222 2,236,458
------------ ------------ ----------- -----------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 181,824,279 (2,048,649) 36,525,596 3,049,444
End of period .................................... 286,821,826 222,292,389 52,372,289 39,743,464
------------ ------------ ----------- -----------
Change in unrealized appreciation (depreciation)
during the period ................................ 104,997,547 224,341,038 15,846,693 36,694,020
------------ ------------ ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 171,521,841 239,258,566 27,614,915 38,930,478
------------ ------------ ----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $174,611,236 $244,635,494 $30,087,333 $41,708,705
============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements.
*Commencement of operations on April 3.
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
-----------------------
1996 1995*
---------- --------
<S> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 268,735 $ 56,215
Expenses (Note 3):
Mortality and expense risk charges ............... 107,106 20,602
---------- --------
NET INVESTMENT INCOME .................................... 161,629 35,613
---------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (17,105) (275)
Realized gain distribution from
The Hudson River Trust ........................ 312,086 --
---------- --------
NET REALIZED GAIN (LOSS) ................................. 294,981 (275)
---------- --------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 667,906 --
End of period .................................... 1,669,853 435,057
---------- --------
Change in unrealized appreciation (depreciation)
during the period ................................ 1,001,947 435,057
---------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 1,296,928 434,782
---------- --------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $1,458,557 $470,395
========== ========
</TABLE>
See Notes to Financial Statements.
*Commencement of operations on April 3.
FSA-22
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONCLUDED)
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
------------------------------
CONSERVATIVE INVESTORS
AGGRESSIVE STOCK FUND FUND
-------------------------------- ------------------------------
1996 1995 1996 1995
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 1,105,507 $ 1,083,866 $ 5,867,240 $ 6,040,445
Expenses (Note 3):
Mortality and expense risk charges ............... 2,923,580 1,915,033 777,140 666,346
------------- ------------- ------------ ------------
NET INVESTMENT INCOME .................................... (1,818,073) (831,167) 5,090,100 5,374,099
------------- ------------- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. 23,657,174 4,846,290 (560,234) (379,912)
Realized gain distribution from
The Hudson River Trust ........................ 85,627,087 -- 2,804,963 --
------------- ------------- ------------ ------------
NET REALIZED GAIN (LOSS) ................................. 109,284,261 4,846,290 2,244,729 (379,912)
------------- ------------- ------------ ------------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 80,271,118 11,560,966 10,362,120 (8,767,697)
End of period .................................... 84,296,723 105,041,544 3,801,017 5,707,618
------------- ------------- ------------ ------------
Change in unrealized appreciation (depreciation)
during the period ................................ 4,025,605 93,480,578 (6,561,103) 14,475,315
------------- ------------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 113,309,866 98,326,868 (4,316,374) 14,095,403
------------- ------------- ------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $ 111,491,793 $ 97,495,701 $ 773,726 $ 19,469,502
============= ============= ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
----------------------------------------------------------------
BALANCED FUND GROWTH INVESTORS FUND
------------------------------- ------------------------------
1996 1995 1996 1995
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 9,585,426 $ 9,067,337 $ 10,945,015 $ 11,331,010
Expenses (Note 3):
Mortality and expense risk charges ............... 1,833,659 1,639,489 2,710,777 1,986,105
------------ ------------ ------------ ------------
NET INVESTMENT INCOME .................................... 7,751,767 7,427,848 8,234,238 9,344,905
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (913,215) (1,988,151) 894,207 1,539,280
Realized gain distribution from
The Hudson River Trust ........................ 26,596,466 -- 63,035,263 --
------------ ------------ ------------ ------------
NET REALIZED GAIN (LOSS) ................................. 25,683,251 (1,988,151) 63,929,470 1,539,280
------------ ------------ ------------ ------------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 43,097,187 (2,878,875) 81,785,873 (770,693)
End of period .................................... 33,860,083 42,508,029 50,836,511 73,394,942
------------ ------------ ------------ ------------
Change in unrealized appreciation (depreciation)
during the period ................................ (9,237,104) 45,386,904 (30,949,362) 74,165,635
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 16,446,147 43,398,753 32,980,108 75,704,915
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $ 24,197,914 $ 50,826,601 $ 41,214,346 $ 85,049,820
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
FSA-23
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
Intermediate Government
MONEY MARKET FUND Securities Fund
-------------------------------- -----------------------------
1996 1995 1996 1995
-------------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income .................... $ 5,561,143 $ 5,869,343 $ 1,519,258 $ 1,335,612
Net realized gain (loss) ................. (149,139) (208,460) (408,620) (768,233)
Change in unrealized appreciation
(depreciation) on investments ........ 282,339 (273,232) (590,660) 2,273,838
------------- ------------- ------------ ------------
Net increase (decrease)
from operations ...................... 5,694,343 5,387,651 519,978 2,841,217
------------- ------------- ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) .................... 73,901,686 70,231,391 7,713,294 8,391,577
Benefits and other policy-related
transactions (Note 3) ................ (27,123,574) (29,452,310) (5,367,810 (4,950,311)
Net transfers among Funds ................ (94,267,163) 17,093,189 2,756,705 136,079
------------- ------------- ------------ ------------
Net increase (decrease) from
policy-related transactions .......... (47,489,051) 57,872,270 5,102,189 3,577,345
------------- ------------- ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ............. (60,740) (30,797) (12,026) (55,730)
------------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO POLICYHOLDERS ......................... (41,855,448) 63,229,124 5,610,141 6,362,832
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
BEGINNING OF PERIOD ...................... 207,133,531 137,496,085 37,149,044 27,654,075
------------- ------------- ------------ -----------
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
END OF PERIOD ............................ $ 165,278,083 $ 200,725,209 $42,729,185 $34,016,907
============= ============= ============ ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
QUALITY BOND FUND HIGH YIELD FUND
------------------------------- ------------------------------
1996 1995 1996 1995
------------ ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income .................... $ 5,733,005 $ 5,492,419 $ 5,654,559 $ 4,248,922
Net realized gain (loss) ................. (220,874) (377,247) 3,600,269 (275,035)
Change in unrealized appreciation
(depreciation) on investments ........ (4,225,945) 9,436,555 4,529,655 3,815,422
------------ ------------- ------------ ------------
Net increase (decrease)
from operations ...................... 1,286,186 14,551,727 13,784,483 7,789,309
------------- ------------- ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) .................... 4,698,961 1,895,869 13,765,625 11,553,599
Benefits and other policy-related
transactions (Note 3) ................ (2,816,687) (2,565,098) (7,942,483) (5,852,984)
Net transfers among Funds ................ 5,771,073 1,565,156 3,802,558 2,835,740
------------- ------------- ------------ ------------
Net increase (decrease) from
policy-related transactions .......... 7,653,347 895,927 9,625,700 8,536,355
------------- ------------- ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ............. (14,957) (583,778) (164,117) (77,962)
------------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO POLICYHOLDERS ......................... 8,924,576 14,863,876 23,246,066 16,247,702
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
BEGINNING OF PERIOD ...................... 138,287,446 117,236,472 71,930,962 49,454,901
------------- ------------- ------------ ------------
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
END OF PERIOD ............................ $ 147,212,022 $ 132,100,348 $ 95,177,028 $ 65,702,603
============= ============= ============ ============
</TABLE>
See Notes to Financial Statements.
FSA-24
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH & INCOME FUND EQUITY INDEX FUND
------------------------------ -------------------------------
1996 1995 1996 1995*
------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ............ $ 276,302 $ 212,219 $ 974,729 $ 460,163
Net realized gain (loss) ......... 563,467 (1,023) 316,883 (9)
Change in unrealized appreciation
(depreciation) on investments 1,492,099 1,746,342 9,925,486 9,947,037
------------ ------------ ------------- -----------
Net increase (decrease)
from operations .............. 2,331,868 1,957,538 11,217,098 10,407,191
------------ ------------ ------------- ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 8,373,294 4,359,667 24,299,229 6,034,578
Benefits and other policy-related
transactions (Note 3) ........ (2,102,400) (961,902) (5,365,898) (1,188,165)
Net transfers among Funds ........ 3,316,994 3,789,319 17,429,345 13,078,752
------------ ------------- ------------ ------------
Net increase from Assets
policy-related transactions .. 9,587,888 7,187,084 36,362,676 17,925,165
------------ ------------- ------------- ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... (53,011) (195,384) (42,017) (57,807)
------------ ------------ ------------- ------------
INCREASE IN NET ASSETS ATTRIBUTABLE
TO POLICYHOLDERS ................. 11,866,745 8,949,238 47,537,757 28,274,549
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, BEGINNING OF PERIOD 18,618,313 5,908,383 71,623,615 31,125,403
------------- ------------ ------------- ------------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, END OF PERIOD ..... $ 30,485,058 $ 14,857,621 $ 119,161,372 $ 59,399,952
============ ============ ============= ============
</TABLE>
See Notes to Financial Statements.
*Commencement of operations on April 3.
<TABLE>
<CAPTION>
COMMON STOCK FUND GLOBAL STOCK FUND
------------------------------------ -------------------------------
1996 1995 1996 1995
--------------- --------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ............ $ 3,089,395 $ 5,376,928 $ 2,472,418 $ 2,778,227
Net realized gain (loss) ......... 66,524,294 14,917,528 11,768,222 2,236,458
Change in unrealized appreciation
(depreciation) on investments 104,997,547 224,341,038 15,846,693 36,694,020
--------------- --------------- ------------- -------------
Net increase (decrease)
from operations .............. 174,611,236 244,635,494 30,087,333 41,708,705
--------------- --------------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 202,074,526 160,014,740 73,729,435 72,248,903
Benefits and other policy-related
transactions (Note 3) ........ (112,009,732) (86,608,436) (31,604,430) (26,985,045)
Net transfers among Funds ........ 68,835,712 (38,614,310) (2,060,721) (10,330,932)
--------------- --------------- ------------- -------------
Net increase from Assets
policy-related transactions .. 158,900,506 34,791,994 40,064,284 34,932,926
--------------- --------------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... (286,233) (371,006) (69,929) (89,566)
--------------- --------------- ------------- -------------
INCREASE IN NET ASSETS ATTRIBUTABLE
TO POLICYHOLDERS ................. 333,225,509 279,056,482 70,081,688 76,552,065
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, BEGINNING OF PERIOD 1,146,585,274 811,006,200 333,497,020 241,838,471
---------------- --------------- ------------- -------------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, END OF PERIOD ..... $ 1,479,810,783 $ 1,090,062,682 $ 403,578,708 $ 318,390,536
=============== =============== ============= =============
</TABLE>
See Notes to Financial Statements.
*Commencement of operations on April 3.
INTERNATIONAL FUND
-----------------------------
1996 1995*
------------ -----------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS:
FROM OPERATIONS:
Net investment income ............ $ 161,629 $ 35,613
Net realized gain (loss) ......... 294,981 (275)
Change in unrealized appreciation
(depreciation) on investments 1,001,947 435,057
------------ -----------
Net increase (decrease)
from operations .............. 1,458,557 470,395
------------ -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 8,182,092 804,351
Benefits and other policy-related
transactions (Note 3) ........ (1,516,547) (150,197)
Net transfers among Funds ........ 14,255,013 7,399,293
------------ -----------
Net increase from Assets
policy-related transactions .. 20,920,558 8,053,447
------------ -----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... (16,632) (13,498)
------------ -----------
INCREASE IN NET ASSETS ATTRIBUTABLE
TO POLICYHOLDERS ................. 22,362,483 8,510,344
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, BEGINNING OF PERIOD 12,431,938 0
------------- -----------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, END OF PERIOD ..... $ 34,794,421 $ 8,510,344
============ ===========
See Notes to Financial Statements.
*Commencement of operations on April 3.
FSA-25
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-------------------------------
AGGRESSIVE STOCK CONSERVATIVE INVESTORS
FUND FUND
-------------------------------- -------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ............... $ (1,818,073) $ (831,167) $ 5,090,100 $ 5,374,099
Net realized gain (loss) ............ 109,284,261 4,846,290 2,244,729 (379,912)
Change in unrealized appreciation
(depreciation) on investments ... 4,025,605 93,480,578 (6,561,103) 14,475,315
------------- ------------- ------------- -------------
Net increase (decrease)
from operations ................. 111,491,793 97,495,701 773,726 19,469,502
------------- ------------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............... 122,205,511 89,700,780 29,624,479 31,286,054
Benefits and other policy-related
transactions (Note 3) ........... (61,714,088) (46,154,214) (19,045,888) (17,525,531)
Net transfers among Funds ........... 17,647,426 15,707,464 (13,623,081) (2,274,604)
------------- ------------- ------------- -------------
Net increase (decrease) from
policy-related transactions ..... 78,138,849 59,254,030 (3,044,490) 11,485,919
------------- ----------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ........ (194,883) (172,982) (14,041) (72,273)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYHOLDERS ....... 189,435,759 156,576,749 (2,284,805) 30,883,148
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
BEGINNING OF PERIOD................. 555,188,131 355,671,865 172,087,099 129,940,498
------------- ------------- ------------- -------------
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
END OF PERIOD ....................... $ 744,623,890 $ 512,248,614 $ 169,802,294 $ 160,823,646
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-------------------------------------------------------------------
GROWTH INVESTORS
BALANCED FUND FUND
------------------------------- -------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ............... $ 7,751,767 $ 7,427,848 $ 8,234,238 $ 9,344,905
Net realized gain (loss) ............ 25,683,251 (1,988,151) 63,929,470 1,539,280
Change in unrealized appreciation
(depreciation) on investments ... (9,237,104) 45,386,904 (30,949,362) 74,165,635
------------- ------------- ------------- -------------
Net increase (decrease)
from operations ................. 24,197,914 50,826,601 41,214,346 85,049,820
------------- ------------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............... 47,887,117 49,301,601 122,316,625 118,766,910
Benefits and other policy-related
transactions (Note 3) ........... (38,894,806) (37,166,454) (60,278,616) (49,995,250)
Net transfers among Funds ........... (17,062,769) (13,985,044) (376,762) (4,344,785)
------------- ------------- ------------- -------------
Net increase (decrease) from
policy-related transactions ..... (8,070,458) (1,849,897) 61,661,247 64,426,875
------------- ------------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ........ (103,615) (79,293) (74,670) (107,675)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYHOLDERS ....... 16,023,841 48,897,411 102,800,923 149,369,020
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
BEGINNING OF PERIOD................. 398,565,209 338,415,565 555,877,666 367,219,554
------------- ------------- ------------- -------------
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
END OF PERIOD ....................... $ 414,589,050 $ 387,312,976 $ 658,678,589 $ 516,588,574
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
FSA-26
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
1. General
Equitable Variable Life Insurance Company (Equitable Variable Life), a
wholly-owned subsidiary of The Equitable Life Assurance Society of the
United States (Equitable Life), established Separate Account FP (the
Account) as a unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. The Account
consists of thirteen investment funds: the Money Market Fund, the
Intermediate Government Securities Fund, the High Yield Fund, the Balanced
Fund, the Common Stock Fund, the Global Fund, the Aggressive Stock Fund,
the Conservative Investors Fund, the Growth Investors Fund, the Growth &
Income Fund, the Quality Bond Fund, the Equity Index Fund and the
International Fund. The assets in each Fund 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, flexible premium
variable life insurance policies, Incentive Life 2000, flexible premium
variable life insurance policies, Champion 2000, modified premium variable
whole life insurance policies, Survivorship 2000, flexible premium joint
survivorship variable life insurance policies, Incentive Life Plus,(SM)
flexible premium variable life insurance policies, IL Protector,(SM)
flexible premium variable life insurance policies, IL COLI II, flexible
premium variable life insurance policies, and SP-Flex, 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. Incentive Life Plus
policies offered with a prospectus dated on or after September 15, 1995,
are referred to as Incentive Life Plus Second Series. Incentive Life Plus
policies issued with a prior prospectus are referred to as Incentive Life
Plus Original Series. 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.
Policyowners may allocate amounts in their individual accounts to the
Funds of the Account and/or (except for SP-Flex policies) to the
guaranteed interest fund of Equitable Variable Life's General Account. Net
transfers to (from) the guaranteed interest fund of the General Account
and other Separate Accounts of ($6,424,330) and $7,944,683 for the nine
months ended 1996 and 1995, respectively, are included in Net Transfers
Among Funds. The net assets of any Fund of the Account may not be less
than the aggregate of the policyowners' accounts allocated to that Fund.
Additional assets are set aside in Equitable Variable Life'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. Significant Accounting Policies
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. These statements should be read in conjunction with the
financial statements of Separate Account FP for the year ended December
31, 1995. The results of operations for the nine months ended September
30, 1996 are not necessarily indicative of the results to be expected for
the full year.
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 Life. Under the provisions of the Policies,
Equitable Variable Life 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 Life pays no tax on investment income and capital gains reflected
in variable life insurance policy reserves. However, Equitable Variable
Life 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.
FSA-27
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
SEPTEMBER 30, 1996
3. Asset Charges
Under the Policies, Equitable Variable Life 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, Incentive Life Plus Second Series
and Champion 2000 policyowners, 0.90% of net assets attributable to
Survivorship 2000 policyowners, 0.80% for IL Protector policyowners, and
0.85% for SP-Flex policyowners. Incentive Life Plus Original Series, IL
COLI, and IL COLI II deduct this charge from the Policy Account. Under
SP-Flex, Equitable Variable Life 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, Incentive Life Plus, the Series 2000 Policies, IL
Protector and IL COLI II mortality and administrative charges are assessed
in a different manner than SP-Flex policies (see Notes 4 and 5).
Before amounts are allocated to the Account for Incentive Life, Incentive
Life Plus, IL COLI, IL COLI II and the Series 2000 Policies, Equitable
Variable Life deducts a charge for taxes and either an initial policy fee
(Incentive Life) or a premium sales charge (Incentive Life Plus, IL COLI
II and Series 2000 Policies) from premiums. Under SP-Flex, the entire
initial premium is allocated to the Account. Before any additional
premiums under SP-Flex are allocated to the Account, an administrative
charge is deducted.
The amounts attributable to Incentive Life, Incentive Life Plus, IL
Protector, IL COLI, IL COLI II, and the Series 2000 policyowners' accounts
are assessed monthly by Equitable Variable Life with mortality and
administrative charges. 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.
4. Amounts Retained by Equitable Variable Life in Separate Account FP
The amount retained by Equitable Variable Life in the Account arises
principally from (1) contributions from Equitable Variable Life, 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 Life are not subject
to charges for mortality and expense risks or mortality and administrative
costs.
Amounts retained by Equitable Variable Life in the Account may be
transferred at any time by Equitable Variable Life to its General Account.
During the nine months ended September 30, 1995 surplus contribution of
$200,000 were made by EVLICO into the International Fund.
5. Distribution and Servicing Agreements
Equitable Variable Life has entered into a Distribution and Servicing
Agreement with Equitable Life and EQ Financial Consultants Inc., whereby
registered representatives of EQ Financial Consultants Inc., 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 Life.
Equitable Variable Life also has entered into an agreement with Equitable
Life under which Equitable Life 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.
6. Investment Returns
The Separate Account rates of return attributable to Incentive Life,
Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000
policyowners are different than those attributable to Survivorship 2000,
Incentive Life Plus Original Series, IL Protector, IL COLI, IL COLI II and
to SP-Flex policyowners because asset charges are deducted at different
rates under each policy (see Note 3).
The tables on this page and the following pages show the gross and net
investment returns with respect to the Funds for the periods shown. The
net return for each Fund is based upon net assets for a policy whose
policy commences with the beginning date of such period and is not based
on the average net assets in the Fund during such period. Gross return is
equal to the total return earned by the underlying Trust investment.
FSA-28
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
INCENTIVE LIFE
- --------------
INCENTIVE LIFE 2000*
- -------------------
INCENTIVE LIFE PLUS SECOND SERIES*
- ---------------------------------
AND CHAMPION 2000*
- ------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
------------------- -------------------------------------------------------------- -------------------
MONEY MARKET FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 3.91% 4.30% 5.74% 4.02% 3.00% 3.56% 6.18% 8.24% 9.18% 7.32% 6.63% 6.05%
Net return........... 3.44% 3.83% 5.11% 3.39% 2.35% 2.94% 5.55% 7.59% 8.53% 6.68% 5.99% 5.47%
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE NINE MONTHS ENDED(B) APRIL 1(A)(B) TO
GOVERNMENT SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
SECURITIES FUND -------------------- -------------------------------------- ------------------
- --------------- 1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 1.71% 9.94% 13.33% (4.37)% 10.58% 5.60% 12.26%
Net return........... 1.25% 9.45% 12.65% (4.95)% 9.88% 4.96% 11.60%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEARS ENDED OCTOBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
-------------------- -------------------- -------------------
QUALITY BOND FUND 1996 1995 1995 1994 1993
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return......... 1.28% 12.37% 17.02% (5.10)% (0.51)%
Net return........... 0.82% 11.86% 16.32% (5.67)% (0.66)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B)
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------- ----------------------------------------------------------------------
HIGH YIELD FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 18.79% 14.89% 19.92% (2.79)% 23.15% 12.31% 24.46% (1.12)% 5.13% 9.73% 4.68%
Net return........... 18.25% 14.37% 19.20% (3.37)% 22.41% 11.64% 23.72% (1.71)% 4.50% 9.08% 4.05%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEARS ENDED OCTOBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
-------------------- --------------------- ----------------------
GROWTH & INCOME FUND 1996 1995 1995 1994 1993
- -------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return......... 9.89% 19.76% 24.07% (0.58)% (0.25)%
Net return........... 9.39% 19.23% 23.33% (1.17)% (0.41)%
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30(A)(B)
NINE MONTHS ENDED(B) YEAR ENDED TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------------------- ----------------------- ----------------------
EQUITY INDEX FUND 1996 1995 1995 1994
- ----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return........ 13.10% 28.97% 36.48% 1.08%
Net return.......... 12.59% 28.39% 35.66% 0.58%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ----------------------------------------------------------------------- ---------------
COMMON STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 14.25% 28.99% 32.45% (2.14)% 24.84% 3.22% 37.88% (8.12)% 25.59% 22.43% 7.49% 15.65%
Net return........... 13.73% 28.42% 31.66% (2.73)% 24.08% 2.60% 37.06% (8.67)% 24.84% 21.70% 6.84% 15.01%
</TABLE>
- ------------------
*Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992.
Sales of Incentive Life Plus Second Series commenced on September 15, 1995.
(a) Date as of which net premiums under the policies were first allocated to the
Fund.
(b) The gross return and the net return for the periods indicated are not annual
rates of return.
FSA-29
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
INCENTIVE LIFE
- --------------
INCENTIVE LIFE 2000*
- -------------------
INCENTIVE LIFE PLUS SECOND SERIES*
- ---------------------------------
AND CHAMPION 2000*
- ------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ----------------------------------------------------------------- -----------------
GLOBAL FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 8.96% 16.02% 18.81% 5.23% 32.09% (0.50)% 30.55% (6.07)% 26.93% 10.88% (13.27)%
Net return............ 8.47% 15.50% 18.11% 4.60% 31.33% (1.10)% 29.77% (6.63)% 26.17% 10.22% (13.45)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO
SEPTEMBER 30, DECEMBER 31,
-------------------- ----------------
INTERNATIONAL FUND 1996 1995 1995
- ------------------ ---- ---- ----
<S> <C> <C> <C>
Gross return.......... 7.29% 5.71% 11.29%
Net return............ 6.80% 6.94% 10.79%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- --------------------------------------------------------------------- ---------------
AGGRESSIVE STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 19.52% 25.74% 31.63% (3.81)% 16.77% (3.16)% 86.86% 8.17% 43.50% 1.17% 7.31% 35.88%
Net return............ 18.98% 25.17% 30.85% (4.39)% 16.05% (3.74)% 85.75% 7.51% 42.64% 0.53% 6.66% 35.13%
</TABLE>
ASSET ALLOCATION SERIES
- -----------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ------------------------------------------------------------------------ --------------
BALANCED FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 6.63% 15.50% 19.75% (8.02)% 12.28% (2.84)% 41.26% 0.24% 25.83% 13.27% (0.85)% 29.07%
Net return............ 6.15% 14.98% 19.03% (8.57)% 11.64% (3.42)% 40.42% (0.36)% 25.08% 12.59% (1.45)% 28.34%
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE NINE MONTHS ENDED(B) OCTOBER 2(A)(B) TO
INVESTORS FUND SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
- -------------- ------------------ ----------------------------------------------------- ------------------
1996 1995 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 0.94% 14.87% 20.40% (4.10)% 10.76% 5.72% 19.87% 6.37% 3.09%
Net return............ 0.48% 14.35% 19.68% (4.67)% 10.15% 5.09% 19.16% 5.73% 2.94%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) OCTOBER 2(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ---------------------------------------------------- -----------------
GROWTH INVESTORS FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 7.39% 21.63% 26.37% (3.15)% 15.26% 4.90% 48.89% 10.66% 3.98%
Net return............ 6.90% 21.09% 25.62% (3.73)% 14.58% 4.27% 48.01% 10.00% 3.82%
</TABLE>
- ----------
*Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992.
Sales of Incentive Life Plus Second Series commenced on September 15, 1995.
(a) Date as of which net premiums under the policies were first allocated to the
Fund.
(b) The gross return and the net return for the periods indicated are not annual
rates of return.
FSA-30
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
SURVIVORSHIP 2000
- -----------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
---------------------- -------------------------------- ---------------------
MONEY MARKET FUND 1996 1995 1995 1994 1993 1992
- ----------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return..................... 3.91% 4.30% 5.74% 4.02% 3.00% 1.11%
Net return....................... 3.20% 3.60% 4.80% 3.08% 2.04% 0.77%
INTERMEDIATE GOVERNMENT
SECURITIES FUND
- ---------------
Gross return..................... 1.71% 9.94% 13.33% (4.37)% 10.58% 0.90%
Net return....................... 1.02% 9.20% 12.31% (5.23)% 9.55% 0.56%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) OCTOBER 1(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
---------------------- ------------------------ ------------------
QUALITY BOND FUND 1996 1995 1995 1994 1993
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return..................... 1.28% 12.37% 17.02% (5.10)% (0.51)%
Net return....................... 0.59% 11.61% 15.97% (5.95)% (0.73)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------------- ----------------------------------------- -------------------
HIGH YIELD FUND 1996 1995 1995 1994 1993 1992
- --------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return..................... 18.79% 14.89% 19.92% (2.79)% 23.15% 1.84%
Net return....................... 17.98% 14.12% 18.84% (3.66)% 22.04% 1.50%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) OCTOBER 1(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
---------------------- ------------------------- -----------------------
GROWTH &
INCOME FUND 1996 1995 1995 1994 1993
- ----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return..................... 9.89% 19.76% 24.07% (0.58)% (0.25)%
Net return....................... 9.14% 18.96% 22.96% (1.47)% (0.48)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEAR ENDED MARCH 1 (A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
---------------------- ------------------ -------------------
EQUITY INDEX FUND 1996 1995 1995 1994
- ----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return..................... 13.10% 28.97% 36.48% 1.08%
Net return....................... 12.33% 28.10% 35.26% 0.33%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
---------------------- -------------------------------------- ----------------------
COMMON STOCK FUND 1996 1995 1995 1994 1993 1992
- ----------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return..................... 14.25% 28.99% 32.45% (2.14)% 24.84% 5.28%
Net return....................... 13.47% 28.13% 31.26% (3.02)% 23.70% 4.93%
GLOBAL FUND
- -----------
Gross return..................... 8.96% 16.02% 18.81% 5.23% 32.09% 4.87%
Net return....................... 8.22% 15.25% 17.75% 4.29% 30.93% 4.52%
AGGRESSIVE STOCK FUND
- ---------------------
Gross return..................... 19.52% 25.74% 31.63% (3.81)% 16.77% 11.49%
Net return....................... 18.71% 24.89% 30.46% (4.68)% 15.70% 11.11%
</TABLE>
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO
SEPTEMBER 30, DECEMBER 31,
---------------------- ------------------
INTERNATIONAL FUND 1996 1995 1995
- ------------------ ---- ---- ----
Gross return..................... 7.29% 5.71% 11.29%
Net return....................... 6.56% 6.78% 10.55%
ASSET ALLOCATION SERIES
- -----------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE ----------------------- ---------------------------------------- ----------------------
INVESTORS FUND 1996 1995 1995 1994 1993 1992
- -------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return..................... 0.94% 14.87% 20.40% (4.10)% 10.76% 1.38%
Net return....................... 0.25% 14.09% 19.32% (4.96)% 9.81% 1.04%
BALANCED FUND
- -------------
Gross return..................... 6.63% 15.50% 19.75% (8.02)% 12.28% 5.37%
Net return....................... 5.90% 14.72% 18.68% (8.84)% 11.30% 5.02%
GROWTH INVESTORS FUND
- ---------------------
Gross return..................... 7.39% 21.63% 26.37% (3.15)% 15.26% 6.89%
Net return....................... 6.65% 20.81% 25.24% (4.02)% 14.24% 6.53%
</TABLE>
- ----------
(a) Date as of which net premiums under the policies were first allocated to the
Fund.
(b) The gross return and the net return for the periods indicated are not annual
rates of return.
FSA-31
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
INCENTIVE LIFE PLUS ORIGINAL SERIES*(A)
- -----------------------------------
IL COLI**(A)
- -------
<TABLE>
<CAPTION>
INCENTIVE LIFE PLUS ORIGINAL SERIES IL COLI
---------------------------------------------- -------------------------------------------------
NINE MONTHS NINE MONTHS
ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15 TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
--------------- -------------- ------------- --------------- --------------- ---------------
1996 1995 1995 1996 1995 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund........... 3.91% 4.25% 5.69% 3.91% 0.19% 1.58%
Intermediate Government
Securities Fund............. 1.71% 9.92% 13.31% 1.71% 0.00% 3.08%
Quality Bond Fund........... 1.28% 12.47% 17.13% 1.28% 0.16% 4.31%
High Yield Fund............. 18.79% 14.92% 19.95% 18.79% 0.31% 4.70%
Growth & Income Fund........ 9.89% 20.05% 24.38% 9.89% 0.30% 3.91%
Equity Index Fund........... 13.10% 29.01% 36.53% 13.10% 0.24% 6.08%
Common Stock Fund........... 14.25% 29.60% 33.07% 14.25% (1.13)% 1.51%
Global Fund................. 8.96% 16.57% 19.38% 8.96% 0.25% 2.67%
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED APRIL 30 TO APRIL 30 TO ENDED APRIL 30 TO APRIL 30 TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
--------------- -------------- ------------- --------------- --------------- ---------------
1996 1995 1995 1996 1995 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
International Fund.......... 7.29% 7.26% 11.29% 7.29% 0.71% 4.49%
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15 TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
--------------- -------------- ------------- --------------- --------------- ---------------
1996 1995 1995 1996 1995 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Aggressive Stock Fund....... 19.52% 27.02% 33.00% 19.52% (0.38)% 4.28%
ASSET ALLOCATION SERIES
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
--------------- -------------- ------------- --------------- --------------- ---------------
1996 1995 1995 1996 1995 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Conservative Investors Fund.. 8.96% 15.05% 20.59% 8.96% 0.07% 4.91%
Balanced Fund................ 6.63% 16.05% 20.32% 6.63% (0.47)% 3.18%
Growth Investors Fund........ 7.39% 22.16% 26.92% 7.39% 0.90% 4.83%
</TABLE>
- ----------------------------
*Sales of Incentive Life Plus Original Series commenced on January 6, 1995.
**Sales of IL COLI commenced on September 15, 1995.
(a)There are no Separate Account asset charges for this policy and therefore
the gross and net rates of return are the same. The rates of return for the
periods indicated are not annual rates of return.
FSA-32
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
SP-FLEX
- -------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ------------------------------------------------------------ ----------------
MONEY MARKET FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return................. 3.91% 4.30% 5.74% 4.02% 3.00% 3.56% 6.17% 8.24% 9.18% 7.32% 2.15%
Net return................... 2.51% 2.91% 3.86% 2.17% 1.13% 1.71% 4.29% 6.30% 7.24% 5.41% 1.62%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) APRIL 1(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
INTERMEDIATE GOVERNMENT -------------------- --------------------------------- ------------------
SECURITIES FUND 1996 1995 1995 1994 1993 1992 1991
- --------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return................. 1.71% 9.94% 13.33% (4.37)% 10.58% 5.60% 12.10%
Net return................... 0.34% 8.47% 11.31% (6.08)% 8.57% 3.71% 10.59%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
-------------------- ----------------- -------------------
QUALITY BOND FUND 1996 1995 1995 1994
- ----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return................. 1.28% 12.37% 17.02% (2.20)%
Net return................... (0.09)% 10.86% 14.94% (2.35)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- --------------------------------------------------------------- ---------------
HIGH YIELD FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return................. 18.79% 14.89% 19.92% (2.79)% 23.15% 12.31% 24.46% (1.12)% 5.13% 9.73% 1.95%
Net return................... 17.19% 13.35% 17.79% (4.52)% 20.96% 10.30% 22.25% (2.89)% 3.26% 7.78% 1.39%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
GROWTH & -------------------- ------------------------------------
INCOME FUND 1996 1995 1995 1994
- ----------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return................. 9.89% 19.76% 24.07% (3.40)%
Net return................... 8.40% 18.16% 21.87% (3.55)%
EQUITY INDEX FUND
- -----------------
Gross return................. 13.10% 28.97% 36.48% (2.54)%
Net return................... 11.58% 27.25% 34.06% (2.69)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ---------------------------------------------------------------- --------------
COMMON STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return................. 14.25% 28.99% 32.45% (2.14)% 24.84% 3.23% 37.87% (8.12)% 25.59% 22.43% (22.57)%
Net return................... 12.70% 27.27% 30.10% (3.88)% 22.60% 1.38% 35.43% (9.76)% 23.36% 20.26% (23.00)%
GLOBAL FUND
- -----------
Gross return................. 8.96% 16.02% 18.81% 5.23% 32.09% (0.50)% 30.55% (6.07)% 26.93% 10.88% (11.40)%
Net return................... 7.49% 14.47% 16.70% 3.36% 29.77% (2.28)% 28.23% (7.75)% 24.67% 8.90% (11.86)%
</TABLE>
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO
SEPTEMBER 30, DECEMBER 31,
-------------------- ---------------
INTERNATIONAL FUND 1996 1995 1995
- ------------------ ---- ---- ----
Gross return................ 7.29% 5.71% 11.29%
Net return.................. 5.84% 6.31% 9.82%
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ---------------------------------------------------------------- ----------------
AGGRESSIVE STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return................ 19.52% 25.74% 31.63% (3.81)% 16.77% (3.16)% 86.86% 8.17% 43.50% 1.17% (24.28)%
Net return.................. 17.91% 24.06% 29.30% (5.53)% 14.67% (4.89)% 83.54% 6.23% 40.95% (0.66)% (24.68)%
</TABLE>
- ----------
(a) Date as of which net premiums under the policies were first allocated to the
Fund.
(b) The gross return and the net return for the periods indicated are not annual
rates of return.
FSA-33
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONCLUDED)
ASSET ALLOCATION SERIES
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
CONSERVATIVE -------------------- -------------------------------------
INVESTORS FUND 1996 1995 1995 1994
- -------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return................. 0.94% 14.87% 20.40% (1.83)%
Net return................... (0.43)% 13.33% 18.26% (1.98)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ---------------------------------------------------------------- --------------
BALANCED FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return................. 6.63% 15.50% 19.75% (8.02)% 12.28% (2.83)% 41.27% 0.24% 25.83% 13.27% (20.26)%
Net return................... 5.19% 13.96% 17.62% (9.66)% 10.31% (4.57)% 38.75% (1.56)% 23.59% 11.25% (20.71)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
GROWTH -------------------- --------------------------------------
INVESTORS FUND 1996 1995 1995 1994
- -------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return................. 7.39% 21.63% 26.37% (3.16)%
Net return................... 5.93% 20.01% 24.12% (3.31)%
</TABLE>
- ----------
(a) Date as of which net premiums under the policies were first allocated to the
Fund.
(b) The gross return and the net return for the periods indicated are not annual
rates of return.
FSA-34
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
IL PROTECTOR*
- ----------------------------
AUGUST 22 TO
SEPTEMBER 30,(A)
-----------------
1996
------
Money Market Fund................. 1.80%
Intermediate Government
Securities Fund................... 2.62%
Quality Bond...................... 3.89%
High Yield Fund................... 10.33%
Growth & Income Fund.............. 6.01%
Equity Index Fund................. 7.65%
Common Stock Fund................. 8.18%
Global Fund....................... 1.73%
International Fund................ (0.03)%
Aggressive Stock Fund............. 4.10%
ASSET ALLOCATION SERIES
AUGUST 5 TO
SEPTEMBER 30,(A)
-----------------
1996
------
Conservative Investors Fund....... 3.77%
Balanced Fund..................... 3.97%
Growth Investors Fund............. 4.52%
- ----------
*Sales of IL Protector commenced on August 22, 1996.
(a) Date as of which net premiums under the policies were first allocated to the
Fund. The gross return and the net return for the periods indicated are not
annual rates of return.
7. Subsequent Event
On September 19, 1996 the Board of Directors of Equitable Life approved an
Agreement and Plan of Merger by and between Equitable Life and Equitable
Variable Life (the "Merger Agreement"). The merger is expected to be
effective on January 1, 1997, subject to receipt of all necessary regulatory
approvals. On that date, and in accordance with the provisions of the Merger
Agreement, the separate existence of Equitable Variable Life will cease and
Equitable Life will survive the merger. From and after the effective date of
the merger, Equitable Life will be liable in place of Equitable Variable
Life for the liabilities and obligations of Equitable Variable Life,
including liabilities under policies and contracts issued by Equitable
Variable Life, and all of Equitable Variable Life's assets will become
assets of Equitable Life.
FSA-35
<PAGE>
INDEX TO FINANCIAL STATEMENTS
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
<TABLE>
<S> <C>
Independent Auditors' Report....................................................................................F-2
Consolidated Financial Statements:
Consolidated Balance Sheets, December 31, 1995 and 1994...................................................F-3
Consolidated Statements of Earnings for the Years Ended December 31, 1995, 1994
and 1993...............................................................................................F-4
Consolidated Statements of Equity for the Years Ended December 31, 1995, 1994
and 1993...............................................................................................F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994
and 1993...............................................................................................F-6
Notes to Consolidated Financial Statements................................................................F-7
Unaudited Interim Consolidated Financial Statements:
Consolidated Balance Sheets, September 30, 1996 and December 31, 1995....................................F-42
Consolidated Statements of Earnings for the Three and Nine Months Ended
September 30, 1996 and 1995...........................................................................F-43
Consolidated Statements of Equity for the Nine Months Ended
September 30, 1996 and 1995...........................................................................F-44
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995...........................................................................F-45
Notes to Consolidated Financial Statements...............................................................F-46
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
The Equitable Life Assurance Society of the United States
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of The
Equitable Life Assurance Society of the United States and its subsidiaries
("Equitable Life") at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of Equitable Life's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 2 to the consolidated financial statements, Equitable Life
changed its methods of accounting for loan impairments in 1995, for
postemployment benefits in 1994 and for investment securities in 1993.
PRICE WATERHOUSE LLP
New York, New York
February 7, 1996
F-2
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value............................. $ 15,899.9 $ 7,586.0
Held to maturity, at amortized cost..................................... - 5,223.0
Mortgage loans on real estate............................................. 3,638.3 4,018.0
Equity real estate........................................................ 3,916.2 4,446.4
Policy loans.............................................................. 1,976.4 1,731.2
Other equity investments.................................................. 621.1 678.5
Investment in and loans to affiliates..................................... 636.6 560.2
Other invested assets..................................................... 706.1 489.3
----------------- -----------------
Total investments..................................................... 27,394.6 24,732.6
Cash and cash equivalents................................................... 774.7 693.6
Deferred policy acquisition costs........................................... 3,083.3 3,221.1
Amounts due from discontinued GIC Segment................................... 2,097.1 2,108.6
Other assets................................................................ 2,713.1 2,078.6
Closed Block assets......................................................... 8,612.8 8,105.5
Separate Accounts assets.................................................... 24,566.6 20,469.5
----------------- -----------------
TOTAL ASSETS................................................................ $ 69,242.2 $ 61,409.5
================= =================
LIABILITIES
Policyholders' account balances............................................. $ 21,752.6 $ 21,238.0
Future policy benefits and other policyholders' liabilities................. 4,171.8 3,840.8
Short-term and long-term debt............................................... 1,899.3 1,337.4
Other liabilities........................................................... 3,379.5 2,300.1
Closed Block liabilities.................................................... 9,507.2 9,069.5
Separate Accounts liabilities............................................... 24,531.0 20,429.3
----------------- -----------------
Total liabilities..................................................... 65,241.4 58,215.1
----------------- -----------------
Commitments and contingencies (Notes 10, 12, 13, 14 and 15)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value 2.0 million shares authorized, issued
and outstanding........................................................... 2.5 2.5
Capital in excess of par value.............................................. 2,913.6 2,913.6
Retained earnings........................................................... 781.6 484.0
Net unrealized investment gains (losses).................................... 338.2 (203.0)
Minimum pension liability................................................... (35.1) (2.7)
----------------- -----------------
Total shareholder's equity............................................ 4,000.8 3,194.4
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................................. $ 69,242.2 $ 61,409.5
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and investment-type product policy fee
income...................................................... $ 771.0 $ 715.0 $ 644.5
Premiums...................................................... 606.8 625.6 599.1
Net investment income......................................... 2,127.7 2,030.9 2,599.3
Investment gains, net......................................... 5.3 91.8 533.4
Commissions, fees and other income............................ 886.8 845.4 1,717.2
Contribution from the Closed Block............................ 124.4 151.0 128.3
----------------- ----------------- -----------------
Total revenues.......................................... 4,522.0 4,459.7 6,221.8
----------------- ----------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances.......... 1,244.2 1,201.3 1,330.0
Policyholders' benefits....................................... 1,011.3 920.6 1,003.9
Other operating costs and expenses............................ 1,856.5 1,943.1 3,584.2
----------------- ----------------- -----------------
Total benefits and other deductions..................... 4,112.0 4,065.0 5,918.1
----------------- ----------------- -----------------
Earnings before Federal income taxes and cumulative
effect of accounting change................................. 410.0 394.7 303.7
Federal income taxes.......................................... 112.4 101.2 91.3
----------------- ----------------- -----------------
Earnings before cumulative effect of accounting change........ 297.6 293.5 212.4
Cumulative effect of accounting change, net of Federal
income taxes................................................ - (27.1) -
----------------- ----------------- -----------------
Net Earnings.................................................. $ 297.6 $ 266.4 $ 212.4
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Common stock, at par value, beginning of year................. $ 2.5 $ 2.5 $ 2.0
Increase in par value......................................... - - .5
----------------- ----------------- -----------------
Common stock, at par value, end of year....................... 2.5 2.5 2.5
----------------- ----------------- -----------------
Capital in excess of par value, beginning of year............. 2,913.6 2,613.6 2,273.9
Additional capital in excess of par value..................... - 300.0 340.2
Increase in par value......................................... - - (.5)
----------------- ----------------- -----------------
Capital in excess of par value, end of year................... 2,913.6 2,913.6 2,613.6
----------------- ----------------- -----------------
Retained earnings, beginning of year.......................... 484.0 217.6 5.2
Net earnings.................................................. 297.6 266.4 212.4
----------------- ----------------- -----------------
Retained earnings, end of year................................ 781.6 484.0 217.6
----------------- ----------------- -----------------
Net unrealized investment (losses) gains, beginning of year... (203.0) 131.9 78.8
Change in unrealized investment gains (losses)................ 541.2 (334.9) (9.5)
Effect of adopting new accounting standard.................... - - 62.6
----------------- ----------------- -----------------
Net unrealized investment gains (losses), end of year......... 338.2 (203.0) 131.9
----------------- ----------------- -----------------
Minimum pension liability, beginning of year.................. (2.7) (15.0) -
Change in minimum pension liability........................... (32.4) 12.3 (15.0)
----------------- ----------------- -----------------
Minimum pension liability, end of year........................ (35.1) (2.7) (15.0)
----------------- ----------------- -----------------
TOTAL SHAREHOLDER'S EQUITY, END OF YEAR....................... $ 4,000.8 $ 3,194.4 $ 2,950.6
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net earnings.................................................. $ 297.6 $ 266.4 $ 212.4
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Net change in trading activities and broker-dealer
related receivables/payables.............................. - - (4,177.8)
Increase in matched resale agreements....................... - - (2,900.5)
Increase in matched repurchase agreements................... - - 2,900.5
Investment gains, net of dealer and trading gains........... (5.3) (91.8) (160.8)
Change in amounts due from discontinued GIC Segment......... - 57.3 47.8
General Account policy charges.............................. (769.7) (711.9) (623.4)
Interest credited to policyholders' account balances........ 1,244.2 1,201.3 1,330.0
Changes in Closed Block assets and liabilities, net......... (69.6) (95.1) (73.3)
Other, net.................................................. 627.1 7.8 (416.1)
----------------- ----------------- -----------------
Net cash provided (used) by operating activities.............. 1,324.3 634.0 (3,861.2)
----------------- ----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................... 1,863.1 2,319.7 3,479.6
Sales....................................................... 8,901.4 5,661.9 7,399.2
Return of capital from joint ventures and limited
partnerships.............................................. 65.2 39.0 119.5
Purchases................................................... (11,675.5) (7,417.6) (11,184.2)
Decrease (increase) in loans to discontinued GIC Segment.... 1,226.9 (40.0) (880.0)
Cash received on sale of 61% interest in DLJ................ - - 346.7
Other, net.................................................. (625.5) (371.1) (317.0)
----------------- ----------------- -----------------
Net cash (used) provided by investing activities.............. (244.4) 191.9 (1,036.2)
----------------- ----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits.................................................. 2,414.9 2,082.7 2,410.7
Withdrawals............................................... (2,692.7) (2,887.4) (2,433.5)
Net (decrease) increase in short-term financings............ (16.4) (173.0) 4,717.2
Additions to long-term debt................................. 599.7 51.8 97.7
Repayments of long-term debt................................ (40.7) (199.8) (64.4)
Proceeds from issuance of Alliance units.................... - 100.0 -
Payment of obligation to fund accumulated deficit of
discontinued GIC Segment.................................. (1,215.4) - -
Capital contribution from the Holding Company............... - 300.0 -
Other, net.................................................. (48.2) - -
----------------- ----------------- -----------------
Net cash (used) provided by financing activities.............. (998.8) (725.7) 4,727.7
----------------- ----------------- -----------------
Change in cash and cash equivalents........................... 81.1 100.2 (169.7)
Cash and cash equivalents, beginning of year.................. 693.6 593.4 763.1
----------------- ----------------- -----------------
Cash and Cash Equivalents, End of Year........................ $ 774.7 $ 693.6 $ 593.4
================= ================= =================
Supplemental cash flow information
Interest Paid............................................... $ 89.6 $ 34.9 $ 1,437.2
================= ================= =================
Income Taxes (Refunded) Paid................................ $ (82.7) $ 49.2 $ 41.0
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) ORGANIZATION
The Equitable Life Assurance Society of the United States ("Equitable
Life") 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"). Equitable Life's insurance business, which is
comprised of an Individual Insurance and Annuities segment and a Group
Pension segment is conducted principally by Equitable Life and its
wholly owned life insurance subsidiary, Equitable Variable Life
Insurance Company ("EVLICO"). Equitable Life's investment management
business, which comprises the Investment Services segment, is conducted
principally by Alliance Capital Management L.P. ("Alliance"), Equitable
Real Estate Investment Management, Inc. ("EREIM") and Donaldson, Lufkin
and Jenrette, Inc. ("DLJ"), an investment banking and brokerage
affiliate. AXA, a French holding company for an international group of
insurance and related financial services companies is the Holding
Company's largest shareholder, owning approximately 60.6% at December
31, 1995 (63.5% assuming conversion of Series E Convertible Preferred
Stock held by AXA and 54.2% if all securities convertible into, or
options on, common stock were to be converted or exercised).
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
-----------------------------------------------------
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles ("GAAP").
The accompanying consolidated financial statements include the accounts
of Equitable Life and its wholly owned life insurance subsidiaries
(collectively, the "Insurance Group"); non-insurance subsidiaries,
principally Alliance, an investment advisory subsidiary and EREIM, a
real estate investment management subsidiary; and those partnerships and
joint ventures in which the Company has control and a majority economic
interest (collectively, including its consolidated subsidiaries, the
"Company"). The consolidated statement of earnings and cash flow for the
year ended December 31, 1993 include the results of operations and cash
flow of DLJ, an investment banking and brokerage affiliate, on a
consolidated basis through December 15, 1993 (see Note 20). Subsequent
to that date, DLJ is accounted for on the equity basis. The Closed Block
assets and liabilities and results of operations are presented in the
consolidated financial statements as single line items (see Note 6).
Unless specifically stated, all disclosures contained herein supporting
the consolidated financial statements exclude the Closed Block related
amounts.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
All significant intercompany transactions and balances have been
eliminated in consolidation other than intercompany transactions and
balances with the Closed Block and the discontinued Guaranteed Interest
Contract ("GIC") Segment (see Note 7).
Certain reclassifications have been made in the amounts presented for
prior periods to conform these periods with the 1995 presentation.
F-7
<PAGE>
Closed Block
------------
As of July 22, 1992, Equitable Life established the Closed Block for the
benefit of certain classes of individual participating policies for
which Equitable Life had a dividend scale payable in 1991 and which were
in force on that date. Assets were allocated to the Closed Block in an
amount which, together with anticipated revenues from policies included
in the Closed Block, was reasonably expected to be sufficient to support
such business, including provision for payment of claims, certain
expenses and taxes, and for continuation of dividend scales payable in
1991, assuming the experience underlying such scales continues.
Assets allocated to the Closed Block inure solely to the benefit of the
holders of policies included in the Closed Block and will not revert to
the benefit of the Holding Company. The plan of demutualization
prohibits the reallocation, transfer, borrowing or lending of assets
between the Closed Block and other portions of Equitable Life's General
Account, any of its Separate Accounts or to any affiliate of Equitable
Life without the approval of the New York Superintendent of Insurance.
Closed Block assets and liabilities are carried on the same basis as
similar assets and liabilities held in the General Account.
The excess of Closed Block liabilities over Closed Block assets
represents the expected future post-tax contribution from the Closed
Block which would be recognized in income over the period the policies
and contracts in the Closed Block remain in force. If the actual
contribution from the Closed Block in any given period equals or exceeds
the expected contribution for such period as determined at the
establishment of the Closed Block, the expected contribution would be
recognized in income for that period. Any excess of the actual
contribution over the expected contribution would also be recognized in
income to the extent that the aggregate expected contribution for all
prior periods exceeded the aggregate actual contribution. Any remaining
excess of actual contribution over expected contributions would be
accrued in the Closed Block as a liability for future dividends to be
paid to the Closed Block policyholders. If, over the period the policies
and contracts in the Closed Block remain in force, the actual
contribution from the Closed Block is less than the expected
contribution from the Closed Block, only such actual contribution would
be recognized in income.
Discontinued Operations
-----------------------
In 1991, the Company's management adopted a plan to discontinue the
business operations of the GIC Segment, consisting of the Guaranteed
Interest Contract and Group Non-Participating Wind-Up Annuities lines of
business. The Company established a pre-tax provision for the estimated
future losses of the GIC line of business and a premium deficiency
reserve for the Group Non-Participating Wind-Up Annuities. Subsequent
losses incurred have been charged to the allowance for future losses and
the premium deficiency reserve. Total allowances are based upon
management's best judgment and there is no assurance that the ultimate
losses will not differ.
Accounting Changes
------------------
In the first quarter of 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan". This statement applies to all loans, including
loans restructured in a troubled debt restructuring involving a
modification of terms. This statement addresses the accounting for
impairment of a loan by specifying how allowances for credit losses
should be determined. Impaired loans within the scope of this statement
are measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, at the loan's
observable market price or the fair value of the collateral if the loan
is collateral dependent. The Company provides for impairment of loans
through an allowance for possible losses. The adoption of this statement
did not have a material effect on the level of these allowances or on
the Company's consolidated statements of earnings and shareholder's
equity.
F-8
<PAGE>
In the fourth quarter of 1994 (effective as of January 1, 1994), the
Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," which required 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
$27.1 million, net of a Federal income tax benefit of $14.6 million.
At December 31, 1993, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which expanded 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 $62.6
million, net of deferred policy acquisition costs, amounts attributable
to participating group annuity contracts and deferred Federal income
tax. Beginning coincident with issuance of SFAS No. 115 implementation
guidance in November 1995, the Financial Accounting Standards Board
("FASB") permitted companies a one-time opportunity, through December
31, 1995, to reassess the appropriateness of the classification of all
securities held at that time. On December 1, 1995, the Company
transferred $4,794.9 million of securities classified as held to
maturity to the available for sale portfolio. As a result consolidated
shareholder's equity increased by $126.2 million, net of deferred policy
acquisition costs, amounts attributable to participating group annuity
contracts and deferred Federal income tax.
New Accounting Pronouncements
-----------------------------
In January 1995, the FASB issued SFAS No. 120, "Accounting and Reporting
by Mutual Life Insurance Enterprises and by Insurance Enterprises for
Certain Long-Duration Participating Contracts," which permits, but does
not require, stock life insurance companies with participating life
contracts to account for those contracts in accordance with Statement of
Position No. 95-1, "Accounting for Certain Insurance Activities of
Mutual Life Insurance Enterprises". The Company has decided to retain
the existing methodology to account for traditional participating
policies and, therefore, will not adopt this statement.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of such assets may not be
recoverable. The Company will implement this statement as of January 1,
1996. The cumulative effect of this accounting change will be a charge
of $23.4 million, net of a Federal income tax benefit of $12.1 million,
due to the writedown to fair value of building improvements relating to
facilities being vacated beginning in 1996. The Company currently
provides allowances for possible losses for other assets under the scope
of this statement. Management has not yet determined the impact of this
statement on assets to be held and used.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights," which requires a mortgage banking enterprise to
recognize rights to service mortgage loans for others as separate assets
however those servicing rights are acquired. It further requires
capitalized mortgage servicing rights be assessed for impairment based
on the fair value of those rights. The Company will implement this
statement as of January 1, 1996. Implementation of this statement will
not have a material effect on the Company's consolidated financial
statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". This statement defines a fair value based
method of accounting for stock-based employee compensation plans while
continuing to allow an entity to measure compensation cost for such
plans using the intrinsic value based method of accounting. Management
has decided to retain the current compensation cost methodology
prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees".
F-9
<PAGE>
Valuation of Investments
------------------------
Fixed maturities, which the Company has both the ability and the intent
to hold to maturity, are stated principally at amortized cost. Fixed
maturities identified as available for sale are reported at estimated
fair value. The amortized cost of fixed maturities is adjusted for
impairments in value deemed to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances,
net of unamortized discounts and valuation allowances. Effective with
the adoption of SFAS No. 114 on January 1, 1995, the valuation
allowances are based on the present value of expected future cash flows
discounted at the loan's original effective interest rate or the
collateral value if the loan is collateral dependent. However, if
foreclosure is or becomes probable, the measurement method used is
collateral value. Prior to the adoption of SFAS No. 114, the valuation
allowances were 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 management believed may not be collectible
in full. In establishing valuation allowances, management previously
considered, among other things the estimated fair value of the
underlying collateral.
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 the Company's cost of funds; valuation allowances on
real estate available for sale are computed using the lower of current
estimated fair value, net of disposition costs, or depreciated cost.
Policy loans are stated at unpaid principal balances.
Partnerships and joint venture interests in which the Company does not
have control and a majority economic interest are reported on the equity
basis of accounting and are included either with equity real estate or
other equity investments, as appropriate.
Common stocks are carried at estimated fair value and are included in
other equity investments.
Short-term investments are stated at amortized cost which approximates
fair value and are included with other invested assets.
Cash and cash equivalents includes cash on hand, amounts due from banks
and highly liquid debt instruments purchased with an original maturity
of three months or less.
All securities are recorded in the consolidated financial statements on
a trade date basis.
Investment Results and Unrealized Investment Gains (Losses)
-----------------------------------------------------------
Net investment income and realized investment gains and losses
(collectively, "investment results") related to certain participating
group annuity contracts are passed through to the contractholders as
interest credited to policyholders' account balances.
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 held by the Company are accounted for as a
separate component of shareholder's equity, net of related deferred
Federal income taxes, amounts attributable to the discontinued GIC
Segment, Closed Block, participating group annuity contracts and
deferred policy acquisition costs related to universal life and
investment-type products.
F-10
<PAGE>
Recognition of Insurance Income and Related Expenses
----------------------------------------------------
Premiums from universal life and investment-type contracts are reported
as deposits to policyholders' account balances. Revenues from these
contracts consist of amounts assessed during the period against
policyholders' account balances for mortality charges, policy
administration charges and surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the
period in excess of related policyholders' account balances.
Premiums from traditional life and annuity policies with life
contingencies generally are recognized as income when due. Benefits and
expenses are matched with such income so as to result in the recognition
of profits over the life of the contracts. This match is accomplished by
means of the provision for liabilities for future policy benefits and
the deferral and subsequent amortization of policy acquisition costs.
For contracts with a single premium or a limited number of premium
payments due over a significantly shorter period than the total period
over which benefits are provided, premiums are recorded as income when
due with any excess profit deferred and recognized in income in a
constant relationship to insurance in force or, for annuities, the
amount of expected future benefit payments.
Premiums from individual health contracts are recognized as income over
the period to which the premiums relate in proportion to the amount of
insurance protection provided.
Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
underwriting, agency and policy issue expenses, all of which vary with
and are primarily related to the production of new business, are
deferred. 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 effect on
the amortization of deferred policy acquisition costs of revisions to
estimated gross profits is reflected in earnings in the period such
estimated gross profits are revised. The effect on the deferred policy
acquisition cost asset that would result from realization of unrealized
gains (losses) is recognized with an offset to unrealized gains (losses)
in consolidated shareholder's equity as of the balance sheet date.
For traditional life and annuity policies with life contingencies,
deferred policy acquisition costs are amortized in proportion to
anticipated premiums. Assumptions as to anticipated premiums are
estimated at the date of policy issue and are consistently applied
during the life of the contracts. Deviations from estimated experience
are reflected in earnings in the period such deviations occur. For these
contracts, the amortization periods generally are for the estimated life
of the policy.
For individual health benefit insurance, deferred policy acquisition
costs are amortized over the expected average life of the contracts (10
years for major medical policies and 20 years for disability income
products) in proportion to anticipated premium revenue at time of issue.
Policyholders' Account Balances and Future Policy Benefits
----------------------------------------------------------
Policyholders' account balances for universal life and investment-type
contracts are equal to the policy account values. The policy account
values represent an accumulation of gross premium payments plus credited
interest less expense and mortality charges and withdrawals.
F-11
<PAGE>
For traditional life insurance policies, future policy benefit and
dividend liabilities are estimated using a net level premium method on
the basis of actuarial assumptions as to mortality, persistency and
interest established at policy issue. Assumptions established at policy
issue as to mortality and persistency are based on the Insurance Group's
experience which, together with interest and expense assumptions,
provide a margin for adverse deviation. When the liabilities for future
policy benefits plus the present value of expected future gross premiums
for a product are insufficient to provide for expected future policy
benefits and expenses for that product, deferred policy acquisition
costs are written off and thereafter, if required, a premium deficiency
reserve is established by a charge to earnings. Benefit liabilities for
traditional annuities during the accumulation period are equal to
accumulated contractholders' fund balances and after annuitization are
equal to the present value of expected future payments. Interest rates
used in establishing such liabilities range from 2.25% to 11.5% for life
insurance liabilities and from 2.25% to 13.5% for annuity liabilities.
Individual health benefit liabilities for active lives are estimated
using the net level premium method, and assumptions as to future
morbidity, withdrawals and interest which provide a margin for adverse
deviation. Benefit liabilities for disabled lives are estimated using
the present value of benefits method and experience assumptions as to
claim terminations, expenses and interest.
Claim reserves and associated liabilities for individual disability
income and major medical policies were $639.6 million, $570.6 million at
December 31, 1995 and 1994, respectively. Incurred benefits (benefits
paid plus changes in claim reserves) and benefits paid for individual
disability income and major medical policies are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Incurred benefits related to current year.......... $ 176.0 $ 188.6 $ 193.1
Incurred benefits related to prior years........... 67.8 28.7 106.1
----------------- ---------------- -----------------
Total Incurred Benefits............................ $ 243.8 $ 217.3 $ 299.2
================= ================ =================
Benefits paid related to current year.............. $ 37.0 $ 43.7 $ 48.9
Benefits paid related to prior years............... 137.8 132.3 123.1
----------------- ---------------- -----------------
Total Benefits Paid................................ $ 174.8 $ 176.0 $ 172.0
================= ================ =================
</TABLE>
The amount of policyholders' dividends to be paid (including those on
policies included in the Closed Block) is determined annually by
Equitable Life's Board of Directors. The aggregate amount of
policyholders' dividends is related to actual interest, mortality,
morbidity and expense experience for the year and judgment as to the
appropriate level of statutory surplus to be retained by Equitable Life.
Equitable Life is subject to limitations on the amount of statutory
profits which can be retained with respect to certain classes of
individual participating policies that were in force on July 22, 1992
which are not included in the Closed Block and with respect to
participating policies issued subsequent to July 22, 1992. Excess
statutory profits, if any, will be distributed over time to such
policyholders and will not be available to Equitable Life's shareholder.
Earnings in excess of limitations are accrued as policyholders'
dividends.
At December 31, 1995, participating policies including those in the
Closed Block represent approximately 27.2% ($58.4 billion) of directly
written life insurance in force, net of amounts ceded. Participating
policies represent primarily all of the premium income as reflected in
the consolidated statements of earnings and in the results of the Closed
Block.
F-12
<PAGE>
Federal Income Taxes
--------------------
Equitable Life and its life insurance and non-life insurance
subsidiaries file a consolidated Federal income tax return with the
Holding Company and its non-life insurance subsidiaries. Current Federal
income taxes are charged or credited to operations based upon amounts
estimated to be payable or recoverable as a result of taxable operations
for the current year. Deferred income tax assets and liabilities are
recognized based on the difference between financial statement carrying
amounts and income tax bases of assets and liabilities using enacted
income tax rates and laws.
Separate Accounts
-----------------
Separate Accounts are established in conformity with the New York State
Insurance Law and generally are not chargeable with liabilities that
arise from any other business of the Insurance Group. Separate Accounts
assets are subject to General Account claims only to the extent the
value of such assets exceeds 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, and for which the
Insurance Group does not bear the investment risk, are shown as separate
captions in the consolidated balance sheets. The Insurance Group bears
the investment risk on assets held in one Separate Account, therefore,
such assets are carried on the same basis as similar assets held in the
General Account portfolio. Assets held in the other Separate Accounts
are carried at quoted market values or, where quoted values are not
available, at estimated fair values as determined by the Insurance
Group.
The investment results of Separate Accounts on which the Insurance Group
does not bear the investment risk are reflected directly in Separate
Accounts liabilities. For the years ended December 31, 1995, 1994 and
1993, investment results of such Separate Accounts were $1,956.3
million, $676.3 million and $1,676.5 million, respectively.
Deposits to all Separate Accounts are reported as increases in Separate
Accounts liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges on all Separate Accounts are
included in revenues.
F-13
<PAGE>
3) INVESTMENTS
The following tables provide additional information relating to fixed
maturities and equity securities:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------------- ----------------- ---------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
-----------------
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 10,910.7 $ 617.6 $ 118.1 $ 11,410.2
Mortgage-backed.................... 1,838.0 31.2 1.2 1,868.0
U.S. Treasury securities and
U.S. government and
agency securities................ 2,257.0 77.8 4.1 2,330.7
States and political subdivisions.. 45.7 5.2 - 50.9
Foreign governments................ 124.5 11.0 .2 135.3
Redeemable preferred stock......... 108.1 5.3 8.6 104.8
----------------- ----------------- ---------------- ---------------
Total Available for Sale............... $ 15,284.0 $ 748.1 $ 132.2 $ 15,899.9
================= ================= ================ ===============
Equity Securities:
Common stock......................... $ 97.3 $ 49.1 $ 18.0 $ 128.4
================= ================= ================ ===============
December 31, 1994
-----------------
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 5,663.4 $ 34.6 $ 368.0 $ 5,330.0
Mortgage-backed.................... 686.0 2.9 44.8 644.1
U.S. Treasury securities and
U.S. government and
agency securities................ 1,519.3 6.7 71.9 1,454.1
States and political subdivisions.. 23.4 .1 .7 22.8
Foreign governments................ 43.8 .3 4.2 39.9
Redeemable preferred stock......... 108.4 .4 13.7 95.1
----------------- ----------------- ---------------- ---------------
Total Available for Sale............... $ 8,044.3 $ 45.0 $ 503.3 $ 7,586.0
================= ================= ================ ===============
Held to Maturity:
Corporate.......................... $ 4,661.0 $ 67.9 $ 233.8 $ 4,495.1
U.S. Treasury securities and
U.S. government and
agency securities................ 428.9 4.6 44.2 389.3
States and political subdivisions.. 63.4 .9 3.7 60.6
Foreign governments................ 69.7 4.2 2.0 71.9
================= ================= ================ ===============
Total Held to Maturity................. $ 5,223.0 $ 77.6 $ 283.7 $ 5,016.9
================= ================= ================ ===============
Equity Securities:
Common stock......................... $ 126.4 $ 31.2 $ 23.5 $ 134.1
================= ================= ================ ===============
</TABLE>
F-14
<PAGE>
For publicly traded fixed maturities and equity securities, estimated
fair value is determined using quoted market prices. For fixed
maturities without a readily ascertainable market value, the Company has
determined an estimated fair value using a discounted cash flow
approach, including provisions for credit risk, generally based 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 the Company.
Such estimated fair values do not necessarily represent the values for
which these securities could have been sold at the dates of the
consolidated balance sheets. At December 31, 1995 and 1994, securities
without a readily ascertainable market value having an amortized cost of
$3,748.9 million and $3,980.4 million, respectively, had estimated fair
values of $3,981.8 million and $3,858.7 million, respectively.
The contractual maturity of bonds at December 31, 1995 is shown below:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
------------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less................................................ $ 357.9 $ 360.0
Due in years two through five.......................................... 3,773.1 3,847.1
Due in years six through ten........................................... 4,709.8 4,821.8
Due after ten years.................................................... 4,497.1 4,898.2
Mortgage-backed securities............................................. 1,838.0 1,868.0
---------------- -----------------
Total.................................................................. $ 15,175.9 $ 15,795.1
================ =================
</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 prepayment penalties.
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balances, beginning of year........................ $ 284.9 $ 355.6 $ 512.0
Additions charged to income........................ 136.0 51.0 92.8
Deductions for writedowns and asset dispositions... (95.6) (121.7) (249.2)
----------------- ---------------- -----------------
Balances, End of Year.............................. $ 325.3 $ 284.9 $ 355.6
================= ================ =================
Balances, end of year comprise:
Mortgage loans on real estate.................... $ 65.5 $ 64.2 $ 144.4
Equity real estate............................... 259.8 220.7 211.2
----------------- ---------------- -----------------
Total.............................................. $ 325.3 $ 284.9 $ 355.6
================= ================ =================
</TABLE>
Deductions for writedowns and asset dispositions for 1993 include an
$87.1 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, 1995, 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 $37.2 million
of fixed maturities and $84.7 million of mortgage loans on real estate.
F-15
<PAGE>
The Insurance Group's fixed maturity investment portfolio includes
corporate high yield securities consisting of public high yield bonds,
redeemable preferred stocks and directly negotiated debt in leveraged
buyout transactions. The Insurance Group seeks to minimize the higher
than normal credit risks associated with such securities by monitoring
the total investments in any single issuer or total investment in a
particular industry group. Certain of these corporate high yield
securities are classified as other than investment grade by the various
rating agencies, i.e., a rating below Baa or National Association of
Insurance Commissioners ("NAIC") designation of 3 (medium grade), 4 or 5
(below investment grade) or 6 (in or near default). At December 31,
1995, approximately 15.57% of the $15,139.9 million aggregate amortized
cost of bonds held by the Insurance Group were considered to be other
than investment grade.
In addition to its holdings of corporate high yield securities, the
Insurance Group is an equity investor in limited partnership interests
which primarily invest in securities considered to be other than
investment grade.
The Company has restructured or modified the terms of certain fixed
maturity investments. The fixed maturity portfolio, based on amortized
cost, includes $15.9 million and $30.5 million at December 31, 1995 and
1994, 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 $1.6 million
and $9.7 million as of December 31, 1995 and 1994, respectively. Gross
interest income that would have been recorded in accordance with the
original terms of restructured fixed maturities amounted to $3.0
million, $7.5 million and $11.7 million in 1995, 1994 and 1993,
respectively. Gross interest income on these fixed maturities included
in net investment income aggregated $2.9 million, $6.8 million and $9.7
million in 1995, 1994 and 1993, respectively.
At December 31, 1995 and 1994, 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 $87.7 million (2.4% of total
mortgage loans on real estate) and $96.9 million (2.3% 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 $531.5
million and $447.9 million at December 31, 1995 and 1994, respectively.
These amounts include $3.8 million and $1.0 million of problem mortgage
loans on real estate at December 31, 1995 and 1994, 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 $52.1 million, $44.9 million and $51.8 million in 1995, 1994
and 1993, respectively. Gross interest income on these loans included in
net investment income aggregated $37.4 million, $32.8 million and $46.0
million in 1995, 1994 and 1993, respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31, 1995
-------------------
(IN MILLIONS)
<S> <C>
Impaired mortgage loans with provision for losses....................................... $ 310.1
Impaired mortgage loans with no provision for losses.................................... 160.8
-------------------
Recorded investment in impaired mortgage loans.......................................... 470.9
Provision for losses.................................................................... 62.7
-------------------
Net Impaired Mortgage Loans............................................................. $ 408.2
===================
</TABLE>
F-16
<PAGE>
Impaired mortgage loans with no provision for losses are loans where the
fair value of the collateral or the net present value of the loan equals
or exceeds the recorded investment. Interest income earned on loans
where the collateral value is used to measure impairment is recorded on
a cash basis. Interest income on loans where the present value method is
used to measure impairment is accrued on the net carrying value amount
of the loan at the interest rate used to discount the cash flows.
Changes in the present value attributable to changes in the amount or
timing of expected cash flows are reported as investment gains or
losses.
During the year ended December 31, 1995, the Company's average recorded
investment in impaired mortgage loans was $429.0 million. Interest
income recognized on these impaired mortgage loans totaled $27.9 million
for the year ended December 31, 1995, including $13.4 million recognized
on a cash basis.
At December 31, 1995, investments owned of any one issuer, including its
affiliates, for which the aggregate carrying values are 10% or more of
total shareholders' equity, were $508.3 million relating to Trammell
Crow and affiliates (including holdings of the Closed Block and the
discontinued GIC Segment). The amount includes restructured mortgage
loans on real estate with an amortized cost of $152.4 million. A $294.0
million commercial loan package which was in bankruptcy at the beginning
of the year was resolved in 1995, with part of the package reclassified
as restructured and the remainder reclassified as equity real estate.
The Insurance Group's investment in equity real estate is through direct
ownership and through investments in real estate joint ventures. At
December 31, 1995 and 1994, the carrying value of equity real estate
available for sale amounted to $255.5 million and $447.8 million,
respectively. For the years ended December 31, 1995, 1994 and 1993,
respectively, real estate of $35.3 million, $189.8 million and $261.8
million was acquired in satisfaction of debt. At December 31, 1995 and
1994, the Company owned $862.7 million and $1,086.9 million,
respectively, of real estate acquired in satisfaction of debt.
Depreciation of real estate is computed using the straight-line method
over the estimated useful lives of the properties, which generally range
from 40 to 50 years. Accumulated depreciation on real estate was $662.4
million and $703.1 million at December 31, 1995 and 1994, respectively.
Depreciation expense on real estate totaled $121.7 million, $117.0
million and $115.3 million for the years ended December 31, 1995, 1994
and 1993, respectively.
F-17
<PAGE>
4) JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information of real estate joint ventures
(38 and 47 individual ventures as of December 31, 1995 and 1994,
respectively) and of limited partnership interests accounted for under
the equity method, in which the Company has an investment of $10.0
million or greater and an equity interest of 10% or greater is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
FINANCIAL POSITION
Investments in real estate, at depreciated cost........................ $ 2,684.1 $ 2,786.7
Investments in securities, generally at estimated fair value........... 2,459.8 3,071.2
Cash and cash equivalents.............................................. 489.1 359.8
Other assets........................................................... 270.8 398.7
---------------- -----------------
Total assets........................................................... 5,903.8 6,616.4
---------------- -----------------
Borrowed funds - third party........................................... 1,782.3 1,759.6
Borrowed funds - the Company........................................... 220.5 238.0
Other liabilities...................................................... 593.9 987.7
---------------- -----------------
Total liabilities...................................................... 2,596.7 2,985.3
---------------- -----------------
Partners' Capital...................................................... $ 3,307.1 $ 3,631.1
================ =================
Equity in partners' capital included above............................. $ 902.2 $ 964.2
Equity in limited partnership interests not included above............. 212.8 224.6
Excess (deficit) of equity in partners' capital over investment cost
and equity earnings.................................................. 3.6 (1.8)
Notes receivable from joint venture.................................... 5.3 6.1
---------------- -----------------
Carrying Value......................................................... $ 1,123.9 $ 1,193.1
================ =================
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures............. $ 463.5 $ 537.7 $ 602.7
Revenues of other limited partnership interests.... 242.3 103.4 319.1
Interest expense - third party..................... (135.3) (114.9) (118.8)
Interest expense - the Company..................... (41.0) (36.9) (52.1)
Other expenses..................................... (397.7) (430.9) (531.7)
----------------- ---------------- -----------------
Net Earnings....................................... $ 131.8 $ 58.4 $ 219.2
================= ================ =================
Equity in net earnings included above.............. $ 49.1 $ 18.9 $ 71.6
Equity in net earnings of limited partnerships
interests not included above..................... 44.8 25.3 46.3
Excess of earnings in joint ventures over equity
ownership percentage and amortization of
differences in bases............................. .9 1.8 9.2
Interest on notes receivable....................... .1 - .5
----------------- ---------------- -----------------
Total Equity in Net Earnings....................... $ 94.9 $ 46.0 $ 127.6
================= ================ =================
</TABLE>
F-18
<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,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................... $ 1,151.0 $ 1,024.5 $ 981.7
Trading account securities......................... - - 709.3
Securities purchased under resale agreements....... - - 533.8
Mortgage loans on real estate...................... 329.0 384.3 457.4
Equity real estate................................. 560.4 561.8 539.1
Other equity investments........................... 76.9 35.7 110.4
Policy loans....................................... 144.4 122.7 117.0
Broker-dealer related receivables.................. - - 292.2
Other investment income............................ 279.7 336.3 304.9
----------------- ---------------- -----------------
Gross investment income.......................... 2,541.4 2,465.3 4,045.8
----------------- ---------------- -----------------
Interest expense to finance short-term trading
instruments...................................... - - 983.4
Other investment expenses.......................... 413.7 434.4 463.1
----------------- ---------------- -----------------
Investment expenses.............................. 413.7 434.4 1,446.5
----------------- ---------------- -----------------
Net Investment Income.............................. $ 2,127.7 $ 2,030.9 $ 2,599.3
================= ================ =================
</TABLE>
Investment gains (losses), net, including changes in the valuation
allowances, are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................... $ 119.9 $ (14.1) $ 123.1
Mortgage loans on real estate...................... (40.2) (43.1) (65.1)
Equity real estate................................. (86.6) 20.6 (18.5)
Other equity investments........................... 12.8 76.0 119.5
Dealer and trading gains........................... - - 372.5
Sales of newly issued Alliance Units............... - 52.4 -
Other.............................................. (.6) - 1.9
----------------- ---------------- -----------------
Investment Gains, Net.............................. $ 5.3 $ 91.8 $ 533.4
================= ================ =================
</TABLE>
Writedowns of fixed maturities amounted to $46.7 million, $30.8 million
and $5.4 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
For the years ended December 31, 1995 and 1994, respectively, proceeds
received on sales of fixed maturities classified as available for sale
amounted to $8,206.0 million and $5,253.9 million. Gross gains of $211.4
million and $65.2 million and gross losses of $64.2 million and $50.8
million, respectively, were realized on these sales. The change in
unrealized investment gains (losses) related to fixed maturities
classified as available for sale for the years ended December 31, 1995
and 1994 amounted to $1,077.2 million and $(742.2) million,
respectively.
Gross gains of $188.5 million and gross losses of $145.0 million were
realized on sales of investments in fixed maturities held for investment
and available for sale for the year ended December 31, 1993.
F-19
<PAGE>
During each of the years ended December 31, 1995 and 1994, one security
classified as held to maturity was sold and during the eleven months
ended November 30, 1995 and the year ended December 31, 1994,
respectively, twelve and six securities so classified were transferred
to the available for sale portfolio. All actions were taken as a result
of a significant deterioration in creditworthiness. The aggregate
amortized cost of the securities sold were $1.0 million and $19.9
million with a related investment gain of $-0- million and $.8 million
recognized in 1995 and 1994, respectively; the aggregate amortized cost
of the securities transferred was $116.0 million and $42.8 million with
gross unrealized investment losses of $3.2 million and $3.1 million
charged to consolidated shareholders' equity for the eleven months ended
November 30, 1995 and the year ended December 31, 1994, respectively. On
December 1, 1995, the Company transferred $4,794.9 million of securities
classified as held to maturity to the available for sale portfolio. As a
result, unrealized gains on fixed maturities increased $307.0 million,
offset by deferred policy acquisition costs of $73.7 million, amounts
attributable to participating group annuity contracts of $39.2 million
and deferred Federal income tax of $67.9 million.
Investment gains from other equity investments for the year ended
December 31, 1993, included $79.9 million generated by DLJ's involvement
in long-term corporate development investments.
For the years ended December 31, 1995, 1994 and 1993, investment results
passed through to certain participating group annuity contracts as
interest credited to policyholders' account balances amounted to $131.2
million, $175.8 million and $243.2 million, respectively.
During 1995, Alliance entered into an agreement to acquire the business
of Cursitor-Eaton Asset Management Company and Cursitor Holdings Limited
(collectively, "Cursitor") for approximately $141.5 million consisting
of $84.9 million in cash, 1,764,115 of Alliance's publicly traded units
("Alliance Units"), 6% notes aggregating $21.5 million payable ratably
over four years, and substantial additional consideration which will be
determined at a later date. The transaction, which is expected to be
completed during the first quarter of 1996, is subject to the receipt of
consents, regulatory approvals, and certain other closing conditions,
including client approval of the transfer of Cursitor accounts. Upon
completion of this transaction, the Company's ownership percentage of
Alliance will be reduced.
In 1994, Alliance sold 4.96 million newly issued Alliance Units to third
parties at prevailing market prices. The sales decreased the Company's
ownership of Alliance's Units from 63.2% to 59.2%. In addition, the
Company continues to hold its 1% general partnership interest in
Alliance. The Company recognized an investment gain of $52.4 million as
a result of these transactions.
The Company's ownership interest in Alliance will be further reduced
upon the exercise of options granted to certain Alliance employees. At
December 31, 1995, Alliance had options outstanding to purchase an
aggregate of 4.8 million Alliance Units at a price ranging from $6.0625
to $22.25 per unit. Options are exercisable at a rate of 20% on each of
the first five anniversary dates from the date of grant.
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of equity and the changes for the
corresponding years, are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year......................... $ (203.0) $ 131.9 $ 78.8
Changes in unrealized investment (losses) gains.... 1,117.7 (823.8) (14.1)
Effect of adopting SFAS No. 115.................... - - 283.9
Changes in unrealized investment (gains)
losses attributable to:
Participating group annuity contracts.......... (78.1) 40.8 (36.2)
Deferred policy acquisition costs.............. (208.4) 269.5 (150.5)
Deferred Federal income taxes.................. (290.0) 178.6 (30.0)
----------------- ---------------- -----------------
Balance, End of Year............................... $ 338.2 $ (203.0) $ 131.9
================= ================ =================
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, end of year comprises:
Unrealized investment (losses) gains on:
Fixed maturities............................... $ 615.9 $ (461.3) $ 283.9
Other equity investments....................... 31.1 7.7 75.8
Other.......................................... 31.6 14.5 25.0
----------------- ---------------- -----------------
Total........................................ 678.6 (439.1) 384.7
Amounts of unrealized investment (gains)
losses attributable to:
Participating group annuity contracts........ (72.2) 5.9 (34.9)
Deferred policy acquisition costs............ (89.4) 119.0 (150.5)
Deferred Federal income taxes................ (178.8) 111.2 (67.4)
----------------- ---------------- -----------------
Total.............................................. $ 338.2 $ (203.0) $ 131.9
================= ================ =================
</TABLE>
6) CLOSED BLOCK
Summarized financial information of the Closed Block follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Fixed Maturities:
Available for sale, at estimated fair value (amortized cost,
$3,662.8 and $1,270.3)........................................... $ 3,896.2 $ 1,197.0
Held to maturity, at amortized cost (estimated fair value of
$1,785.0 in 1994)................................................ - 1,927.8
Mortgage loans on real estate........................................ 1,368.8 1,543.7
Policy loans......................................................... 1,797.2 1,827.9
Cash and other invested assets....................................... 440.9 442.5
Deferred policy acquisition costs.................................... 823.6 878.1
Other assets......................................................... 286.1 288.5
----------------- -----------------
Total Assets......................................................... $ 8,612.8 $ 8,105.5
================= =================
Liabilities
Future policy benefits and policyholders' account balances........... $ 9,346.7 $ 8,965.3
Other liabilities.................................................... 160.5 104.2
----------------- -----------------
Total Liabilities.................................................... $ 9,507.2 $ 9,069.5
================= =================
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other revenue......................... $ 753.4 $ 798.1 $ 860.2
Investment income (net of investment
expenses of $26.7, $19.0 and $17.3).............. 538.9 523.0 526.5
Investment losses, net............................. (20.2) (24.0) (15.0)
----------------- ---------------- -----------------
Total revenues............................... 1,272.1 1,297.1 1,371.7
----------------- ---------------- -----------------
Benefits and Other Deductions
Policyholders' benefits and dividends.............. 1,085.1 1,075.6 1,141.4
Other operating costs and expenses................. 62.6 70.5 102.0
----------------- ---------------- -----------------
Total benefits and other deductions.......... 1,147.7 1,146.1 1,243.4
----------------- ---------------- -----------------
Contribution from the Closed Block................. $ 124.4 $ 151.0 $ 128.3
================= ================ =================
</TABLE>
The fixed maturity portfolio, based on amortized cost, includes $4.3
million and $23.8 million at December 31, 1995 and 1994, respectively,
of restructured securities which includes problem fixed maturities of
$1.9 million and $6.4 million, respectively.
During the eleven months ended November 30, 1995, one security
classified as held to maturity was sold and ten securities classified as
held to maturity were transferred to the available for sale portfolio.
All actions resulted from a significant deterioration in
creditworthiness. The amortized cost of the security sold was $4.2
million. The aggregate amortized cost of the securities transferred was
$81.3 million with gross unrealized investment losses of $.1 million
transferred to equity. At December 1, 1995, $1,750.7 million of
securities classified as held to maturity were transferred to the
available for sale portfolio. As a result, unrealized gains of $88.5
million on fixed maturities were recognized and offset by an increase to
the deferred dividend liability. Implementation of SFAS No. 115 for the
valuation of fixed maturities at December 31, 1993 resulted in the
recognition of a deferred dividend liability of $49.6 million.
At December 31, 1995 and 1994, problem mortgage loans on real estate had
an amortized cost of $36.5 million and $27.6 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had an amortized cost of $137.7 million and $179.2 million,
respectively. At December 31, 1995 and 1994, the restructured mortgage
loans on real estate amount included $8.8 million and $.7 million,
respectively, of problem mortgage loans on real estate.
Valuation allowances amounted to $18.4 million and $46.2 million on
mortgage loans on real estate and $4.3 million and $2.6 million on
equity real estate at December 31, 1995 and 1994, respectively.
Writedowns of fixed maturities amounted to $16.8 million and $15.9
million and $1.7 million for the years ended December 31, 1995, 1994 and
1993, respectively.
Many expenses related to Closed Block operations are charged to
operations outside of the Closed Block; accordingly, the contribution
from the Closed Block does not represent the actual profitability of the
Closed Block operations. Operating costs and expenses outside of the
Closed Block are, therefore, disproportionate to the business outside of
the Closed Block.
F-22
<PAGE>
7) DISCONTINUED OPERATIONS
Summarized financial information of the GIC Segment follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Mortgage loans on real estate........................................ $ 1,485.8 $ 1,730.5
Equity real estate................................................... 1,122.1 1,194.8
Other invested assets................................................ 665.2 978.8
Other assets......................................................... 579.3 529.5
----------------- -----------------
Total Assets......................................................... $ 3,852.4 $ 4,433.6
================= =================
Liabilities
Policyholders' liabilities........................................... $ 1,399.8 $ 1,924.0
Allowance for future losses.......................................... 164.2 185.6
Amounts due to continuing operations................................. 2,097.1 2,108.6
Other liabilities.................................................... 191.3 215.4
----------------- -----------------
Total Liabilities.................................................... $ 3,852.4 $ 4,433.6
================= =================
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Investment income (net of investment expenses
of $143.8, $174.0 and $175.8).................... $ 325.1 $ 395.0 $ 535.1
Investment (losses) gains, net..................... (22.9) 26.8 (22.6)
Policy fees, premiums and other income............. .7 .3 8.7
----------------- ---------------- -----------------
Total revenues..................................... 302.9 422.1 521.2
Benefits and other deductions...................... 328.0 443.8 545.9
----------------- ---------------- -----------------
Losses Charged to Allowance for Future Losses...... $ (25.1) $ (21.7) $ (24.7)
================= ================ =================
</TABLE>
In 1991, the Company established a pre-tax provision of $396.7 million
for the estimated future losses of the GIC Segment. At December 31,
1993, implementation of SFAS No. 115 for the valuation of fixed
maturities resulted in a benefit of $13.1 million, offset by a
corresponding addition to the allowance for future losses.
The amounts due to continuing operations at December 31, 1994 consisted
of $3,324.0 million borrowed by the GIC Segment from continuing
operations, offset by $1,215.4 million representing an obligation of
continuing operations to provide assets to fund the accumulated deficit
of the GIC Segment. In January 1995, continuing operations transferred
$1,215.4 million in cash to the GIC Segment in settlement of its
obligation. Subsequently, the GIC Segment remitted $1,155.4 million in
cash to continuing operations in partial repayment of borrowings by the
GIC Segment. No gains or losses were recognized on these transactions.
Amounts due to continuing operations at December 31, 1995, consisted of
$2,097.1 million borrowed by the discontinued GIC Segment.
F-23
<PAGE>
Investment income included $88.2 million and $97.7 million of interest
income for the years ended December 31, 1994 and 1993, respectively, on
amounts due from continuing operations. Benefits and other deductions
includes $154.6 million, $219.7 million and $197.1 million of interest
expense related to amounts borrowed from continuing operations in 1995,
1994 and 1993, respectively.
Valuation allowances amounted to $19.2 million and $50.2 million on
mortgage loans on real estate and $77.9 million and $74.7 million on
equity real estate at December 31, 1995 and 1994, respectively.
Writedowns of fixed maturities amounted to $8.1 million, $17.8 million
and $1.1 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
The fixed maturity portfolio, based on amortized cost, includes $15.1
million and $43.3 million at December 31, 1995 and 1994, respectively,
of restructured securities. These amounts include problem fixed
maturities of $6.1 million and $9.7 million at December 31, 1995 and
1994, respectively.
At December 31, 1995 and 1994, problem mortgage loans on real estate had
amortized costs of $35.4 million and $14.9 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had amortized costs of $289.3 million and $371.2 million,
respectively.
At December 31, 1995 and 1994, the GIC Segment had $310.9 million and
$312.2 million, respectively, of real estate acquired in satisfaction of
debt.
8) SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Short-term debt...................................................... $ - $ 20.0
----------------- -----------------
Long-term debt:
Equitable Life:
Surplus notes, 6.95%, scheduled to mature 2005..................... 399.3 -
Surplus notes, 7.70%, scheduled to mature 2015..................... 199.6 -
Eurodollar notes, 10.375% due 1995................................. - 34.6
Eurodollar notes, 10.5% due 1997................................... 76.2 76.2
Zero coupon note, 11.25% due 1997.................................. 120.1 107.8
Other.............................................................. 16.3 14.3
----------------- -----------------
Total Equitable Life........................................... 811.5 232.9
----------------- -----------------
Wholly Owned and Joint Venture Real Estate:
Mortgage notes, 4.98% - 12.75% due through 2019.................... 1,084.4 1,080.6
----------------- -----------------
Alliance:
Other.............................................................. 3.4 3.9
----------------- -----------------
Total long-term debt................................................. 1,899.3 1,317.4
----------------- -----------------
Total Short-term and Long-term Debt.................................. $ 1,899.3 $ 1,337.4
================= =================
</TABLE>
Short-term Debt
---------------
Equitable Life has a $350.0 million bank credit facility available to
fund short-term working capital needs and to facilitate the securities
settlement process. The credit facility consists of two types of
borrowing options with varying interest rates. The interest rates are
based on external indices dependent on the type of borrowing and at
December 31, 1995 range from 5.8% (the London Interbank Offering Rate
plus 22.5 basis points) to 8.5% (the prime rate). There were no
borrowings outstanding under this bank credit facility at December 31,
1995.
F-24
<PAGE>
Equitable Life has a commercial paper program with an issue limit of
$500.0 million. This program is available for general corporate purposes
used to support Equitable Life's liquidity needs and is supported by
Equitable Life's existing $350.0 million five-year bank credit facility.
There were no borrowings outstanding under this program at December 31,
1995.
In 1994, Alliance established a $100.0 million revolving credit facility
with several banks. On March 31, 1997, the revolving credit facility
converts into a term loan payable in quarterly installments through
March 31, 1999. Outstanding borrowings generally bear interest at the
Eurodollar rate plus .875% per annum through March 31, 1997 and at the
Eurodollar rate plus 1.125% per annum after conversion through March 31,
1999. In addition, a quarterly commitment fee of .25% per annum is paid
on the average daily unused amount. At December 31, 1995, there were no
amounts outstanding under the facility.
In 1994, Alliance also established a $100.0 million commercial paper
program and entered into a three-year $100.0 million revolving credit
facility with a group of commercial banks to support commercial paper to
be issued under the program and for general corporate purposes. Amounts
outstanding under the facility bear interest at an annual rate ranging
from the Eurodollar rate plus .225% to the Eurodollar rate plus .2875%.
A fee of .125% per annum is paid quarterly on the entire facility. At
December 31, 1995, Alliance had not issued any commercial paper and
there were no amounts outstanding under the revolving credit facility.
During 1994, EREIM established two bank lines of credit totaling $30.0
million of which $20.0 million was outstanding at December 31, 1994.
Long-term Debt
--------------
Several of the long-term debt agreements have restrictive covenants
related to the total amount of debt, net tangible assets and other
matters. The Company is in compliance with all debt covenants.
On December 18, 1995, Equitable Life issued, in accordance with Section
1307 of the New York Insurance Law, $400.0 million of surplus notes
having an interest rate of 6.95% scheduled to mature in 2005 and $200.0
million of surplus notes having an interest rate of 7.70% scheduled to
mature in 2015. Proceeds from the issuance of the surplus notes were
$596.6 million, net of related issuance costs. The unamortized discount
on the surplus notes was $1.1 million at December 31, 1995. Payments of
interest on or principal of the surplus notes are subject to prior
approval by the New York Insurance Department.
The Company has pledged real estate, mortgage loans, cash and securities
amounting to $1,629.7 million and $1,744.4 million at December 31, 1995
and 1994, respectively, as collateral for certain long-term debt.
At December 31, 1995, aggregate maturities of the long-term debt based
on required principal payments at maturity for 1996 and the succeeding
four years are $124.0 million, $466.6 million, $309.5 million, $15.8
million, respectively, and $1,015.0 million thereafter.
9) FEDERAL INCOME TAXES
A summary of the Federal income tax expense (benefit) in the
consolidated statements of earnings is shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current.......................................... $ (11.7) $ 4.0 $ 115.8
Deferred......................................... 124.1 97.2 (24.5)
----------------- ---------------- -----------------
Total.............................................. $ 112.4 $ 101.2 $ 91.3
================= ================ =================
</TABLE>
F-25
<PAGE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings before
Federal income taxes and cumulative effect of accounting change by the
expected Federal income tax rate of 35%. The sources of the difference
and the tax effects of each are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Expected Federal income tax expense................ $ 143.5 $ 138.1 $ 106.3
Differential earnings amount....................... - (16.8) (23.2)
Adjustment of tax audit reserves................... 4.1 (4.6) 22.9
Tax rate adjustment................................ - - (5.0)
Other.............................................. (35.2) (15.5) (9.7)
----------------- --------------- -----------------
Federal Income Tax Expense......................... $ 112.4 $ 101.2 $ 91.3
================= ================ =================
</TABLE>
Prior to the date of demutualization, Equitable Life reduced its
deduction for policyholder dividends by the differential earnings
amount. This amount was computed, for each tax year, by multiplying
Equitable Life's average equity base, as determined for tax purposes, by
an estimate of the excess of an imputed earnings rate for stock life
insurance companies over the average mutual life insurance companies'
earnings rate. The differential earnings amount for each tax year was
subsequently recomputed when actual earnings rates were published by the
Internal Revenue Service. As a stock life insurance company, Equitable
Life is no longer required to reduce its policyholder dividend deduction
by the differential earnings amount, but differential earnings amounts
for pre-demutualization years were still being recomputed in 1994 and
1993.
The components of the net deferred Federal income tax asset are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 December 31, 1994
--------------------------------- ---------------------------------
ASSETS LIABILITIES Assets Liabilities
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Deferred policy acquisition costs,
reserves and reinsurance............. $ - $ 303.2 $ - $ 220.3
Investments............................ - 326.9 - 18.7
Compensation and related benefits...... 293.0 - 307.3 -
Other.................................. - 32.3 - 5.8
--------------- ---------------- --------------- ---------------
Total.................................. $ 293.0 $ 662.4 $ 307.3 $ 244.8
=============== ================ =============== ===============
</TABLE>
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,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Deferred policy acquisition costs, reserves
and reinsurance.................................. $ 55.1 $ 13.0 $ (46.7)
Investments........................................ 13.0 89.3 60.4
Compensation and related benefits.................. 30.8 10.0 (50.1)
Other.............................................. 25.2 (15.1) 11.9
----------------- ---------------- -----------------
Deferred Federal Income Tax Expense (Benefit)...... $ 124.1 $ 97.2 $ (24.5)
================= ================ =================
</TABLE>
F-26
<PAGE>
The Internal Revenue Service completed its audit of the Company's
Federal income tax returns for the years 1984 through 1988. There was no
material effect on the Company's consolidated results of operations.
10) REINSURANCE AGREEMENTS
The Insurance Group assumes and cedes reinsurance with other insurance
companies. The Insurance Group evaluates the financial condition of its
reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies. The effect of reinsurance (excluding group life and
health) is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums.................................... $ 474.2 $ 476.7 $ 458.8
Reinsurance assumed................................ 171.3 180.5 169.9
Reinsurance ceded.................................. (38.7) (31.6) (29.6)
----------------- ---------------- -----------------
Premiums........................................... $ 606.8 $ 625.6 $ 599.1
================= ================ =================
Universal Life and Investment-type Product
Policy Fee Income Ceded.......................... $ 38.9 $ 27.5 $ 33.7
================= ================ =================
Policyholders' Benefits Ceded...................... $ 48.2 $ 20.7 $ 72.3
================= ================ =================
Interest Credited to Policyholders' Account
Balances Ceded................................... $ 28.5 $ 25.4 $ 24.1
================= ================ =================
</TABLE>
In February 1993, management established a practice limiting the risk
retention on new policies issued by the Insurance Group to a maximum of
$5.0 million. In addition, effective January 1, 1994, all in force
business above $5.0 million was reinsured. The Insurance Group also
reinsures the entire risk on certain substandard underwriting risks as
well as in certain other cases.
The Insurance Group cedes 100% of its group life and health business to
a third party insurance company. Premiums ceded totaled $260.6 million,
$241.0 million and $895.1 million for the years ended December 31, 1995,
1994 and 1993, respectively. Ceded death and disability benefits totaled
$188.1 million, $235.5 million and $787.8 million for the years ended
December 31, 1995, 1994 and 1993, respectively. Insurance liabilities
ceded totaled $724.2 million and $833.4 million at December 31, 1995 and
1994, respectively.
11) EMPLOYEE BENEFIT PLANS
The Company sponsors qualified and non-qualified defined benefit plans
covering substantially all employees (including certain qualified
part-time employees), managers and certain agents. The pension plans are
non-contributory and benefits are based on a cash balance formula or
years of service and final average earnings, if greater, under certain
grandfathering rules in the plans. The Company's funding policy is to
make the minimum contribution required by the Employee Retirement Income
Security Act of 1974.
Components of net periodic pension (credit) cost for the qualified and
non-qualified plans are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost....................................... $ 30.0 $ 30.3 $ 29.8
Interest cost on projected benefit obligations..... 122.0 111.0 108.0
Actual return on assets............................ (309.2) 24.4 (178.6)
Net amortization and deferrals..................... 155.6 (142.5) 55.3
----------------- ---------------- -----------------
Net Periodic Pension (Credit) Cost................. $ (1.6) $ 23.2 $ 14.5
================= ================ =================
</TABLE>
F-27
<PAGE>
The funded status of the qualified and non-qualified pension plans is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of obligations:
Vested............................................................... $ 1,642.4 $ 1,295.5
Non-vested........................................................... 10.9 8.7
--------------- -----------------
Accumulated Benefit Obligation......................................... $ 1,653.3 $ 1,304.2
================ =================
Plan assets at fair value.............................................. $ 1,503.8 $ 1,193.5
Projected benefit obligation........................................... 1,743.0 1,403.4
---------------- -----------------
Projected benefit obligation in excess of plan assets.................. (239.2) (209.9)
Unrecognized prior service cost........................................ (25.5) (33.2)
Unrecognized net loss from past experience different from that
assumed.............................................................. 368.2 298.9
Unrecognized net asset at transition................................... (7.3) (20.8)
Additional minimum liability........................................... (51.9) (37.8)
---------------- -----------------
Prepaid (Accrued) Pension Cost......................................... $ 44.3 $ (2.8)
================ =================
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of projected benefit
obligations were 7.25% and 4.50%, respectively, at December 31, 1995 and
8.75% and 4.88%, respectively, at December 31, 1994. As of January 1,
1995 and 1994, the expected long-term rate of return on assets for the
retirement plan was 11% and 10%, respectively.
The Company recorded, as a reduction of shareholder's equity, an
additional minimum pension liability of $35.1 million and $2.7 million,
net of Federal income taxes, at December 31, 1995 and 1994,
respectively, representing the excess of the accumulated benefit
obligation over the fair value of plan assets and accrued pension
liability.
The pension plan's assets include corporate and government debt
securities, equity securities, equity real estate and shares of Group
Trusts managed by Alliance.
As of December 31, 1993, the Company changed the method of determining
the market-related value of plan assets from fair value to a calculated
value. This change in estimate had no material effect on the Company's
consolidated statements of earnings.
Prior to 1987, the qualified plan funded participants' benefits through
the purchase of non-participating annuity contracts from Equitable Life.
Benefit payments under these contracts were approximately $36.4 million,
$38.1 million and $39.9 million for the years ended December 31, 1995,
1994 and 1993, respectively.
The Company provides certain medical and life insurance benefits
(collectively, "postretirement benefits") for qualifying employees,
managers and agents retiring from the Company on or after attaining age
55 who have at least 10 years of service. The life insurance benefits
are related to age and salary at retirement. The costs of postretirement
benefits are recognized in accordance with the provisions of SFAS No.
106. The Company continues to fund postretirement benefits costs on a
pay-as-you-go basis and, for the years ended December 31, 1995, 1994 and
1993, the Company made estimated postretirement benefits payments of
$31.1 million, $29.8 million and $29.7 million, respectively.
F-28
<PAGE>
The following table sets forth the postretirement benefits plan's
status, reconciled to amounts recognized in the Company's consolidated
financial statements:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost....................................... $ 4.0 $ 3.9 $ 5.3
Interest cost on accumulated postretirement
benefits obligation.............................. 34.7 28.6 29.2
Unrecognized prior service cost.................... (2.3) (3.9) (6.9)
Net amortization and deferrals..................... - - 1.5
----------------- ---------------- -----------------
Net Periodic Postretirement Benefits Costs......... $ 36.4 $ 28.6 $ 29.1
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefits obligation:
Retirees............................................................. $ 391.8 $ 300.4
Fully eligible active plan participants.............................. 50.4 33.0
Other active plan participants....................................... 64.2 44.0
---------------- -----------------
506.4 377.4
Unrecognized benefit of plan amendments................................ - 3.2
Unrecognized prior service cost........................................ 56.3 61.9
Unrecognized net loss from past experience different from that
assumed and from changes in assumptions.............................. (181.3) (64.7)
---------------- -----------------
Accrued Postretirement Benefits Cost................................... $ 381.4 $ 377.8
================ =================
</TABLE>
In 1993, the Company amended the cost sharing provisions of
postretirement medical benefits. At January 1, 1994, medical benefits
available to retirees under age 65 are the same as those offered to
active employees and medical benefits will be limited to 200% of 1993
costs for all participants.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefits obligation was 10% in 1995,
gradually declining to 3.5% in the year 2008 and in 1994 was 10%,
gradually declining to 5% in the year 2004. The discount rate used in
determining the accumulated postretirement benefits obligation was 7.25%
and 8.75% at December 31, 1995 and 1994, respectively.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefits obligation as of December 31, 1995
would be increased 6.5%. The effect of this change on the sum of the
service cost and interest cost would be an increase of 6.7%.
12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives
-----------
The Insurance Group primarily uses derivatives for asset/liability risk
management and for hedging individual securities. Derivatives mainly are
utilized to reduce the Insurance Group's exposure to interest rate
fluctuations. Accounting for interest rate swap transactions is on an
accrual basis. Gains and losses related to interest rate swap
transactions are amortized as yield adjustments over the remaining life
of the underlying hedged security. Income and expense resulting from
interest rate swap activities are reflected in net investment income
except for hedging transactions related to insurance liabilities. The
notional amount of matched interest rate swaps outstanding at December
31, 1995 was $1,120.8 million. The average unexpired terms at December
31, 1995 range from 2.5 to 3.0 years. At December 31, 1995, the cost of
terminating outstanding matched swaps in a loss position was $15.9
million and the unrealized gain on
F-29
<PAGE>
outstanding matched swaps in a gain position was $19.0 million. The
Company has no intention of terminating these contracts prior to
maturity. During 1995, 1994 and 1993, net gains (losses) of $1.4
million, $(.2) million and $-0- million, respectively, were recorded in
connection with interest rate swap activity. Equitable Life has
implemented an interest rate cap program designed to hedge crediting
rates on interest-sensitive individual annuities contracts. The
outstanding notional amounts at December 31, 1995 of contracts purchased
and sold were $2,625.0 million and $300.0 million, respectively. The net
premium paid by Equitable Life on these contracts was $12.5 million and
is being amortized ratably over the contract periods ranging from 3 to 5
years. Income and expense resulting from this program are reflected as
an adjustment to interest credited to policyholders' account balances.
Substantially all of DLJ's business related derivatives is by its nature
trading activities which are primarily for the purpose of customer
accommodations. DLJ's derivative activities consist of option writing
and trading in forward and futures contracts. Derivative financial
instruments have both on-and-off balance sheet implications depending on
the nature of the contracts. DLJ's involvement in swap contracts is not
significant.
Fair Value of Financial Instruments
-----------------------------------
The Company defines fair value as the quoted market prices for those
instruments that are actively traded in financial markets. In cases
where quoted market prices are not available, fair values are estimated
using present value or other valuation techniques. The fair value
estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument,
including estimates of 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
the Company's entire holdings of a particular financial instrument, nor
do they consider the tax impact of the realization of unrealized gains
or losses. In many cases, the fair value estimates cannot be
substantiated by comparison to independent markets, nor can the
disclosed value be realized in immediate settlement of the instrument.
Certain financial instruments are excluded, particularly insurance
liabilities other than financial guarantees and investment contracts.
Fair market value of off-balance-sheet financial instruments of the
Insurance Group was not material at December 31, 1995 and 1994.
Fair value for mortgage loans on real estate are estimated by
discounting future contractual cash flows using interest rates at which
loans with similar characteristics and credit quality would be made.
Fair values for foreclosed mortgage loans and problem mortgage loans are
limited to the estimated fair value of the underlying collateral if
lower.
The estimated fair values for the Company's liabilities under GIC and
association plan contracts are estimated using contractual cash flows
discounted based on the T. Rowe Price GIC Index Rate for the appropriate
duration. For durations in excess of the published index rate, the
appropriate Treasury rate is used plus a spread equal to the longest
duration GIC rate spread published.
The estimated fair values for those group annuity contracts which are
classified as investment contracts are measured at the estimated fair
value of the underlying assets. Deposit administration contracts
(included with group annuity contracts) classified as insurance
contracts are measured at estimated fair value of the underlying assets.
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.
Fair value for long-term debt is determined using published market
values, where available, or contractual cash flows discounted at market
interest rates. The estimated fair values for non-recourse mortgage debt
are determined by discounting contractual cash flows at a rate which
takes into account the level of current market interest rates and
collateral risk. The estimated fair values for recourse mortgage debt
are determined by discounting contractual cash flows at a rate based
upon current interest rates of other companies with credit ratings
similar to the Company. The Company's fair value of short-term
borrowings approximates their carrying value.
F-30
<PAGE>
The following table discloses carrying value and estimated fair value
for financial instruments not otherwise disclosed in Notes 3, 6 and 7:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1995 1994
--------------------------------- ---------------------------------
CARRYING ESTIMATED Carrying Estimated
VALUE FAIR VALUE Value Fair Value
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Consolidated Financial Instruments:
-----------------------------------
Mortgage loans on real estate.......... $ 3,638.3 $ 3,973.6 $ 4,018.0 $ 3,919.4
Other joint ventures................... 492.7 492.7 544.4 544.4
Policy loans........................... 1,976.4 2,057.5 1,731.2 1,676.6
Policyholders' account balances:
Association plans.................... 101.0 100.0 141.0 141.0
Group annuity contracts.............. 2,335.0 2,395.0 2,450.0 2,469.0
SPDA................................. 1,265.8 1,272.0 1,744.3 1,732.7
Annuities certain and SCNILC......... 649.1 680.7 599.1 624.7
Long-term debt......................... 1,899.3 1,962.9 1,317.4 1,249.2
Closed Block Financial Instruments:
-----------------------------------
Mortgage loans on real estate.......... 1,368.8 1,461.4 1,543.7 1,477.8
Other equity investments............... 151.6 151.6 179.5 179.5
Policy loans........................... 1,797.2 1,891.4 1,827.9 1,721.9
SCNILC liability....................... 34.8 34.5 39.5 37.0
GIC Segment Financial Instruments:
----------------------------------
Mortgage loans on real estate.......... 1,485.8 1,666.1 1,730.5 1,743.7
Fixed maturities....................... 107.4 107.4 219.3 219.3
Other equity investments............... 455.9 455.9 591.8 591.8
Guaranteed interest contracts.......... 329.0 352.0 835.0 855.0
Long-term debt......................... 135.1 136.0 134.8 127.9
</TABLE>
13) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has provided, from time to time, certain guarantees or
commitments to affiliates, investors and others. These arrangements
include commitments by the Company, under certain conditions: to make
liquidity advances to cover delinquent principal and interest and
property protection expenses with respect to loan servicing agreements
for securitized mortgage loans which at December 31, 1995 totaled $2.8
billion (as of December 31, 1995, $4.0 million have been advanced under
these commitments); to make capital contributions of up to $246.7
million to affiliated real estate joint ventures; to provide equity
financing to certain limited partnerships of $129.4 million at December
31, 1995, under existing loan or loan commitment agreements; and to
provide short-term financing loans which at December 31, 1995 totaled
$45.8 million. Management believes the Company will not incur any
material losses as a result of these commitments.
Equitable Life is the obligor under certain structured settlement
agreements which it had entered into with unaffiliated insurance
companies and beneficiaries. To satisfy its obligations under these
agreements, Equitable Life owns single premium annuities issued by
previously wholly owned life insurance subsidiaries. Equitable Life has
directed payment under these annuities to be made directly to the
beneficiaries under the structured settlement agreements. A contingent
liability exists with respect to these agreements should the previously
wholly owned subsidiaries be unable to meet their obligations.
Management believes the satisfaction of those obligations by Equitable
Life is remote.
At December 31, 1995, the Insurance Group had $29.0 million of letters
of credit outstanding.
F-31
<PAGE>
14) LITIGATION
A number of lawsuits have been filed against life and health insurers in
the jurisdictions in which Equitable Life and its subsidiaries do
business involving insurers' sales practices, alleged agent misconduct,
failure to properly supervise agents, and other matters. Some of the
lawsuits have resulted in the award of substantial judgments against
other insurers, including material amounts of punitive damages, or in
substantial settlements. In some states juries have substantial
discretion in awarding punitive damages. Equitable Life and its
insurance subsidiaries, like other life and health insurers, from time
to time are involved in such litigation. To date, no such lawsuit has
resulted in an award or settlement of any material amount against the
Company. Among litigations pending against Equitable Life and its
insurance subsidiaries of the type referred to in this paragraph are the
litigations described in the following two paragraphs.
An action entitled Golomb et al. v. The Equitable Life Assurance Society
of the United States was filed on January 20, 1995 in New York County
Supreme Court. The action purports to be brought on behalf of a class of
persons insured after 1983 under Lifetime Guaranteed Renewable Major
Medical Insurance Policies issued by Equitable Life (the "policies").
The complaint alleges that premium increases for these policies after
1983, all of which were filed with and approved by the New York State
Insurance Department and certain other state insurance departments,
breached the terms of the insurance policies, and that statements in the
policies and elsewhere concerning premium increases constituted
fraudulent concealment, misrepresentations in violation of New York
Insurance Law Section 4226 and deceptive practices under New York
General Business Law Section 349. The complaint seeks a declaratory
judgment, injunctive relief restricting the methods by which Equitable
Life increases premiums on the policies in the future, a refund of
premiums, and punitive damages. Plaintiffs also have indicated that they
will seek damages in an unspecified amount. Equitable Life has moved to
dismiss the complaint in its entirety on the grounds that it fails to
state a claim and that uncontroverted documentary evidence establishes a
complete defense to the claims. That motion is awaiting decision by the
court. In January 1996, separate actions were filed in Pennsylvania and
Texas state courts (entitled, respectively, Malvin et al. v. The
Equitable Life Assurance Society of the United States and Bowler et al.
v. The Equitable Life Assurance Society of the United States), making
claims similar to those in the New York action described above. These
new actions are asserted on behalf of proposed classes of Pennsylvania
issued or renewed policyholders and Texas issued or renewed
policyholders, insured under the policies. The Pennsylvania and Texas
actions seek compensatory and punitive damages and injunctive relief
restricting the methods by which Equitable Life increases premiums in
the future based on the common law and statutes of those states.
Although the outcome of any litigation cannot be predicted with
certainty, particularly in the early stages of an action, Equitable
Life's management believes that the ultimate resolution of those
litigations should not have a material adverse effect on the financial
position of the Company. Due to the early stage of such litigation,
Equitable Life's management cannot make an estimate of loss, if any, or
predict whether or not such litigation will have a material adverse
effect on the Company's results of operations in any particular period.
An action was instituted on April 6, 1995 against Equitable Life and its
wholly owned subsidiary, The Equitable of Colorado, Inc. ("EOC"), in New
York State Court, entitled Sidney C. Cole et al. v. The Equitable Life
Assurance Society of the United States and The Equitable of Colorado,
Inc., No. 95/108611 (N.Y. County). The action is brought by the holders
of a joint survivorship whole life policy issued by EOC. The action
purports to be on behalf of a class consisting of all persons who from
January 1, 1984 purchased life insurance policies sold by Equitable Life
and EOC based upon their allegedly uniform sales presentations and
policy illustrations. The complaint puts in issue various alleged sales
practices that plaintiffs assert, among other things, misrepresented the
stated number of years that the annual premium would need to be paid.
Plaintiffs seek damages in an unspecified amount, imposition of a
constructive trust, and seek to enjoin Equitable Life and EOC from
engaging in the challenged sales practices. Equitable Life and EOC
intend to defend vigorously and believe that they have meritorious
defenses which, if successful, would dispose of the action completely.
Equitable Life and EOC further do not believe that this case is an
appropriate class action. Although the outcome of any litigation cannot
be predicted with certainty, particularly in the early stages of an
action, Equitable Life's management believes that the ultimate
F-32
<PAGE>
resolution of this litigation should not have a material adverse effect
on the financial position of the Company. Due to the early stage of such
litigation, the Company's management cannot make an estimate of loss, if
any, or predict whether or not such litigation will have a material
adverse effect on the Company's results of operations in any particular
period.
Equitable Casualty Insurance Company ("Casualty"), a captive property
and casualty insurance company organized under the laws of Vermont,
which is an indirect wholly owned subsidiary of Equitable Life, is a
party to an arbitration proceeding that commenced in August 1995 with
the selection of three arbitrators. The arbitration will resolve a
dispute among Casualty, Houston General Insurance Company ("Houston
General"), and GEICO General Insurance Company ("GEICO General")
regarding the interpretation of a reinsurance agreement that was entered
into as part of a 1980 transaction whereby Equitable General Insurance
Company ("Equitable General"), formerly an indirect subsidiary of
Equitable Life and the predecessor of GEICO General, sold its commercial
lines business along with the stock of Houston General to subsidiaries
of Tokio Marine & Fire Insurance Company, Ltd. ("Tokio Marine").
Casualty and GEICO General maintain that, under the reinsurance
agreement, Houston General assumed liability for all losses insured
under commercial lines policies written by Equitable General and its
predecessors in order to effect the transfer of that business to Tokio
Marine's subsidiaries. Houston General contends that it did not assume
reinsurance liability for losses insured under certain of those
commercial lines policies. The arbitration panel determined to begin
hearing evidence in the arbitration in June 1996. The result of the
arbitration is expected to resolve two litigations that were commenced
by Houston General and that have been stayed by the presiding courts
pending the completion of the arbitration (in one case, Houston General
named as a defendant only GEICO General but Casualty intervened as a
defendant with GEICO General, and in the other case, Houston General
named GEICO General and Equitable Life). The arbitration is expected to
be completed during the second half of 1996. While the ultimate outcome
of the arbitration cannot be predicted with certainty, the Company's
management believes that the arbitrators will recognize that Houston
General's position is without merit and contrary to the way in which the
reinsurance industry operates and therefore the ultimate resolution of
this matter should not have a material adverse effect on the Company's
financial position or results of operations.
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Complaint") was filed against the Alliance North American Government
Income Trust, Inc. (the "Fund"), Alliance and certain other defendants
affiliated with Alliance, including the Holding Company, alleging
violations of Federal securities laws, fraud and breach of fiduciary
duty in connection with the Fund's investments in Mexican and Argentine
securities. A similar complaint was filed on November 7, 1995 and was
subsequently consolidated with the Complaint. The Complaint, which seeks
certification of a plaintiff class of persons who purchased or owned
Class A, B or C shares of the Fund from March 27, 1992 through December
23, 1994, seeks an unspecified amount of damages, costs, attorneys' fees
and punitive damages. The principal allegations of the Complaint are
that the Fund purchased debt securities issued by the Mexican and
Argentine governments in amounts that were not permitted by the Fund's
investment objective, and that there was no shareholder vote to change
the investment objective to permit purchases in such amounts. The
Complaint further alleges that the decline in the value of the Mexican
and Argentine securities held by the Fund caused the Fund's net asset
value to decline to the detriment of the Fund's shareholders. On
September 26, 1995, the defendants jointly filed a motion to dismiss the
Complaint which has not yet been decided by the Court. Alliance believes
that the allegations in the Complaint are without merit and intends to
vigorously defend against these claims. While the ultimate results of
this action cannot be determined, management of Alliance does not expect
that this action will have a material adverse effect on Alliance's
business.
On January 26, 1996, a purported purchaser of certain notes and warrants
to purchase shares of common stock of Rickel Home Centers, Inc.
("Rickel") filed a class action complaint against Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC"), a wholly owned subsidiary of
DLJ, and certain other defendants for unspecified compensatory and
punitive damages in the United States District Court for the Southern
District of New York. The suit was brought on behalf of the purchasers
of 126,457 units consisting of $126,457,000 aggregate principal amount
of 13 1/2% senior notes due 2001 and 126,457 warrants to purchase shares
of common stock of Rickel (the "Units") issued by Rickel in October
1994. The complaint alleges violations of Federal securities laws and
common law fraud against DLJSC, as the underwriter of
F-33
<PAGE>
the Units and as an owner of 7.3% of the common stock of Rickel, Eos
Partners, L.P., and General Electric Capital Corporation, each as owners
of 44.2% of the common stock of Rickel, and members of the Board of
Directors of Rickel, including a DLJSC Managing Director. The complaint
seeks to hold DLJSC liable for alleged misstatements and omissions
contained in the prospectus and registration statement filed in
connection with the offering of the Units, alleging that the defendants
knew of financial losses and a decline in value of Rickel in the months
prior to the offering and did not disclose such information. The
complaint also alleges that Rickel failed to pay its semi-annual
interest payment due on the Units on December 15, 1995 and that Rickel
filed a voluntary petition for reorganization pursuant to Chapter 11 of
the United States Bankruptcy Code on January 10, 1996. DLJSC intends to
defend itself vigorously against all of the allegations contained in the
complaint. Although there can be no assurance, DLJ does not believe the
outcome of this litigation will have a material adverse effect on its
financial condition. Due to the early stage of this litigation, based on
the information currently available to it, DLJ's management cannot make
an estimate of loss or predict whether or not such litigation will have
a material adverse effect on DLJ's results of operations in any
particular period.
On June 12, 1995, a purported purchaser of certain securities issued by
Spectravision, Inc. ("Spectravision") filed a class action complaint
against DLJSC and certain other defendants for unspecified damages in
the U.S. District Court for the Northern District of Texas. The suit was
brought on behalf of the purchasers of $260,795,000 of securities issued
by Spectravision in November 1992, and alleges violations of the Federal
securities laws and the Texas Securities Act, common law fraud and
negligent misrepresentation. The securities were issued by Spectravision
pursuant to a prepackaged bankruptcy reorganization plan. DLJSC served
as financial advisor to Spectravision in its reorganization and as
Dealer Manager for Spectravision's 1992 issuance of the securities.
DLJSC is also being sued as a seller of certain notes of Spectravision
acquired and resold by DLJSC. The complaint seeks to hold DLJSC liable
for various alleged misstatements and omissions contained in
prospectuses and other materials issued between July 1992 and June 1994.
DLJSC intends to defend itself vigorously against all of the allegations
contained in the complaint. On June 8, 1995, Spectravision filed a
Chapter 11 petition in the United States Bankruptcy Court for the
District of Delaware. On January 5, 1996, the district court in the
litigation involving DLJSC ordered a partial stay of discovery until
Spectravision has emerged from bankruptcy or six months from the date of
the stipulated stay (whichever comes first). Accordingly, discovery of
DLJSC has not yet occurred. Although there can be no assurance, DLJ does
not believe that the ultimate outcome of this litigation will have a
material adverse effect on its financial condition. Due to the early
stage of such litigation, based upon information currently available to
it, DLJ's management cannot make an estimate of loss or predict whether
or not such litigation will have a material adverse effect on DLJ's
results of operations in any particular period. Plaintiff's counsel in
the class action against DLJSC described above has also filed another
securities class action based on similar factual allegations. Such suit
names as defendants Spectravision and its directors, and was brought on
behalf of a class of purchasers of $209.0 million of stock and $77.0
million of notes issued by Spectravision in October 1993. DLJSC served
as the managing underwriter for both of these issuances. DLJSC has not
been named as a defendant in this suit, although it has been reported to
DLJSC that plaintiff's counsel is contemplating seeking to amend the
complaint to add DLJSC as a defendant in that action.
In October 1995, DLJSC was named as a defendant in a purported class
action filed in a Texas State Court on behalf of the holders of $550.0
million principal amount of subordinated redeemable discount debentures
of National Gypsum Corporation ("NGC") canceled in connection with a
Chapter 11 plan of reorganization for NGC consummated in July 1993. The
named plaintiff in the State Court action also filed an adversary
proceeding in the Bankruptcy Court for the Northern District of Texas
seeking a declaratory judgment that the confirmed NGC plan of
reorganization does not bar the class action claims. Subsequent to the
consummation of NGC's plan of reorganization, NGC's shares traded for
values substantially in excess of, and in 1995 NGC was acquired for a
value substantially in excess of, the values upon which NGC's plan of
reorganization was based. The two actions arise out of DLJSC's
activities as financial advisor to NGC in the course of NGC's Chapter 11
reorganization proceedings. The class action complaint alleges that the
plan of reorganization submitted by NGC was based upon projections by
NGC and DLJSC which intentionally understated forecasts, and provided
misleading and incorrect information in order to hide NGC's true value
and that defendants breached their fiduciary duties by, among other
things, providing false, misleading or incomplete information to
deliberately understate the value of NGC. The class action complaint
seeks compensatory and punitive damages purportedly sustained by the
class. The Texas State
F-34
<PAGE>
Court action has subsequently been removed to the Bankruptcy Court,
which removal is being opposed by the plaintiff. DLJSC intends to defend
itself vigorously against all of the allegations contained in the
complaint. Although there can be no assurance, DLJ does not believe that
the ultimate outcome of this litigation will have a material adverse
effect on its financial condition. Due to the early stage of such
litigation, based upon the information currently available to it, DLJ's
management cannot make an estimate of loss or predict whether or not
such litigation will have a material adverse effect on DLJ's results of
operations in any particular period.
In November and December 1995, DLJSC, along with various other parties,
was named as a defendant in a number of purported class actions filed in
the U.S. District Court for the Eastern District of Louisiana. The
complaints allege violations of the Federal securities laws arising out
of a public offering in 1994 of $435.0 million of first mortgage notes
of Harrah's Jazz Company and Harrah's Jazz Finance Corp. The complaints
seek to hold DLJSC liable for various alleged misstatements and
omissions contained in the prospectus dated November 9, 1994. DLJSC
intends to defend itself vigorously against all of the allegations
contained in the complaints. Although there can be no assurance, DLJ
does not believe that the ultimate outcome of this litigation will have
a material adverse effect on its financial condition. Due to the early
stage of this litigation, based upon the information currently available
to it, DLJ's management cannot make an estimate of loss or predict
whether or not such litigation will have a material adverse effect on
DLJ's results of operations in any particular period.
In addition to the matters described above, Equitable Life and its
subsidiaries and DLJ and its subsidiaries are involved in various legal
actions and proceedings in connection with their businesses. Some of the
actions and proceedings have been brought on behalf of various alleged
classes of claimants and certain of these claimants seek damages of
unspecified amounts. While the ultimate outcome of such matters cannot
be predicted with certainty, in the opinion of management no such matter
is likely to have a material adverse effect on the Company's
consolidated financial position or results of operations.
15) LEASES
The Company has entered into operating leases for office space and
certain other assets, principally data processing equipment and office
furniture and equipment. Future minimum payments under noncancelable
leases for 1996 and the succeeding four years are $114.8 million, $101.8
million, $90.0 million, $73.6 million, $57.7 million and $487.0 million
thereafter. Minimum future sublease rental income on these noncancelable
leases for 1996 and the succeeding four years are $11.0 million, $8.7
million, $6.9 million, $4.6 million, $2.9 million and $1.1 million
thereafter.
At December 31, 1995, the minimum future rental income on noncancelable
operating leases for wholly owned investments in real estate for 1996
and the succeeding four years are $292.9 million, $271.2 million, $248.1
million, $226.4 million, $195.5 million and $1,018.8 million thereafter.
F-35
<PAGE>
16) OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Compensation costs................................. $ 595.9 $ 690.0 $ 1,452.3
Commissions........................................ 314.3 313.0 551.1
Short-term debt interest expense................... 11.4 19.0 317.1
Long-term debt interest expense.................... 108.1 98.3 86.0
Amortization of policy acquisition costs........... 320.4 318.1 275.9
Capitalization of policy acquisition costs......... (391.0) (410.9) (397.8)
Rent expense, net of sub-lease income.............. 124.8 128.9 159.5
Other.............................................. 772.6 786.7 1,140.1
----------------- ---------------- -----------------
Total.............................................. $ 1,856.5 $ 1,943.1 $ 3,584.2
================= ================ =================
</TABLE>
During the years ended December 31, 1995, 1994 and 1993, the Company
restructured certain operations in connection with cost reduction
programs and recorded pre-tax provisions of $32.0 million, $20.4 million
and $96.4 million, respectively. The amounts paid during 1995,
associated with the 1995 and 1994 cost reduction programs, totaled $24.0
million. At December 31, 1995, the liabilities associated with the 1995
and 1994 cost reduction programs amounted to $37.8 million. The 1995
cost reduction program included relocation expenses, including the
accelerated amortization of building improvements associated with the
relocation of the home office. The 1994 cost reduction program included
costs associated with the termination of operating leases and employee
severance benefits in connection with the consolidation of 16 insurance
agencies. The 1993 cost reduction program primarily reflected severance
benefits of terminated employees in connection with the combination of a
wholly owned subsidiary of the Company with Alliance.
17) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION
Equitable Life is restricted as to the amounts it may pay as dividends
to the Holding Company. Under the New York Insurance Law, the New York
Superintendent has broad discretion to determine whether the financia1
condition of a stock life insurance company would support the payment of
dividends to its shareholders. For the years ended December 31, 1995,
1994 and 1993, statutory (loss) earnings totaled $(352.4) million, $67.5
million and $324.0 million, respectively. No amounts are expected to be
available for dividends from Equitable Life to the Holding Company in
1996.
At December 31, 1995, the Insurance Group, in accordance with various
government and state regulations, had $18.9 million of securities
deposited with such government or state agencies.
F-36
<PAGE>
Accounting practices used to prepare statutory financial statements for
regulatory filings of stock life insurance companies differ in certain
instances from GAAP. The following reconciles the Company's statutory
change in surplus and capital stock and statutory surplus and capital
stock determined in accordance with accounting practices prescribed by
the New York Insurance Department with net earnings and equity on a GAAP
basis.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net change in statutory surplus and capital stock.. $ 78.1 $ 292.4 $ 190.8
Change in asset valuation reserves................. 365.7 (285.2) 639.1
----------------- ---------------- -----------------
Net change in statutory surplus, capital stock
and asset valuation reserves..................... 443.8 7.2 829.9
Adjustments:
Future policy benefits and policyholders'
account balances............................... (67.9) (11.0) (171.0)
Deferred policy acquisition costs................ 70.6 92.8 121.8
Deferred Federal income taxes.................... (150.0) (59.7) (57.5)
Valuation of investments......................... 189.1 45.2 202.3
Valuation of investment subsidiary............... (188.6) 396.6 (464.9)
Limited risk reinsurance......................... 416.9 74.9 85.2
Issuance of surplus notes........................ (538.9) - -
Sale of subsidiary and joint venture............. - - (366.5)
Contribution from the Holding Company............ - (300.0) -
Postretirement benefits.......................... (26.7) 17.1 23.8
Other, net....................................... 115.1 (44.0) 60.3
GAAP adjustments of Closed Block................. (3.1) 4.5 (16.0)
GAAP adjustments of discontinued GIC
Segment........................................ 37.3 42.8 (35.0)
----------------- ---------------- -----------------
Net Earnings....................................... $ 297.6 $ 266.4 $ 212.4
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Statutory surplus and capital stock................ $ 2,202.9 $ 2,124.8 $ 1,832.4
Asset valuation reserves........................... 1,345.9 980.2 1,265.4
----------------- ---------------- -----------------
Statutory surplus, capital stock and asset
valuation reserves............................... 3,548.8 3,105.0 3,097.8
Adjustments:
Future policy benefits and policyholders'
account balances............................... (1,017.4) (949.5) (938.5)
Deferred policy acquisition costs................ 3,083.3 3,221.1 2,858.8
Deferred Federal income taxes.................... (450.8) (26.8) (137.8)
Valuation of investments......................... 417.7 (794.1) (29.8)
Valuation of investment subsidiary............... (665.1) (476.5) (873.1)
Limited risk reinsurance......................... (429.0) (845.9) (920.8)
Issuance of surplus notes........................ (538.9) - -
Postretirement benefits.......................... (343.3) (316.6) (333.7)
Other, net....................................... 4.4 (79.2) (81.9)
GAAP adjustments of Closed Block................. 575.7 578.8 574.2
GAAP adjustments of discontinued GIC
Segment........................................ (184.6) (221.9) (264.6)
----------------- ---------------- -----------------
Total Shareholder's Equity......................... $ 4,000.8 $ 3,194.4 $ 2,950.6
================= ================ =================
</TABLE>
F-37
<PAGE>
18) BUSINESS SEGMENT INFORMATION
The Company has three major business segments: Individual Insurance and
Annuities; Investment Services and Group Pension.
Consolidation/elimination principally includes debt not specific to any
business segment. Attributed Insurance Capital represents net assets and
related revenues and earnings of the Insurance Group not assigned to the
insurance segments. Interest expense related to debt not specific to any
business segment is presented within Corporate interest expense.
Information for all periods is presented on a comparable basis.
The Individual Insurance and Annuities segment offers a variety of
traditional, variable and interest-sensitive life insurance products,
disability income, annuity products and mutual fund and other investment
products to individuals and small groups. This segment includes Separate
Accounts for certain individual insurance and annuity products.
The Investment Services segment provides investment fund management,
primarily to institutional clients. This segment includes Separate
Accounts which provide various investment options for group clients
through pooled or single group accounts.
Intersegment investment advisory and other fees of approximately $124.1
million, $135.3 million and $128.6 million for 1995, 1994 and 1993,
respectively, are included in total revenues of the Investment Services
segment. These fees, excluding amounts related to the discontinued GIC
Segment of $14.7 million, $27.4 million and $17.0 million for 1995, 1994
and 1993, respectively, are eliminated in consolidation.
The Group Pension segment administers traditional participating group
annuity contracts with conversion features, generally for corporate
qualified pension plans, and association plans which provide full
service retirement programs for individuals affiliated with professional
and trade associations.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Individual insurance and annuities................. $ 3,254.6 $ 3,110.7 $ 2,981.5
Group pension...................................... 292.0 359.1 426.6
Attributed insurance capital....................... 61.2 79.4 61.6
----------------- ---------------- -----------------
Insurance operations............................. 3,607.8 3,549.2 3,469.7
Investment services................................ 949.1 935.2 2,792.6
Consolidation/elimination.......................... (34.9) (24.7) (40.5)
----------------- ---------------- -----------------
Total.............................................. $ 4,522.0 $ 4,459.7 $ 6,221.8
================= ================ =================
Earnings (loss) before Federal income taxes
and cumulative effect of accounting change
Individual insurance and annuities................. $ 274.4 $ 245.5 $ 76.2
Group pension...................................... (13.3) 15.8 2.0
Attributed insurance capital....................... 18.7 69.8 49.0
----------------- ---------------- -----------------
Insurance operations............................. 279.8 331.1 127.2
Investment services................................ 161.2 177.5 302.1
Consolidation/elimination.......................... (3.1) .3 .5
----------------- ---------------- -----------------
Subtotal..................................... 437.9 508.9 429.8
Corporate interest expense......................... (27.9) (114.2) (126.1)
----------------- ---------------- -----------------
Total.............................................. $ 410.0 $ 394.7 $ 303.7
================= ================ =================
</TABLE>
F-38
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Individual insurance and annuities..................................... $ 50,328.8 $ 44,063.4
Group pension.......................................................... 4,033.3 4,222.8
Attributed insurance capital........................................... 2,391.6 2,609.8
---------------- -----------------
Insurance operations................................................. 56,753.7 50,896.0
Investment services.................................................... 12,842.9 12,127.9
Consolidation/elimination.............................................. (354.4) (1,614.4)
---------------- -----------------
Total.................................................................. $ 69,242.2 $ 61,409.5
================ =================
</TABLE>
19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations for the years ended December 31,
1995, 1994 and 1993, are summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
------------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------------- ----------------- ------------------ ------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1995
----
Total Revenues................ $ 1,074.7 $ 1,158.4 $ 1,127.1 $ 1,161.8
================= ================= ================== ==================
Net Earnings.................. $ 59.0 $ 94.3 $ 91.2 $ 53.1
================= ================= ================== ==================
1994
----
Total Revenues................ $ 1,107.4 $ 1,075.0 $ 1,153.8 $ 1,123.5
================= ================= ================== ==================
Earnings before Cumulative
Effect of Accounting
Change...................... $ 64.0 $ 68.4 $ 89.1 $ 72.0
================= ================= ================== ==================
Net Earnings.................. $ 36.9 $ 68.4 $ 89.1 $ 72.0
================= ================= ================== ==================
1993
----
Total Revenues................ $ 1,502.2 $ 1,539.7 $ 1,679.4 $ 1,500.5
================= ================= ================== ==================
Net Earnings.................. $ 32.3 $ 47.1 $ 68.8 $ 64.2
================= ================= ================== ==================
</TABLE>
20) INVESTMENT IN DLJ
On December 15, 1993, the Company sold a 61% interest in DLJ to the
Holding Company for $800.0 million in cash and securities. The excess of
the proceeds over the book value in DLJ at the date of sale of $340.2
million has been reflected as a capital contribution. In 1995, DLJ
completed the initial public offering ("IPO") of 10.58 million shares of
its common stock, which included 7.28 million of the Holding Company's
shares in DLJ, priced at $27 per share. Concurrent with the IPO, the
Company contributed equity securities to DLJ having a market value of
$21.2 million. Upon completion of the IPO, the Company's ownership
percentage was reduced to 36.1%. The Company's ownership interest will
be further reduced upon the issuance of common stock after the vesting
of forfeitable restricted stock units acquired by and/or the exercise of
options granted to certain DLJ employees. At December 31, 1995, DLJ had
options
F-39
<PAGE>
outstanding to purchase approximately 9.2 million shares of DLJ common
stock at $27.00 per share. Options are exercisable over a period of up
to ten years. DLJ restricted stock units represents forfeitable rights
to receive approximately 5.2 million shares of DLJ common stock through
February 2000.
The results of operations and cash flows of DLJ through the date of sale
are included in the consolidated statements of earnings and cash flow
for the year ended December 31, 1993. For the period subsequent to the
date of sale, the results of operations of DLJ are accounted for on the
equity basis and are included in commissions, fees and other income in
the consolidated statements of earnings. The Company's carrying value of
DLJ is included in investment in and loans to affiliates in the
consolidated balance sheets.
Summarized balance sheets information for DLJ, reconciled to the
Company's carrying value of DLJ, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets:
Trading account securities, at market value............................ $ 10,911.4 $ 8,970.0
Securities purchased under resale agreements........................... 18,748.2 10,476.4
Broker-dealer related receivables...................................... 13,023.7 11,784.8
Other assets........................................................... 1,893.2 2,030.4
---------------- -----------------
Total Assets........................................................... $ 44,576.5 $ 33,261.6
================ =================
Liabilities:
Securities sold under repurchase agreements............................ $ 26,744.8 $ 18,356.7
Broker-dealer related payables......................................... 12,915.5 10,618.0
Short-term and long-term debt.......................................... 1,717.5 1,956.5
Other liabilities...................................................... 1,775.0 1,285.1
---------------- -----------------
Total liabilities...................................................... 43,152.8 32,216.3
Cumulative exchangeable preferred stock................................ 225.0 225.0
Total shareholders' equity............................................. 1,198.7 820.3
---------------- -----------------
Total Liabilities, Cumulative Exchangeable Preferred Stock and
Shareholders' Equity................................................. $ 44,576.5 $ 33,261.6
================ =================
DLJ's equity as reported............................................... $ 1,198.7 $ 820.3
Unamortized cost in excess of net assets acquired in 1985
and other adjustments................................................ 40.5 50.8
The Holding Company's equity ownership in DLJ.......................... (499.0) (532.1)
Minority interest in DLJ............................................... (324.3) -
---------------- -----------------
The Company's Carrying Value of DLJ.................................... $ 415.9 $ 339.0
================ =================
</TABLE>
F-40
<PAGE>
Summarized statements of earnings information for DLJ reconciled to the
Company's equity in earnings of DLJ is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Commission, fees and other income...................................... $ 1,325.9 $ 953.5
Net investment income.................................................. 904.1 791.9
Dealer, trading and investment gains, net.............................. 528.6 263.3
---------------- -----------------
Total Revenues......................................................... 2,758.6 2,008.7
Total expenses including income taxes.................................. 2,579.5 1,885.7
---------------- -----------------
Net earnings........................................................... 179.1 123.0
Dividends on preferred stock........................................... 19.9 20.9
---------------- -----------------
Earnings Applicable to Common Shares................................... $ 159.2 $ 102.1
================ =================
DLJ's earnings applicable to common shares as reported................. $ 159.2 $ 102.1
Amortization of cost in excess of net assets acquired in 1985.......... (3.9) (3.1)
The Holding Company's equity in DLJ's earnings......................... (90.4) (60.9)
Minority interest in DLJ............................................... (6.5) -
---------------- -----------------
The Company's Equity in DLJ's Earnings................................. $ 58.4 $ 38.1
================ =================
</TABLE>
21) RELATED PARTY TRANSACTIONS
On August 31, 1993, the Company sold $661.0 million of primarily
privately placed below investment grade fixed maturities to EQ Asset
Trust 1993, a limited purpose business trust, wholly owned by the
Holding Company. The Company recognized a $4.1 million gain net of
related deferred policy acquisition costs, deferred Federal income tax
and amounts attributable to participating group annuity contracts. In
conjunction with this transaction, the Company received $200.0 million
of Class B Notes issued by EQ Asset Trust 1993. These notes have
interest rates ranging from 6.85% to 9.45%. The Class B Notes are
reflected in investments in and loans to affiliates on the consolidated
balance sheets.
F-41
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1996 1995
------------- ------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value ............ $ 17,117.5 $ 15,899.9
Mortgage loans on real estate ............................ 3,298.5 3,638.3
Equity real estate ....................................... 3,705.0 3,916.2
Policy loans ............................................. 2,167.3 1,976.4
Investment in and loans to affiliates .................... 686.8 636.6
Other equity investments ................................. 561.4 621.1
Other invested assets .................................... 358.4 706.1
----------- -----------
Total investments .................................... 27,894.9 27,394.6
Cash and cash equivalents .................................. 528.2 774.7
Deferred policy acquisition costs .......................... 3,279.3 3,083.3
Amounts due from discontinued GIC Segment .................. 1,270.1 2,097.1
Other assets ............................................... 2,720.0 2,713.1
Closed Block assets ........................................ 8,345.7 8,612.8
Separate Accounts assets ................................... 28,242.3 24,566.6
----------- -----------
TOTAL ASSETS ............................................... $ 72,280.5 $ 69,242.2
=========== ============
LIABILITIES
Policyholders' account balances ............................ $ 21,795.3 $ 21,911.2
Future policy benefits and other policyholders' liabilities 4,155.9 4,013.2
Short-term and long-term debt .............................. 2,029.9 1,899.3
Other liabilities .......................................... 2,988.2 3,379.5
Closed Block liabilities ................................... 9,193.2 9,507.2
Separate Accounts liabilities .............................. 28,154.7 24,531.0
----------- -----------
Total liabilities .................................... 68,317.2 65,241.4
----------- -----------
Commitments and contingencies (Note 10)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value; 2.0 million shares
authorized issued and outstanding ......................... 2.5 2.5
Capital in excess of par value ............................. 2,913.6 2,913.6
Retained earnings .......................................... 1,019.0 781.6
Net unrealized investment gains ............................ 63.3 338.2
Minimum pension liability .................................. (35.1) (35.1)
----------- -----------
Total shareholder's equity ........................... 3,963.3 4,000.8
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY ................. $ 72,280.5 $ 69,242.2
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-42
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ---------------------
1996 1995 1996 1995
----------- --------- --------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
REVENUES
Universal life and investment-type
product policy fee income ..................... $ 220.7 $ 197.1 $ 651.4 $ 581.4
Premiums ........................................ 145.8 140.2 439.2 452.7
Net investment income ........................... 534.3 517.5 1,605.9 1,551.7
Investment (losses) gains, net .................. (5.5) 8.8 (21.5) 27.7
Commissions, fees and other income .............. 262.5 232.3 786.8 650.5
Contribution from the Closed Block .............. 23.7 28.2 73.8 85.4
---------- --------- --------- --------
Total revenues ............................ 1,181.5 1,124.1 3,535.6 3,349.4
---------- --------- --------- --------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account
balances ...................................... 315.8 314.8 948.8 921.3
Policyholders' benefits ......................... 268.4 245.7 795.6 766.1
Other operating costs and expenses .............. 457.2 421.8 1,379.0 1,282.4
---------- --------- --------- --------
Total benefits and other deductions ....... 1,041.4 982.3 3,123.4 2,969.8
---------- --------- --------- --------
Earnings before Federal income taxes,
minority interest and cumulative effect of
accounting change ............................. 140.1 141.8 412.2 379.6
Federal income taxes ............................ 33.7 33.9 92.2 89.9
Minority interest in net income of consolidated
subsidiaries .................................. 20.6 16.7 59.5 45.2
---------- --------- --------- --------
Earnings before cumulative effect of
accounting change ............................. 85.8 91.2 260.5 244.5
Cumulative effect of accounting change,
net of Federal income taxes ................... - - (23.1) -
---------- --------- --------- --------
Net Earnings .................................... $ 85.8 $ 91.2 $ 237.4 $ 244.5
========== ========== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-43
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(IN MILLIONS)
<S> <C> <C>
Common stock, at par value, beginning of year and end of period .. $ 2.5 $ 2.5
---------- ----------
Capital in excess of par value, beginning of year
and end of period ............................................... 2,913.6 2,913.6
---------- ----------
Retained earnings, beginning of year ............................. 781.6 484.0
Net earnings ..................................................... 237.4 244.5
---------- ----------
Retained earnings, end of period ................................. 1,019.0 728.5
---------- ----------
Net unrealized investment gains (losses), beginning of year ...... 338.2 (203.0)
Change in unrealized investment (losses) gains ................... (274.9) 270.5
---------- ----------
Net unrealized investment gains, end of period ................... 63.3 67.5
---------- ----------
Minimum pension liability, beginning of year and end of period ... (35.1) (2.7)
---------- ----------
TOTAL SHAREHOLDER'S EQUITY, END OF PERIOD ........................ $ 3,963.3 $ 3,709.4
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-44
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- ----------
(IN MILLIONS)
<S> <C> <C>
Net earnings ......................................................... $ 237.4 $ 244.5
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Interest credited to policyholders' account balances ............. 948.8 921.3
General Account policy charges ................................... (651.4) (581.4)
Investment losses (gains) ........................................ 21.5 (27.7)
Change in Federal income taxes payable ........................... (96.2) 110.8
Changes in Closed Block assets and liabilities, net .............. (46.9) (52.6)
Other, net ....................................................... 33.8 102.2
---------- ----------
Net cash provided by operating activities ............................ 447.0 717.1
---------- ----------
Cash flows from investing activities:
Maturities and repayments .......................................... 1,626.0 1,312.6
Sales .............................................................. 6,913.2 5,371.0
Return of capital from joint ventures and limited partnerships ..... 64.3 34.7
Purchases .......................................................... (9,646.9) (7,100.5)
Decrease in loans to discontinued GIC Segment ...................... 827.0 1,155.4
Other, net ......................................................... (97.9) (176.7)
---------- ----------
Net cash (used) provided by investing activities ..................... (314.3) 596.5
---------- ----------
Cash flows from financing activities:
Policyholders' account balances:
Deposits ......................................................... 1,402.2 2,034.3
Withdrawals ...................................................... (1,839.5) (2,078.9)
Net increase in short-term financings .............................. 195.3 272.5
Repayments of long-term debt ....................................... (88.5) (5.3)
Payment of obligation to fund accumulated deficit of discontinued
GIC Segment ...................................................... - (1,215.4)
Other, net ......................................................... (48.7) (33.8)
---------- ----------
Net cash used by financing activities ................................ (379.2) (1,026.6)
---------- ----------
Change in cash and cash equivalents .................................. (246.5) 287.0
Cash and cash equivalents, beginning of year ......................... 774.7 693.6
---------- ----------
Cash and Cash Equivalents, End of Period ............................. $ 528.2 $ 980.6
========== ==========
Supplemental cash flow information
Interest Paid ...................................................... $ 70.6 $ 61.2
========== ==========
Income Taxes (Refunded) Paid ....................................... $ (7.9) $ 4.1
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-45
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1) BASIS OF PRESENTATION
The preparation of the accompanying consolidated financial statements in
conformity with GAAP required management to make estimates and assumptions
(including normal, recurring accruals) that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. These statements should
be read in conjunction with the consolidated financial statements of the
Company for the year ended December 31, 1995. The results of operations
for the nine months ended September 30, 1996 are not necessarily
indicative of the results to be expected for the full year.
Certain reclassifications have been made in the amounts presented for
prior periods to conform those periods with the current presentation.
2) ACCOUNTING CHANGES AND PRONOUNCEMENTS
The Company implemented SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," as of
January 1, 1996. The statement requires long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate the carrying value of such assets may
not be recoverable. Impaired real estate is written down to fair value
with the impairment loss being included in Investment gains, net. Before
implementing SFAS No. 121, valuation allowances on real estate held for
the production of income were computed using the forecasted cash flows of
the respective properties discounted at a rate equal to the Company's cost
of funds. The adoption of the statement resulted in the release of
valuation allowances of $152.4 million and recognition of impairment
losses of $144.0 million on real estate held and used. Real estate which
management has committed to disposing of by sale or abandonment is
classified as real estate to be disposed of. Valuation allowances on real
estate to be disposed of continue to be computed using the lower of
estimated fair value or depreciated cost, net of disposition costs.
Implementation of the SFAS No. 121 impairment requirements relative to
other assets to be disposed of resulted in a charge for the cumulative
effect of an accounting change of $23.1 million, net of a Federal income
tax benefit of $12.4 million, due to the writedown to fair value of
building improvements relating to facilities being vacated beginning in
1996.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". SFAS
No. 125 specifies the accounting and reporting requirements for transfers
of financial assets, the recognition and measurement of servicing assets
and liabilities and extinguishments of liabilities. SFAS No. 125 is
effective for transactions occurring after December 31, 1996 and is to be
applied prospectively. Management has not yet determined the effect of
implementing SFAS No. 125.
3) FEDERAL INCOME TAXES
Federal income taxes for interim periods have been computed using an
estimated annual effective tax rate. This rate is revised, if necessary,
at the end of each successive interim period to reflect the current
estimate of the annual effective tax rate.
F-46
<PAGE>
4) INVESTMENTS
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
--------- ----------
(IN MILLIONS)
<S> <C> <C>
Balances, beginning of year ............................ $ 325.3 $ 284.9
SFAS No. 121 release ................................... (152.4) -
Additions charged to income ............................ 88.7 67.8
Deductions for writedowns and asset dispositions ....... (105.2) (49.7)
-------- --------
Balances, End of Period ................................ $ 156.4 $ 303.0
======== ========
Balances, end of period:
Mortgage loans on real estate ........................ $ 93.3 $ 66.8
Equity real estate ................................... 63.1 236.2
-------- --------
Total............................................. $ 156.4 $ 303.0
======== ========
</TABLE>
For the three months and nine months ended September 30, 1996 and 1995,
investment income is shown net of investment expenses of $89.9 million,
$272.1 million, $115.2 million and $343.3 million, respectively.
As of September 30, 1996 and December 31, 1995, fixed maturities
classified as available for sale had amortized costs of $17,001.8 million
and $15,284.0 million, respectively. Other equity investments included
equity securities with carrying values of $125.0 million and $128.4
million and costs of $101.3 million and $97.3 million as of September 30,
1996 and December 31, 1995, respectively.
For the nine months ended September 30, 1996 and 1995, proceeds received
on sales of fixed maturities classified as available for sale amounted to
$6,645.1 million and $5,009.6 million, respectively. Gross gains of $94.0
million and $135.1 million and gross losses of $58.4 million and $49.8
million were realized on these sales for the nine months ended September
30, 1996 and 1995, respectively. The decrease in unrealized investment
gains related to fixed maturities classified as available for sale for the
nine months ended September 30, 1996 amounted to $500.1 million.
During the nine months ended September 30, 1995, one security classified
as held to maturity was sold and twelve securities classified as held to
maturity were transferred to the available for sale portfolio. All actions
were taken as a result of significant deterioration in creditworthiness.
The amortized cost of the security sold was $4.2 million. The aggregate
amortized cost of the securities transferred was $116.0 million with gross
unrealized investment losses of $3.2 million transferred to equity for the
nine months ended September 30, 1995.
Impaired mortgage loans along with the related provision for losses
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1996 1995
------------- ----------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with provision for losses ........ $ 428.6 $ 310.1
Impaired mortgage loans with no provision for losses ..... 148.3 160.8
-------- --------
Recorded investment in impaired mortgage loans ........... 576.9 470.9
Provision for losses ..................................... 88.0 62.7
-------- --------
Net Impaired Mortgage Loans .............................. $ 488.9 $ 408.2
======== ========
</TABLE>
F-47
<PAGE>
Impaired mortgage loans with no provision for losses are loans where the
fair value of the collateral or the net present value of the loans equals
or exceeds the recorded investment. Interest income earned on loans where
the collateral value is used to measure impairment is recorded using the
cash basis method. Interest income on loans where the present value method
is used to measure impairment is accrued on the net carrying value amount
of the loan at the interest rate used to discount the cash flows. Changes
in the present value attributable to changes in the amount or timing of
expected cash flows are reported as investment gains or losses.
During the nine months ended September 30, 1996 and 1995, respectively,
the Company's average recorded investment in impaired mortgage loans was
$548.7 million and $295.5 million. Interest income recognized on these
impaired mortgage loans totaled $30.9 million and $20.3 million for the
nine months ended September 30, 1996 and 1995, respectively, including
$13.7 million and $10.8 million recognized on the cash basis method.
5) ALLIANCE - CURSITOR TRANSACTION
On February 29, 1996, Alliance acquired the business of Cursitor-Eaton
Asset Management Company and Cursitor Holdings Limited in exchange for
approximately 1.8 million Alliance Units, $84.9 million in cash, $21.5
million in notes which are payable ratably over the next four years and
substantial additional consideration which will be determined at a later
date. The Company recognized an investment gain of $20.6 million as a
result of the issuance of Units in this transaction. At September 30,
1996, the Company's ownership of Alliance Units was approximately 57.4%.
6) BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ----------------------
1996 1995 1996 1995
----------- ---------- ----------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Revenues
Individual insurance and annuities .. $ 841.7 $ 793.5 $ 2,496.9 $ 2,436.6
Group pension ....................... 60.7 77.1 189.3 209.4
Attributed insurance capital ........ 17.9 17.0 49.2 45.6
---------- ---------- ---------- ----------
Insurance operations .............. 920.3 887.6 2,735.4 2,691.6
Investment services ................. 267.0 243.7 818.3 681.1
Consolidation/elimination ........... (5.8) (7.2) (18.1) (23.3)
---------- ---------- ---------- ----------
Total ............................... $ 1,181.5 $ 1,124.1 $ 3,535.6 $ 3,349.4
========== ========== ========== ==========
EARNINGS (LOSS) BEFORE FEDERAL
INCOME TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE
Individual insurance and annuities .. $ 86.8 $ 80.6 $ 240.3 $ 232.2
Group pension ....................... (8.3) (.9) (28.6) (12.7)
Attributed insurance capital ........ 9.7 9.9 23.5 22.5
---------- ---------- ---------- ----------
Insurance operations .............. 88.2 89.6 235.2 242.0
Investment services ................. 68.8 59.2 226.8 157.2
---------- ---------- ---------- ----------
Subtotal .......................... 157.0 148.8 462.0 399.2
Corporate interest expense .......... (16.9) (7.0) (49.8) (19.6)
---------- ---------- ---------- ----------
Total ............................... $ 140.1 $ 141.8 $ 412.2 $ 379.6
========== ========== ========== ==========
</TABLE>
F-48
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1996 1995
-------------- ------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Individual insurance and annuities ........... $ 53,559.8 $ 50,328.8
Group pension ................................ 3,601.0 4,033.3
Attributed insurance capital ................. 2,055.5 2,391.6
----------- -----------
Insurance operations ....................... 59,216.3 56,753.7
Investment services .......................... 13,434.1 12,842.9
Consolidation/elimination .................... (369.9) (354.4)
----------- -----------
Total ........................................ $ 72,280.5 $ 69,242.2
=========== ===========
</TABLE>
7) DISCONTINUED OPERATIONS
Summarized financial information of the discontinued GIC Segment follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------------- ------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Mortgage loans on real estate .................... $ 1,285.0 $ 1,485.8
Equity real estate ............................... 1,057.1 1,122.1
Cash and other invested assets ................... 361.7 665.2
Other assets ..................................... 191.5 579.3
---------- ----------
Total Assets ..................................... $ 2,895.3 $ 3,852.4
========== ==========
LIABILITIES
Policyholders' liabilities ....................... $ 1,360.3 $ 1,399.8
Allowance for future losses ...................... 118.8 164.2
Amounts due to continuing operations ............. 1,270.1 2,097.1
Other liabilities ................................ 146.1 191.3
---------- ----------
Total Liabilities ................................ $ 2,895.3 $ 3,852.4
========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1996 1995 1996 1995
------- -------- ------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
REVENUES
Investment income (net of investment
expenses of $31.8, $40.5, $96.1
and $117.9) ............................ $ 50.2 $ 52.6 $ 182.4 $ 202.1
Investment (losses) gains, net ........... (6.2) 6.6 (23.8) (12.3)
Policy fees, premiums and other
income, net ............................ .1 .1 .2 .6
--------- -------- -------- --------
Total revenues ........................... 44.1 59.3 158.8 190.4
BENEFITS AND OTHER DEDUCTIONS ............ 56.9 76.6 196.2 253.9
--------- -------- -------- --------
Losses Charged to Allowance
for Future Losses ...................... $ (12.8) $ (17.3) $ (37.4) $ (63.5)
======= ======= ======== ========
</TABLE>
F-49
<PAGE>
Investment valuation allowances amounted to $19.9 million on mortgage
loans and $16.3 million on equity real estate for an aggregate of $36.2
million at September 30, 1996. As of January 1, 1996, the adoption of SFAS
No. 121 resulted in a release of existing valuation allowances of $71.9
million on equity real estate and recognition of impairment losses of
$69.8 million on real estate held and used. At December 31, 1995,
valuation allowances amounted to $19.2 million on mortgage loans and $77.9
million on equity real estate for an aggregate of $97.1 million.
Benefits and other deductions included $23.3 million, $94.8 million, $38.7
million and $116.0 million of interest expense related to amounts borrowed
from continuing operations for the three months and nine months ended
September 30, 1996 and 1995, respectively.
The allowance for future losses is based upon management's best judgment
and there can be no assurance ultimate losses will not differ.
8) CLOSED BLOCK
Summarized financial information of the Closed Block follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Fixed maturities:
Available for sale, at estimated fair value (amortized
cost of $3,730.0 and $3,662.8) ...................... $ 3,736.2 $ 3,896.2
Mortgage loans on real estate ........................... 1,422.2 1,368.8
Policy loans ............................................ 1,778.8 1,797.2
Cash and other invested assets .......................... 321.8 440.9
Deferred policy acquisition costs ....................... 780.8 823.6
Other assets ............................................ 305.9 286.1
---------- ----------
Total Assets ............................................ $ 8,345.7 $ 8,612.8
========== ==========
LIABILITIES
Future policy benefits and other policyholders'
account balances ....................................... $ 9,159.6 $ 9,346.7
Other liabilities ....................................... 33.6 160.5
--------- ----------
Total Liabilities ....................................... $ 9,193.2 $ 9,507.2
========= ==========
</TABLE>
F-50
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ --------------------
1996 1995 1996 1995
-------- -------- -------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
REVENUES
Premiums and other income ......... $ 171.3 $ 178.8 $ 539.1 $ 561.3
Investment income (net of investment
expenses of $6.9, $6.6, $21.0 and
$20.3) .......................... 140.2 133.3 408.4 400.7
Investment losses, net ............ (4.6) (.6) (13.2) (7.5)
-------- -------- -------- --------
Total revenues .................... 306.9 311.5 934.3 954.5
-------- -------- -------- --------
BENEFITS AND OTHER DEDUCTIONS
Policyholders' benefits and dividends 266.9 270.8 810.2 824.1
Other operating costs and expenses . 16.3 12.5 50.3 45.0
-------- -------- -------- --------
Total benefits and other deductions 283.2 283.3 860.5 869.1
-------- -------- -------- --------
Contribution from the Closed Block $ 23.7 $ 28.2 $ 73.8 $ 85.4
======== ======== ======== ========
</TABLE>
Investment valuation allowances amounted to $33.4 million and $18.4
million on mortgage loans and $2.5 million and $4.3 million on equity real
estate for an aggregate of $35.9 million and $22.7 million at September
30, 1996 and December 31, 1995, respectively. As of January 1, 1996, the
adoption of SFAS No. 121 resulted in the recognition of impairment losses
of $5.6 million on real estate held and used.
9) RESTRUCTURE COSTS
At September 30, 1996, liabilities associated with 1994 and 1995 cost
reduction programs totaled $27.3 million. During the nine months ended
September 30, 1996 and 1995, the Company restructured certain operations
in connection with cost reduction programs and incurred costs of $2.6
million and $8.6 million, respectively, primarily associated with
severance related benefits. Amounts paid during the nine months ended
September 30, 1996 and charged against the liabilities for the 1994 and
1995 cost reduction programs totaled $13.1 million.
10) LITIGATION
There have been no new material legal proceedings and no material
developments in matters which were previously reported in the Company's
Notes to Consolidated Financial Statements for the year ended December 31,
1995, except as follows:
On May 29, 1996, the New York County Supreme Court entered a judgment
dismissing the complaint with prejudice in the previously reported action
Golomb, et al. v. The Equitable Life Assurance Society of the United
States. Plaintiffs have filed a notice of appeal of that judgment. On
February 9, 1996, Equitable Life removed the Pennsylvania action, Malvin
v. The Equitable Life Assurance Society of the United States, to the
United States District Court for the Middle District of Pennsylvania.
Following the decision granting Equitable Life's motion to dismiss the New
York action (Golomb), on the consent of the parties, the District Court
ordered an indefinite stay of all proceedings in the Pennsylvania action,
pending either party's right to reinstate the proceeding, and ordered that
for administrative purposes the case be deemed administratively closed. On
February 2, 1996, Equitable Life removed the Texas action, Bowler, et al.
v. The Equitable Life Assurance Society of the United States, to the
United States District Court for the Northern District of Texas. On July
1, 1996, Equitable Life filed a motion for summary judgment dismissing the
complaint in its entirety. The Company's management has been advised that
plaintiffs plan to oppose the motion for summary judgment. In August,
1996, the court granted plaintiffs leave to file a supplemental complaint
on behalf of a proposed class of Texas policyholders claiming unfair
discrimination, breach of contract and other claims arising out of alleged
differences between premiums charged to Texas policyholders and premiums
charged to
F-51
<PAGE>
similarly situated policyholders in New York and certain other states.
Plaintiffs seek refunds of alleged overcharges, exemplary or additional
damages citing Texas statutory provisions which among other things, permit
two times the amount of actual damage plus additional penalties if the
acts complained of are found to be knowingly committed, and injunctive
relief. Equitable Life has also filed a motion for summary judgment
dismissing the supplemental complaint in its entirety. Equitable Life's
management has been advised that plaintiffs plan to oppose that motion.
On May 22, 1996, a separate action entitled Bachman v. The Equitable Life
Assurance Society of the United States, was filed in Florida state court
making claims similar to those in the previously reported Golomb action.
The Florida action is asserted on behalf of a proposed class of Florida
issued or renewed policyholders, insured after 1983 under Lifetime
Guaranteed Renewable Major Medical Insurance Policies issued by Equitable
Life. The Florida action seeks compensatory and punitive damages and
injunctive relief restricting the methods by which Equitable Life
increases premiums in the future, based on various common law claims. On
June 20, 1996, Equitable Life removed the Florida action to Federal court.
Equitable Life has answered the complaint, denying the material
allegations and asserting certain affirmative defenses. Although the
outcome of any litigation cannot be predicted with certainty, particularly
in the early stages of an action, The Equitable's management believes that
the ultimate resolution of this litigation should not have a material
adverse effect on the financial position of the Company. Due to the early
stage of such litigation, the Company's management cannot make an estimate
of loss, if any, or predict whether or not such litigation will have a
material adverse effect on the Company's results of operations in any
particular period.
On November 6, 1996, a proposed class action entitled Fletcher, et al. v.
The Equitable Life Assurance Society of the United States, was filed in
California Superior Court for Fresno County, making substantially the same
allegations concerning premium rates and premium rate increases on
guaranteed renewable policies made in the Bowler action. The complaint
alleges, among other things, that differentials between rates charged
California policyholders and policyholders in New York and certain other
states, and the methods used by Equitable Life to calculate premium
increases, breached the terms of its policies and that Equitable Life
misrepresented and concealed the facts pertaining to such differentials
and methods in violation of California law. Plaintiffs seek compensatory
damages in an unspecified amount, rescission, injunctive relief and
attorneys fees. Although the outcome of any litigation cannot be predicted
with certainty, particularly in the early stages of an action, Equitable
Life's management believes that the ultimate resolution of this litigation
should not have a material adverse effect on the financial position of
Equitable Life. Due to the early stage of such litigation, Equitable
Life's management cannot make an estimate of loss, if any, or predict
whether or not such litigation will have a material adverse effect on
Equitable Life's results of operations in any particular period.
In connection with the previously reported action entitled Sidney C. Cole
et al. v. The Equitable Life Assurance Society of the United States and
The Equitable of Colorado, Inc., on June 28, 1996, the court issued a
decision and order dismissing with prejudice plaintiff's causes of action
for fraud, constructive fraud, breach of fiduciary duty, negligence, and
unjust enrichment, and dismissing without prejudice plaintiff's cause of
action under the New York State consumer protection statute. The only
remaining causes of action are for breach of contract and negligent
misrepresentation. Plaintiffs have made a motion for reargument with
respect to this order, which was submitted to the court in October 1996.
On May 21, 1996, an action entitled Elton F. Duncan, III v. The Equitable
Life Assurance Society of the United States, was commenced against
Equitable Life in the Civil District Court for the Parish of Orleans,
State of Louisiana. The action is brought by an individual who purchased a
whole life policy. Plaintiff alleges misrepresentations concerning the
extent to which the policy was a proper replacement policy and the number
of years that the annual premium would need to be paid. Plaintiff purports
to represent a class consisting of all persons who purchased whole life or
universal life insurance policies from Equitable Life from January 1, 1982
to the present. Plaintiff seeks damages, including punitive damages, in an
unspecified amount. On June 21, 1996, Equitable Life removed the action to
the United States District Court for the Eastern District of Louisiana.
Plaintiff has made a motion to remand to the Louisiana Civil District
Court, and Equitable Life will
F-52
<PAGE>
oppose such motion. On July 26, 1996, an action entitled Michael Bradley
v. Equitable Variable Life Insurance Company, was commenced in New York
state court. The action is brought by the holder of a variable life
insurance policy issued by EVLICO. The plaintiff purports to represent a
class consisting of all persons or entities who purchased one or more life
insurance policies issued by EVLICO from January 1, 1980. The complaint
puts at issue various alleged sales practices and alleges
misrepresentations concerning the extent to which the policy was a proper
replacement policy and the number of years that the annual premium would
need to be paid. Plaintiff seeks damages, including punitive damages, in
an unspecified amount and also seeks injunctive relief prohibiting EVLICO
from canceling policies for failure to make premium payments beyond the
alleged stated number of years that the annual premium would need to be
paid. Equitable Life and EVLICO have made a motion to consolidate or
jointly try this proceeding with the Cole action, which will not be heard
until November 1996. Although the outcome of any litigation cannot be
predicted with certainty, particularly in the early stages of an action,
the Company's management believes that the ultimate resolution of the
litigations discussed in this paragraph should not have a material adverse
effect on the financial position of the Company. Due to the early stages
of such litigation, the Company's management cannot make an estimate of
loss, if any, or predict whether or not such litigation will have a
material adverse effect on the Company's results of operations in any
particular period.
Equitable Life recently received a subpoena from the U.S. Department of
Labor ("DOL") requesting copies of any third-party appraisals in Equitable
Life's possession relating to the ten largest properties (by value) in the
Prime Property Fund ("PPF"). PPF is an open-end, commingled real estate
separate account of Equitable Life's for pension clients. Equitable Life
serves as investment manager in PPF and has retained Equitable Real Estate
Investment Management, Inc. ("Equitable Real Estate") as adviser. In early
1995, the DOL commenced a national investigation of commingled real estate
funds with pension investors, including PPF. The investigation now appears
to be focused principally on appraisal and valuation procedures in respect
of fund properties. The most recent request from the DOL seems to reflect,
at least in part, an interest in the relationship between the valuations
for those properties reflected in appraisals prepared for local property
tax proceedings and the valuations used by PPF for other purposes. At no
time has the DOL made any specific allegation that Equitable Life or
Equitable Real Estate has acted improperly and Equitable Life and
Equitable Real Estate believe that any such allegation would be without
foundation. While the outcome of this investigation cannot be predicted
with certainty, in the opinion of management, the ultimate resolution of
this matter should not have a material adverse effect on the Company's
consolidated financial position or results of operations.
In connection with the previously reported arbitration involving Equitable
Casualty Insurance Company ("Casualty"), the arbitration panel issued a
final award in favor of Casualty and GEICO General Insurance Company
("GEICO General") on June 17, 1996. The result of the arbitration is
expected to resolve in favor of Casualty and GEICO General two litigations
that were commenced by Houston General Insurance Company ("Houston
General") and that have been stayed by the presiding courts pending the
completion of the arbitration. Houston General has informed Casualty,
through counsel, that it is considering whether to consent to entry of a
judgment enforcing the arbitration award or whether to contest the award.
The Company's management believes that Houston General has no valid basis
for contesting the arbitration award and therefore the ultimate resolution
of this matter should not have a material adverse effect on the Company's
financial position or results of operations.
With respect to the previously reported National Gypsum litigation, the
Bankruptcy Court has remanded the Texas state court action to state court.
With respect to the previously reported Spectravision litigation,
plaintiffs have filed an amended complaint in which DLJSC is no longer
named as a defendant.
F-53
<PAGE>
On September 26, 1996, the United States District Court for the Southern
District of New York granted the defendants' motion to dismiss all counts
of the complaint in the previously reported litigation involving Alliance
and the Alliance North American Government Income Fund, Inc. The
plaintiffs have filed motions requesting that the court reconsider its
decision and for permission to file an amended complaint. While the
ultimate outcome cannot be determined at this time, Alliance's management
does not expect that it will have a material adverse effect on Alliance's
consolidated financial position or results of operations.
In addition to the matters previously reported and the matters described
above, Equitable Life and its subsidiaries and DLJ and its subsidiaries
are involved in various legal actions and proceedings in connection with
their businesses. Some of the actions and proceedings have been brought on
behalf of various alleged classes of claimants and certain of these
claimants seek damages of unspecified amounts. While the ultimate outcome
of such matters cannot be predicted with certainty, in the opinion of
management no such matter is likely to have a material adverse effect on
the Company's consolidated financial position or results of operations.
F-54
<PAGE>
APPENDIX A
MANAGEMENT
Here is a list of our directors and, to the extent they are responsible for
variable life insurance operations, our principal officers and a brief statement
of their business experience for the past five years. Unless otherwise noted,
their address is 1290 Avenue of the Americas, New York, New York 10104.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------- ------------------------
DIRECTORS
<S> <C>
Claude Bebear Director of Equitable since July 1991. Chairman of the Board of the Holding Company (February
AXA S.A. 1996-present) and a Director of other affiliates of Equitable. Chairman and Chief Executive
23, Avenue Matignon Officer of AXA since February 1989. Chief Executive Officer of the AXA Group since 1974 and
75008 Paris, France Chairman or Director of numerous subsidiaries and affiliated companies of the AXA Group.
Christopher J. Brocksom Director of Equitable since July 1992. Chief Executive Officer, AXA Equity & Law Life
AXA Equity & Law Assurance Society ("AXA Equity & Law") and various directorships and officerships with AXA
Amersham Road Equity & Law affiliated companies.
High Wycombe
Bucks HP 13 5 AL, England
Francoise Colloc'h Director of Equitable since July 1992. Executive Vice President, Culture-- Management--
AXA S.A. Communications, AXA, and various positions with AXA affiliated companies.
23, Avenue Matignon
75008 Paris, France
Henri de Castries Director of Equitable since September 1993. Vice Chairman of the Board of the Holding
AXA S.A. Company since February 1996. Executive Vice President Financial Services and Life Insurance
23, Avenue Matignon Activities of AXA since 1993. Prior thereto, General Secretary from 1991 to 1993 and
75008 Paris, France Central Director of Finances from 1989 to 1991. Also Director or Officer of various
subsidiaries and affiliates of the AXA Group. Director of the Holding Company and of other
Equitable affiliates.
Joseph L. Dionne Director of Equitable since May 1982. Chairman (since April 1988) and Chief Executive
The McGraw-Hill Companies Officer (Since April 1983) of The McGraw-Hill Companies. Director of the Holding Company.
1221 Avenue of the Americas
New York, NY 10020
William T. Esrey Director of Equitable since July 1986. Chairman (since April 1990) and Chief Executive
Sprint Corporation Officer (since 1985) and President (1985 to February 1996) of Sprint Corporation. Director
P.O. Box 11315 of the Holding Company.
Kansas City, MO 64112
Jean-Rene Fourtou Director of Equitable since July 1992. Chairman and Chief Executive Officer, Rhone-Poulenc,
Rhone-Poulenc S.A. S.A. since 1986. Director of the Holding Company and AXA.
25 Quai Paul Doumer
92408 Courbevoie Cedex,
France
Norman C. Francis Director of Equitable since March 1989. President, Xavier University of Louisiana.
Xavier University of Louisiana
7325 Palmetto Street
New Orleans, LA 70125
Donald J. Greene Director of Equitable since July 1991. Partner, LeBoeuf, Lamb, Greene & MacRae since 1965.
LeBouef, Lamb, Greene & MacRae Director of the Holding Company.
125 West 55th Street
New York, NY 10019-4513
John T. Hartley Director of Equitable since August 1987. Retired Chairman and Chief Executive Officer of
Harris Corporation Harris Corporation (until July 1995); prior thereto, he held the positions of Chairman of
1025 NASA Boulevard Harris Corporation from 1987, Chief Executive Officer from 1986 and President from October
Melbourne, FL 32919 1987 to April 1993.
John H.F. Haskell, Jr. Director of Equitable since July 1992. Managing Director of Dillon, Read & Co., Inc. since
Dillon, Read & Co., Inc. 1975 and member of its Board of Directors.
535 Madison Avenue
New York, NY 10022
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------- ------------------------
DIRECTORS (continued)
<S> <C>
W. Edwin Jarmain Director of Equitable since July 1992. President of Jarmain Group Inc. since 1979; also an
Jarmain Group Inc. Officer or Director of several affiliated companies. Chairman and Director of FCA
121 King Street West International Ltd.; served as President, CEO and Director from 1992 through 1993. Director of
Suite 2525, Box 36 various AXA affiliated companies. Director of the Holding Company since July 1992.
Toronto, Ontario M5H 3T9,
Canada
G. Donald Johnston, Jr. Director of Equitable since January 1986. Retired Chairman and Chief Executive Officer, JWT
184-400 Ocean Road Group, Inc. and J. Walter Thompson Company.
John's Island
Vero Beach, FL 32963
Winthrop Knowlton Director of Equitable since October 1973. Chairman of the Board of Knowlton Brothers, Inc.
Knowlton Brothers, Inc. since May 1989; also President of Knowlton Associates, Inc. since September 1987; Director
530 Fifth Avenue of the Holding Company.
New York, NY 10036
Arthur L. Liman Director of Equitable since March 1984. Partner, Paul, Weiss, Rifkind, Wharton & Garrison
Paul, Weiss, Rifkind, Wharton since 1966.
and Garrison
1285 Avenue of the Americas
New York, NY 10019
George T. Lowy Director of Equitable since July 1992. Partner, Cravath, Swaine & Moore.
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Didier Pineau-Valencienne Director of Equitable since February 1996. Chairman and Chief Executive Officer of
Schneider S.A. Schneider S.A. since 1981 and Chairman or Director of numerous subsidiaries and affiliated
64-70 Avenue Jean-Baptiste companies of Schneider. Director of AXA and the Holding Company.
Clament
96646 Boulogne-Billancourt
Cedex
France
George J. Sella, Jr. Director of Equitable since May 1987. Retired Chairman and Chief Executive Officer of
P.O. Box 397 American Cyanamid Company (until April 1993); prior thereto, Chairman from 1984, Chief
Newton, NJ 07860 Executive Officer from 1983 and President from 1979 to 1991.
Dave H. Williams Director of Equitable since March 1991. Chairman and Chief Executive Officer of Alliance
Alliance Capital Management since 1977 and Chairman or Director of numerous subsidiaries and affiliated companies of
Corporation Alliance. Director of the Holding Company.
1345 Avenue of the Americas
New York, NY 10105
OFFICERS -- DIRECTORS
James M. Benson Director of Equitable since February 1994. Chief Executive Officer (since February 1996)
and President of Equitable (since February 1994); prior thereto, Chief Operating Officer
(February 1994 to February 1996) and Senior Executive Vice President of Equitable (April 1993
to February 1994). Prior thereto, President, Management Compensation Group (1983 to February
1993). Previously, President, Chief Executive Officer and a Director of Equitable Variable
Life Insurance Company ("EVLICO"). Senior Executive Vice President of the Holding Company
since February 1994 and Chief Operating Officer since February 1996; Director of various
Equitable affiliated companies; Director of the Holding Company since February 1994.
William T. McCaffrey Director of Equitable since February 1996. Senior Executive Vice President and Chief
Operating Officer of Equitable (all since February 1996). Prior thereto, Executive Vice
President (from February 1986 to February 1996) and Chief Administrative Officer (from
February 1988 to February 1996). Executive Vice President and Chief Administrative Officer
(since February 1994) of the Holding Company. Director of various Equitable affiliated
companies, including EVLICO.
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------- ------------------------
OFFICERS -- DIRECTORS (continued)
<S> <C>
Joseph J. Melone Chairman of Equitable since February 1994 and a Director of Equitable since November 1990.
Chief Executive Officer of the Holding Company since February 1996 and President of the
Holding Company since May 1992. Previously, Chief Executive Officer of Equitable from
February 1994, to February 1996; prior to February 1994, President, Chief Executive Officer
and Director of Equitable from September 1992 to February 1994 and President, Chief
Operating Officer and a Director since November 1990. Former Chairman, Chief Executive
Officer and Director of EVLICO. Director of various Equitable and AXA affiliated companies.
OTHER OFFICERS
A. Frank Beaz Senior Vice President, Equitable; prior thereto, Vice President, Equitable (until March
1995). Executive Vice President, EQ Financial Consultants, Inc. ("EQF") (May 1995-present).
Leon B. Billis Senior Vice President, Equitable; prior thereto, Vice President, Equitable (until November
1994); Vice President, EVLICO (July 1996 to December 1996).
Harvey Blitz Senior Vice President and Deputy Chief Financial Officer, Equitable. Senior Vice President,
Holding Company; Director or Chairman of various Equitable affiliated companies; Director
(October 1992 to December 1996) and Vice President, EVLICO (April 1995 to December 1996).
Kevin R. Byrne Vice President and Treasurer, Equitable; Vice President and Treasurer, Holding Company;
Treasurer, EVLICO (until December 1996) and Frontier Trust Company; Director or Officer of
other Equitable affiliated companies.
Jerry M. de St. Paer Executive Vice President, Equitable. Senior Executive Vice President (since May 1996) and
Chief Financial Officer (since May 1992) of the Holding Company. Executive Vice President
and Chief Operating Officer (since September 1994) of Equitable Investment Corporation.
Previously held various officerships with Equitable and its affiliates. Director and Senior
Investment Officer, EVLICO (until December 1996). Director of various Equitable affiliated
companies.
Gordon G. Dinsmore Senior Vice President and Corporate Actuary, Equitable. Executive Vice President, Equico.
Director and Senior Vice President, EVLICO (until December 1996); Director of other
Equitable affiliated companies.
Alvin H. Fenichel Senior Vice President and Controller, Equitable. Senior Vice President and Controller,
Holding Company. Vice President and Controller (until December 1996), EVLICO; Vice
President, The Equitable of Colorado, Inc. ("Colorado").
Paul J. Flora Senior Vice President and Auditor, Equitable. Prior thereto, Vice President and Auditor
(February 1994 to March 1996). Vice President and Auditor, Holding Company (September 1994
to present). Vice President/Auditor, National Westminster Bank (November 1984 to June 1994).
Robert E. Garber Executive Vice President and General Counsel, Equitable; Executive Vice President and General
Counsel, Holding Company. Prior thereto, Senior Vice President and General Counsel of
Equitable and the Holding Company (September 1993 to September 1994) and Senior Vice
President and Deputy General Counsel of Equitable (September 1989 to September 1993).
Donald R. Kaplan Vice President and Acting Chief Compliance Officer, Equitable. Prior thereto, Vice President
and Counsel (until June 1996).
Michael S. Martin Senior Vice President, Equitable. Chairman, EQF; Chairman and Chief Executive Officer,
EquiSource of New York (January 1992 to October 1994) and Frontier (April 1992 to October
1994); Vice President, Hudson River Trust ("HRT") (February 1993 to February 1995);
Director, Vice President and Treasurer, Equitable Distributors, Inc. (August 1993 to
February 1995), also Chairman, President, and Chief Executive Officer (December 1993 to
February 1995); Director, Equitable Underwriting and Sales Agency (Bahamas), Ltd. (May 1996
to present) and Colorado (January 1995 to present).
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------- ------------------------
OTHER OFFICERS (continued)
<S> <C>
Peter D. Noris Executive Vice President and Chief Investment Officer, Equitable. Executive Vice President
(since May 1995) and Chief Investment Officer (since July 1995), Holding Company. Prior
thereto, Vice President/Manager, Insurance Companies Investment Strategies Group, Solomon
Brothers, Inc. (November 1992 to May 1995). Prior thereto, with Morgan Stanley & Co., Inc.,
from October 1984 to November 1992 as Principal, Fixed Income Insurance Group. Former
Director and Senior Vice President of EVLICO. Director of other Equitable affiliates.
Anthony C. Pasquale Senior Vice President, Equitable. Chairman and President, Equitable Realty Assets
Corporation (July 1995 to present). Director of other Equitable affiliates.
Michael J. Rich Senior Vice President, Equitable, since October 1994; prior thereto, Vice President of
Underwriting, John Hancock Mutual Life Insurance Co. since 1988. Director of EVLICO (May
1995 to December 1996).
Pauline Sherman Vice President, Secretary and Associate General Counsel, Equitable; prior thereto, Vice
President and Associate General Counsel (until September 1995). Vice President, Secretary and
Associate General Counsel, Holding Company (September 1995 to present).
Samuel Shlesinger Senior Vice President and Actuary, Equitable; prior thereto, Vice President and Actuary.
Previously, Director and Senior Vice President, EVLICO (February 1988 to December 1996).
Director, Chairman and Chief Executive Officer, Equitable of Colorado. Vice President, HRT.
Jose S. Suquet Executive Vice President and Chief Agency Officer, Equitable, since August 1994; prior
thereto, Agency Manager, Equitable (February 1985 to August 1994).
Stanley B. Tulin Senior Executive Vice President and Chief Financial Officer, Equitable; prior thereto,
Chairman, Insurance Consulting and Actuarial Practice, Coopers & Lybrand (until April 1996);
Executive Vice President, Holding Company.
</TABLE>
A-4
<PAGE>
IL
COLI II(SM)
Prospectus Dated January 1, 1997
IL COLI II is an individual flexible premium variable life insurance policy
issued by The Equitable Life Assurance Society of the United States (Equitable).
The policy is designed to be offered to eligible purchasers and to be used for a
variety of business purposes.
The policy offers flexible premium payments, a choice of two death benefit
options, 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>
<CAPTION>
Fixed Income Series: Equity Series: Asset Allocation Series:
<S> <C> <C>
o Money Market o Growth & Income o Conservative Investors
o Intermediate Government Securities o Equity Index o Balanced
o Quality Bond o Common Stock o Growth Investors
o High Yield o Global
o International
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)
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).
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.
Your Equitable agent can provide you with information about all forms of life
insurance available from us and help you decide which may best meet your needs.
Replacing existing insurance with an IL COLI II 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 IL COLI
II. 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 1996 The Equitable Life Assurance Society of the United States.
All rights reserved.
EVM-106 Cat. No. 127188
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF IL COLI II FEATURES...............................1
PART 1 -- DETAILED INFORMATION ABOUT EQUITABLE AND
IL COLI II INVESTMENT CHOICES.............................6
THE COMPANY THAT ISSUES IL COLI II.................6
THE SEPARATE ACCOUNT AND THE TRUST.................6
The Separate Account.............................6
The Trust........................................6
The Trust's Investment Adviser...................6
Investment Policies Of The Trust's Portfolios....7
THE GUARANTEED INTEREST ACCOUNT....................8
Adding Interest In The Unloaned Guaranteed
Interest Account...............................8
Transfers Out Of The Guaranteed Interest Account.8
PART 2-- DETAILED INFORMATION ABOUT IL COLI II..............9
FLEXIBLE PREMIUMS..................................9
Planned Periodic And Death Benefit Guarantee
Premiums.......................................9
Premium And Monthly Charge Allocations...........9
DEATH BENEFITS.....................................9
Guaranteeing The Death Benefit..................10
CHANGES IN INSURANCE PROTECTION...................10
Decreasing The Face Amount......................10
Changing The Death Benefit Option...............10
Substitution Of Insured Person..................11
When Policy Changes Go Into Effect..............11
MATURITY BENEFIT..................................11
LIVING BENEFIT OPTION.............................11
SUPPLEMENTAL INSURANCE ON THE INSURED PERSON......11
YOUR POLICY ACCOUNT VALUE.........................12
Amounts In The Separate Account.................12
How We Determine The Unit Value.................12
Transfers Of Policy Account Value...............12
Telephone Transfers.............................12
Charge For Transfers............................12
BORROWING FROM YOUR POLICY ACCOUNT................12
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....................13
PARTIAL WITHDRAWALS AND SURRENDER.................13
Partial Withdrawals.............................13
Surrender For Net Cash Surrender Value..........14
DEDUCTIONS AND CHARGES............................14
Deductions From Premiums........................14
Deductions From Your Policy Account.............14
Trust Charges...................................15
ADDITIONAL INFORMATION ABOUT IL COLI II...........16
Your Policy Can Terminate.......................16
You May Restore A Policy After It Terminates....16
Policy Periods, Anniversaries, Dates And Ages...16
TAX EFFECTS.......................................17
Policy Proceeds.................................17
Policy Terminations.............................18
Diversification.................................18
Policy Changes..................................18
Tax Changes.....................................18
Estate And Generation Skipping Taxes............19
Pension And Profit-Sharing Plans................19
Other Employee Benefit Programs.................19
Our Taxes.......................................19
When We Withhold Income Taxes...................19
PART 3-- ADDITIONAL INFORMATION............................19
YOUR VOTING PRIVILEGES............................19
Trust Voting Privileges.........................19
How We Determine Your Voting Shares.............20
Separate Account Voting Rights..................20
OUR RIGHT TO CHANGE HOW WE OPERATE................20
OUR REPORTS TO POLICYOWNERS.......................20
LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY.......20
YOUR PAYMENT OPTIONS..............................21
YOUR BENEFICIARY..................................21
ASSIGNING YOUR POLICY.............................21
WHEN WE PAY POLICY PROCEEDS.......................21
DIVIDENDS.........................................21
REGULATION........................................21
SPECIAL CIRCUMSTANCES.............................22
DISTRIBUTION......................................22
LEGAL PROCEEDINGS.................................22
ACCOUNTING AND ACTUARIAL EXPERTS..................22
ADDITIONAL INFORMATION............................22
MANAGEMENT........................................23
PART 4 -- ILLUSTRATIONS OF POLICY BENEFITS..................27
SEPARATE ACCOUNT FP FINANCIAL STATEMENTS.................FSA-1
EQUITABLE 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, 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 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.
<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) or death benefit guarantees (whole life).
Equitable offers 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 IL COLI II 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).
ELIGIBILITY TO PURCHASE
IL COLI II has been designed to be used as a potential source of funds to pay
benefits under non-qualified executive deferred compensation plans, salary
continuation plans or for other business purposes. In order to qualify to
purchase IL COLI II, the following conditions must be satisfied:
o a minimum of five policies must be issued, each on the life of a different
eligible insured person;
o the minimum initial premium under each of the policies must be remitted to
Equitable by the policyowner;
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 in certain
situations, are submitted to Equitable.
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 9.
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'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
6.
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. 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 (4%
minimum, before deductions). See THE GUARANTEED INTEREST ACCOUNT on page 8.
TAKING MONEY OUT OF THE POLICY
o Loans may be taken against 90% of a policy's Cash Surrender Value (Policy
Account value) 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 12.
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 13.
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 The total minimum Face Amount (including any death benefit coverage under any
policy rider) is $100,000.
1
<PAGE>
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 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. See CHANGES IN INSURANCE PROTECTION on page 10.
o After the second policy year, you may be able to substitute the insured
person. See SUBSTITUTION OF INSURED PERSON on page 11.
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 charges. The death benefit guarantee
provision is not available if you have elected any death benefit coverage
under the supplemental term insurance rider. The death benefit guarantee
provision may be limited or not available in some states. See GUARANTEEING
THE DEATH BENEFIT on page 10 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.
LIVING BENEFIT
o The Living Benefit rider enables the policyowner to receive a portion of the
policy's death benefit (excluding any death benefit payable under the
supplemental term insurance rider) 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.
SUPPLEMENTAL INSURANCE ON THE INSURED PERSON
o You may purchase at issue death benefit coverage on the insured person
through a supplemental term insurance rider. Choosing coverage under the
supplemental term insurance rider in lieu of coverage under the base policy
will reduce total charges and increase Policy Account values on a current
charge basis. The more supplemental term insurance coverage you elect, the
greater will be the amount of the reduction in charges and increase in Policy
Account values on a current charge basis. However, the supplemental term
insurance rider has higher guaranteed maximum cost of insurance charges than
the base policy. On a guaranteed charge basis, the use of the rider will
increase charges and decrease Policy Account values. In addition, if you
elect any coverage under this rider, the death benefit guarantee provision
will not be available and the Living Benefit rider will not apply to the
supplemental term insurance. See SUPPLEMENTAL INSURANCE ON THE INSURED PERSON
on page 11.
DEDUCTIONS AND CHARGES
FROM PREMIUMS (See DEDUCTIONS FROM PREMIUMS on page 14.)
o Charge for taxes imposed by states and other jurisdictions. Such charges
currently range from .75% to 5% (Virgin Islands).
o Premium Sales Charge equal to 9% of premiums paid through the tenth policy
year and 3% of premiums paid thereafter. Equitable currently intends to
reduce the 9% charge once premiums paid equal a specified amount.
FROM THE POLICY ACCOUNT (See DEDUCTIONS FROM YOUR POLICY ACCOUNT on page 14.)
o Maximum administrative charge of $18.50 per month for the first three policy
years and $6.00 thereafter, plus a charge per thousand of Face Amount at
issue (excluding any death benefit coverage under the supplemental term
insurance rider) ranging from $0.15 to $0.26 per month for the first ten
policy years (depending upon the issue age of the insured person) and equal
to $0.06 per month thereafter. Equitable intends to reduce these charges on a
current basis. See DEDUCTIONS FROM YOUR POLICY ACCOUNT on page 14.
o Current monthly cost of insurance rates for preferred risk insureds for the
base policy range from less than one cent per thousand of net amount at risk
at the youngest age to $50.00 per thousand of net amount at risk at the
oldest age (99). The net amount at risk is the difference between the Policy
Account value and the current death benefit. Guaranteed cost of insurance
rates for preferred risk insureds for the base policy range from $0.08
(youngest age) to $83.33 (age 99). These same ranges in cost of insurance
rates apply to the supplemental term insurance rider, except that the rates
are based upon per thousand of rider benefit.
o Current monthly charge for certain mortality and expense risks at an annual
rate of .20% of the unloaned Policy Account value (guaranteed not to exceed
.40% per annum).
o Certain policy transactions will result in the following charges:
o Transfers - Currently, we charge $25 per transfer after the
twelfth transfer in a policy year. We reserve the right to charge
$25 per transfer.
o Partial Withdrawals - An expense charge of $25 or 2% of the amount
requested, whichever is less, is made for each partial withdrawal.
o Substitution of Insured Person - A $100 expense charge will be
deducted for each substitution of insured person.
FROM THE TRUST
o The Separate Account Funds purchase shares of the Trust at net asset value.
That price reflects investment management fees, indirect expenses, such as
brokerage commissions, and certain direct operating expenses.
2
<PAGE>
The table below shows (i) actual investment management fees paid by the Trust in
1995 and (ii) other expenses deducted from Trust assets in 1995. Investment
management fees may increase or decrease based on the level of portfolio net
assets. These fees are subject to maximum rates, as described under THE TRUST'S
INVESTMENT ADVISER on page 6, and in the attached Trust prospectus. Other Trust
expenses are likely to fluctuate from year to year. Both investment management
fees and other Trust expenses are expressed in the table below as a percentage
of each portfolio's daily average net assets:
<TABLE>
<CAPTION>
PORTFOLIO ACTUAL 1995 MANAGEMENT FEE 1995 OTHER EXPENSES 1995 TOTAL EXPENSES
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market 0.40% 0.04% 0.44%
Intermediate Govt. Securities 0.50% 0.07% 0.57%
Quality Bond 0.55% 0.04% 0.59%
High Yield 0.55% 0.05% 0.60%
Growth & Income 0.55% 0.05% 0.60%
Equity Index 0.35% 0.13% 0.48%
Common Stock 0.35% 0.03% 0.38%
Global 0.53% 0.08% 0.61%
International 0.90% 0.13%* 1.03%
Aggressive Stock 0.46% 0.03% 0.49%
Conservative Investors 0.55% 0.04% 0.59%
Balanced 0.37% 0.03% 0.40%
Growth Investors 0.52% 0.04% 0.56%
---------------------------
*Annualized
</TABLE>
VARIATIONS
o Equitable is subject to the insurance laws and regulations in every
jurisdiction in which IL COLI II 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 IL COLI II may also vary where special circumstances result in a
reduction in our costs.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
o You have a right to examine the policy. You may cancel the policy by sending
it to our Administrative Office with a written request to cancel. Your
request to cancel the policy must be postmarked no later than 10 days after
you receive the policy. Insurance coverage ends when you send your request.
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.
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
provision is 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 16 and YOU MAY RESTORE A POLICY AFTER IT
TERMINATES on page 16.
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. Death benefits and Policy
Account earnings may, however, have corporate alternative minimum tax
consequences. 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 17.
3
<PAGE>
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 September
30, 1996. The historical performance of the Common Stock and Money Market
Portfolios for periods prior to March 22, 1985, when these funds were managed
separate accounts and subject to a different fee structure, 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 CHARGE, TAX CHARGE AND THE
MORTALITY AND EXPENSE RISK CHARGE APPLICABLE UNDER AN IL COLI II POLICY. SUCH
CHARGES WOULD REDUCE THE RETURNS AND YIELDS SHOWN. SEE ILLUSTRATIONS OF IL COLI
II CASH SURRENDER VALUES BASED ON HISTORICAL INVESTMENT RESULTS BELOW.
<TABLE>
<CAPTION>
RATES OF RETURN FOR PERIODS ENDING SEPTEMBER 30, 1996
---------------------------------------------------------------------------
SEC SINCE
PORTFOLIO YIELDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION(A)
--------- --------- --------- ---------- ---------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Fixed Income Series:
Money Market............................ 5.20% 5.35% 4.81% 4.31% 5.89% -- 7.31%
Intermediate Government Securities...... 5.92 4.85 3.71 6.26 -- -- 6.89
Quality Bond............................ 5.92 5.48 -- -- -- -- 3.82
High Yield.............................. 10.23 23.99 13.97 15.12 -- -- 11.33
The Equity Series:
Growth & Income......................... 13.84 -- -- -- -- 10.58
Equity Index............................ 19.69 -- -- -- -- 18.74
Common Stock............................ 17.31 15.49 14.65 14.91 15.16% 14.94
Global.................................. 11.59 11.36 13.15 -- -- 11.42
International(b)........................ 11.32 -- -- -- -- 12.55
Aggressive Stock........................ 25.13 15.50 14.72 18.73 -- 20.49
The Asset Allocation Series:
Conservative Investors.................. 5.80 5.04 7.86 -- -- 8.72
Balanced................................ 10.55 5.94 8.09 10.11 -- 11.86
Growth Investors........................ 11.57 9.74 12.68 -- -- 15.38
</TABLE>
-------------
(a)The International Portfolio received its initial funding on April 3,
1995; the Equity Index Portfolio 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.
Additional investment performance information appears in the attached Trust
prospectus.
ILLUSTRATIONS OF 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
Cash Surrender Value of hypothetical IL COLI II policies held for specified
periods of time. The table illustrates premiums and Cash Surrender Values of
thirteen hypothetical IL COLI II policies, each with a 100% premium allocation
to a different Fund. The illustration also assumes that, in each case, the
insured is a 45-year-old male, preferred non-tobacco user and that each policy
has an increasing death benefit, a $200,000 initial Face Amount (not including
any supplemental term insurance rider) and a $10,392 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 of inception. 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.
The table then illustrates what the Cash Surrender Value would have been after
one policy year, after five policy years, after 10 policy years and as of
September 30, 1996.
4
<PAGE>
ILLUSTRATIONS OF IL COLI II CASH SURRENDER VALUES
BASED ON HISTORICAL INVESTMENT RESULTS, $200,000 OF INITIAL INSURANCE PROTECTION
AND CURRENT CHARGES(1)
MALE AGE 45
PREFERRED RISK NON-TOBACCO USER
<TABLE>
<CAPTION>
ASSUMED POLICY
PURCHASE DATE (2) AT END OF FIRST POLICY YEAR
--------------------- -------------------------------------
TOTAL CASH
BEGINNING PREMIUM SURRENDER
OF YEAR: PAID VALUE
--------------------- -------------------------------------
THE FIXED INCOME SERIES:
- ------------------------
<S> <C> <C> <C>
Money Market...................................... 1982 $10,392 $ 9,638
Int. Gov't Securities............................. 1991 10,392 9,558
Quality Bond...................................... 1994 10,392 8,039
High Yield........................................ 1987 10,392 8,904
THE EQUITY SERIES:
- ------------------
Growth & Income................................... 1994 10,392 8,436
Equity Index...................................... 1994 10,392 8,586
Common Stock...................................... 1976 10,392 9,302
Global............................................ 1988 10,392 9,452
International..................................... 1995 10,392 9,487
Aggressive Stock.................................. 1986 10,392 11,665
THE ASSET ALLOCATION SERIES:
- ----------------------------
Conservative Investors............................ 1990 10,392 9,045
Balanced.......................................... 1986 10,392 11,063
Growth Investors.................................. 1990 10,392 9,434
<CAPTION>
AT END OF FIFTH POLICY YEAR AT END OF TENTH POLICY YEAR
------------------------------------- -------------------------------------
TOTAL CASH TOTAL CASH
PREMIUM SURRENDER PREMIUM SURRENDER
PAID VALUE PAID VALUE
------------------------------------- -------------------------------------
THE FIXED INCOME SERIES:
- ------------------------
<S> <C> <C> <C> <C>
Money Market...................................... $51,960 $54,346 $103,920 $130,665
Int. Gov't Securities............................. 51,960 51,181 -- --
Quality Bond...................................... -- -- -- --
High Yield........................................ 51,960 56,081 -- --
THE EQUITY SERIES:
- ------------------
Growth & Income................................... -- -- -- --
Equity Index...................................... -- -- -- --
Common Stock...................................... 51,960 80,478 103,920 214,490
Global............................................ 51,960 56,967 -- --
International..................................... -- -- -- --
Aggressive Stock.................................. 51,960 68,973 103,920 255,558
THE ASSET ALLOCATION SERIES:
- ----------------------------
Conservative Investors............................ 51,960 49,698 -- --
Balanced.......................................... 51,960 58,419 103,920 154,151
Growth Investors.................................. 51,960 58,358 -- --
<CAPTION>
FROM POLICY PURCHASE THROUGH
SEPTEMBER 30, 1996
---------------------------------------
TOTAL CASH
PREMIUM SURRENDER
PAID VALUE
---------------------------------------
THE FIXED INCOME SERIES:
- ------------------------
<S> <C> <C>
Money Market...................................... $155,880 $ 206,645
Int. Gov't Securities............................. 62,353 60,696
Quality Bond...................................... 31,176 28,202
High Yield........................................ 103,920 172,137
THE EQUITY SERIES:
- ------------------
Growth & Income................................... 31,176 32,515
Equity Index...................................... 31,176 36,060
Common Stock...................................... 218,232 1,220,152
Global............................................ 93,528 150,196
International..................................... 20,784 19,428
Aggressive Stock.................................. 114,312 315,945
THE ASSET ALLOCATION SERIES:
- ----------------------------
Conservative Investors............................ 72,744 79,137
Balanced.......................................... 114,312 173,866
Growth Investors.................................. 72,744 99,917
</TABLE>
THE DEATH BENEFIT GUARANTEE PREMIUM FOR THIS POLICY IS $3,568.04. SEE
GUARANTEEING THE DEATH BENEFIT ON PAGE 10.
THESE VALUES ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
(1) POLICY VALUES REFLECT ALL CHARGES ASSESSED UNDER THE POLICY AND BY THE
TRUST INCLUDING AN ASSUMED CHARGE FOR TAXES OF 2%. CURRENT NON-GUARANTEED
COST OF INSURANCE, ADMINISTRATIVE, MORTALITY AND EXPENSE RISK AND PREMIUM
SALES CHARGES HAVE BEEN USED TO DETERMINE POLICY VALUES; SUCH CHARGES MAY
BE INCREASED IN THE FUTURE, BUT WILL NEVER EXCEED THE GUARANTEED MAXIMUM
CHARGES SET FORTH IN DEDUCTIONS AND CHARGES ON PAGE 14. IF GUARANTEED COST
OF INSURANCE, ADMINISTRATIVE, MORTALITY AND EXPENSE RISK AND PREMIUM SALES
CHARGES WERE USED, THE RESULTS WOULD BE LOWER.
(2) ASSUMED POLICY PURCHASE DATE IS BASED UPON INCEPTION OF TRUST PORTFOLIO.
PLEASE REFER TO EXPLANATION OF TABLE ON PAGE 4.
5
<PAGE>
PART 1: DETAILED INFORMATION ABOUT EQUITABLE AND IL COLI II
INVESTMENT CHOICES
THE COMPANY THAT ISSUES IL COLI II
EQUITABLE. Equitable, a New York stock life insurance company, had been in
business since 1859. We are a wholly-owned subsidiary of The Equitable Companies
Incorporated (the Holding Company). The largest stockholder of the Holding
Company is AXA S.A. (AXA), a French insurance holding company. AXA beneficially
owns 60.6% 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 and its subsidiaries,
including Equitable. AXA is the holding company for an international group of
insurance and related financial services companies. Equitable, the Holding
Company and their subsidiaries managed approximately $195.3 billion of assets as
of December 31, 1995, including third party assets of approximately $144.4
billion. Equitable's home office is 1290 Avenue of the Americas, New York, New
York 10104. We are licensed to do business in all 50 states, Puerto Rico, the
Virgin Islands and the District of Columbia. We maintain local offices
throughout the United States. At December 31, 1995, we had approximately $132.8
billion face amount of variable life insurance in force. Prior to January 1,
1997, IL COLI II policies were issued by Equitable's wholly-owned subsidiary,
Equitable Variable Life Insurance Company (Equitable Variable). Equitable
Variable was merged into Equitable as of January 1, 1997.
THE SEPARATE ACCOUNT AND THE TRUST
THE SEPARATE ACCOUNT. The Separate Account was established on September 21, 1995
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. The Separate
Account is a successor to a separate account that was established by Equitable
Variable on April 19, 1985. The assets of that separate account became assets of
the Separate Account on January 1, 1997 when Equitable Variable was merged into
Equitable.
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, 1995, Alliance was managing
approximately $146.5 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>
6
<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%
FIRST NEXT OVER
PORTFOLIO $750 MILLION $750 MILLION $1.5 BILLION
--------- ------------ ------------ ------------
Equity Index..................................................................... .350% .300% .250%
FIRST NEXT OVER
PORTFOLIO $500 MILLION $1 BILLION $1.5 BILLION
--------- ------------ ---------- ------------
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
---------- ----------------- ---------
FIXED INCOME SERIES:
<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."
EQUITY SERIES:
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>
7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT POLICY OBJECTIVE
---------- ----------------- ---------
ASSET ALLOCATION SERIES:
<S> <C> <C>
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, IL COLI II
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, including definitions of
certain terms used herein, 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 one 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 UNLOANED 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 unloaned 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%, before policy deductions.
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 credited and compounds daily at an effective annual rate
that equals the declared rate for each policy year.
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. Amounts securing a Living
Benefit payment may not be transferred from the Guaranteed Interest Account.
8
<PAGE>
PART 2: DETAILED INFORMATION ABOUT IL COLI II
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 and tobacco user status of the insured person, the
initial Face Amount of the policy and any additional term insurance benefit
selected. In certain situations, however, no distinction is made based on the
sex of the insured person. See COST OF INSURANCE CHARGES on page 15. You may
choose to pay a higher initial premium.
The full minimum initial premium 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 minimum 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 minimum 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. 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 based upon our interpretation of
current tax rules that such premiums 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 17 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 AND DEATH BENEFIT GUARANTEE PREMIUMS. Although premiums are
flexible, page 3 of your policy (the Policy Information Page) will show a
"planned" periodic premium and a "death benefit guarantee premium" (if the death
benefit guarantee provision is available under your policy). We measure actual
premiums against accumulated death benefit guarantee premiums to determine
whether the death benefit guarantee provision will prevent the policy from going
into default.
The death benefit guarantee premium is actuarially determined at issue based on
the age, sex, tobacco user status and underwriting class of the insured person
and the Face Amount. The death benefit guarantee premium may change if you make
policy changes that decrease the Face Amount of the policy or if there is a
change in the insured person's underwriting or tobacco user classification. We
reserve the right to limit the amount of any premium payments which are in
excess of the greater of the planned periodic premium or the death benefit
guarantee premium.
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 death benefit guarantee premium. Neither the planned premium nor the death
benefit guarantee premium are required premiums. Failure to pay premiums could
cause the policy to terminate. See YOUR POLICY CAN TERMINATE on page 16.
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.
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 term insurance benefit included in your policy, 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.
9
<PAGE>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INSURED 40 or 45 50 55 60 65 70 75 to 100
PERSON'S AGE under 95
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 provision is not available if you have
elected any death benefit coverage under the supplemental term insurance rider.
See SUPPLEMENTAL INSURANCE ON THE INSURED PERSON on page 11. The death benefit
guarantee provision is also not available in some states.
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. Some states may also limit the length of time the death benefit
guarantee provision will last to 5 years or less. You should ask your agent for
further information.
If your policy's Net Cash Surrender Value is insufficient to pay the monthly
deductions, the death benefit guarantee provision can keep your policy from
terminating if two conditions are satisfied. First, any outstanding policy loan
plus accrued loan interest cannot exceed the policy's Cash Surrender Value.
Second, the amount of your actual premium payments minus any withdrawals (each
accumulated at 4% interest) must equal or exceed a benchmark premium amount. To
determine this benchmark premium amount we accumulate the death benefit
guarantee premium (shown on the Policy Information Page) at 4% interest.
CHANGES IN INSURANCE PROTECTION
DECREASING THE FACE AMOUNT. After the second policy year, you may request a
decrease in your policy's Face Amount. You must send your signed written request
to our Administrative Office. See TAX EFFECTS on page 17 for the tax
consequences of changing the Face Amount. Any change will be subject to our
approval and the following conditions.
You may not reduce the Face Amount below the minimum we require to issue this
policy at the time of the reduction. Any reduction must be at least $10,000. The
reduction will be allocated between the base policy and any supplemental term
insurance rider in proportion to their respective Face Amounts at issue, subject
to maintaining the minimum base policy Face Amount that we require. The death
benefit guarantee premium as well as monthly deductions from your Policy Account
for the cost of insurance will generally decrease, beginning on the date the
decrease in Face Amount takes effect.
CHANGING THE DEATH BENEFIT OPTION. After the second policy year, you may change
the death benefit option by sending a signed written request to our
Administrative Office. See TAX EFFECTS on page 17 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 10. 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 for the base policy are based (see
COST OF INSURANCE CHARGES 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.
10
<PAGE>
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. Substituting
the insured person is a taxable event and may, depending upon individual
circumstances, have other adverse tax consequences, including classification of
the policy as a modified endowment contract or disqualification of the policy as
life insurance for Federal income tax purposes unless funds are distributed out
of the policy. See TAX EFFECTS on page 17. 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 potential tax
consequences of making this change. A $100 charge will be deducted from the
Policy Account for each substitution of insured person.
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 on 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
based on our understanding of current rules, the change 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 17.
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 17 and YOUR PAYMENT
OPTIONS on page 21.
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 any death benefit payable under the supplemental term insurance
rider) 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 a 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 Living Benefit 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 in which your policy
is delivered. See BORROWING FROM YOUR POLICY ACCOUNT -- POLICY LOAN INTEREST on
pages 12 and 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
8. 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.
The receipt of a Living Benefit payment may be able to qualify for exclusion
from income tax. See TAX EFFECTS on page 17. 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.
SUPPLEMENTAL INSURANCE ON THE INSURED PERSON
You may purchase at issue death benefit coverage on the insured person through a
supplemental term insurance rider. Choosing coverage under the supplemental term
insurance rider in lieu of coverage under the base policy will reduce total
charges and increase Policy Account values on a current charge basis. The more
supplemental term insurance coverage you elect, the greater will be the amount
of the reduction in charges and increase in Policy Account value on a current
charge basis. However, the supplemental term insurance rider has higher
guaranteed maximum cost of insurance charges than the base policy. On a
guaranteed charge basis, the use of the rider will increase charges and decrease
the Policy Account value. In addition, if you elect any coverage under this
rider, the death benefit guarantee provision will not be available and the
Living Benefit rider will not apply to the supplemental term insurance.
The minimum Face Amount that we will issue under the rider is $10,000. The
minimum total Face Amount (Face Amount under the rider plus base policy Face
Amount) that must be maintained at all times is $100,000, of which at least
$50,000 must be coverage under the base policy. Premiums are allocated between
the base policy and the rider in proportion to their respective Face Amounts at
issue, and a charge equal to 2% will be deducted from premiums allocated to the
rider to cover sales expenses. Premiums allocated to the base policy are subject
to a different sales charge. See PREMIUM SALES CHARGE on page 14. Coverage under
the supplemental term insurance rider is not included when we calculate the
amount of the administrative charge.
If the base policy becomes subject to a higher death benefit in order to
maintain its qualification as life insurance, the amount of coverage provided by
the supplemental term insurance rider will automatically decrease to offset the
increase in the base policy death benefit. Your agent can provide further
information and policy illustrations showing how the supplemental term insurance
rider can affect your policy values under different assumptions.
11
<PAGE>
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.
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. The unit value that applies to
a transaction taking effect on a business day will be the unit value calculated
as of the close of business on that day. 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 on those days other than
a policy anniversary report 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. Finally, we reserve the
right to subtract any daily charge for taxes or amounts set aside as a reserve
for taxes.
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 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.
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 Funds' unit value as of the close of business on
the day you call. We do not accept telephone transfer requests after 4:00 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 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. 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. 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.
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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
based on the proportions that your unloaned amount in the Guaranteed Interest
Account and your values in the Funds bear to the total 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 calendar 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 IL COLI II was offered for the first time in 1996,
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%.
Interest accrues daily on any loaned amount in the Guaranteed Interest Account.
On each policy anniversary and any time you repay a policy loan in full, accrued
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.
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. This
means an additional loan is made to pay the interest. An amount equal to the
difference between the loan interest due and the loan interest credited on the
loaned portion of the Guaranteed Interest Account will be transferred from the
Funds and the Guaranteed Interest Account to make the loan, and allocated based
on the proportion that your unloaned value in the Guaranteed Interest Account
and your values in the Funds bear to the total unloaned value in your Policy
Account.
REPAYING THE LOAN. You may repay all or part of a policy loan at any time. We
assume that any money you send us is a premium payment unless you specifically
indicate in writing that it is to be applied as a loan repayment. Loan
repayments are not subject to a charge for 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 repayments. If you do not provide specific instructions,
repayments will be allocated based on the proportion that your unloaned value in
the Guaranteed Interest Account and your values in the Funds bear to the total
unloaned value in your Policy Account.
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 17 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 16.
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 sending a signed written request to our Administrative
Office. When you make a partial withdrawal, an expense charge of $25 or 2% of
the amount requested, whichever is less, will also 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:
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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. If you
do not specifically indicate, we will make the withdrawal and deduct the related
expense charge based on the proportions that your unloaned amounts in the
Guaranteed Interest Account and the Funds bear 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 on a dollar-for-dollar basis. Normally, it also reduces the
total death benefit on a dollar-for-dollar basis. However, if the total death
benefit is based on the Policy Account percentage multiple, the reduction in
death benefit would be greater. 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 17 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. 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 17 for the tax
consequences of a surrender. We will deduct from the Net Cash 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 certain taxes are deducted from all
premiums. In addition, 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.
Charge For Taxes. We deduct a charge designed to approximate certain taxes and
additional charges imposed upon us by states and certain jurisdictions. Such
charges currently range from .75% to 5% (Virgin Islands).
This charge may be increased or decreased to reflect any changes in our taxes.
In addition, if an insured person changes his or her place of residence, you
should notify us to change our records so that the charge will reflect the new
jurisdiction.
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 IL COLI II, 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 and
any profit we may earn on the charges deducted under the policy, such as the
mortality and expense risk charge. The maximum Premium Sales Charge for premiums
allocated to the base policy is equal to 9% of such premiums paid through the
tenth policy year and 3% of such premiums paid thereafter. Premiums allocated to
the supplemental term insurance rider have a lower sales charge. See
SUPPLEMENTAL INSURANCE ON THE INSURED PERSON on page 11.
Currently, we deduct the 9% Premium Sales Charge from each base policy premium
payment until the cumulative premiums paid during the first 10 policy years
equals seven times the "target premium" and 3% thereafter. The target premium
varies by issue age, sex and tobacco user status of the insured person and the
base policy's Face Amount, and is generally less than or equal to one seven-pay
premium for the base policy. The seven-pay premium is defined by the Internal
Revenue Code and 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 and administrative charges), would be
fully paid for after seven level annual payments. We reserve the right, however,
to deduct the maximum Premium Sales Charge as described in the preceding
paragraph from each base policy premium payment at any time.
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
compensate us for administrative activities in connection with issuing and
maintaining your policy, such as billing, policy transactions and policyowner
communications. The current administrative charge is equal to $16.50 per month
in the first three policy years (guaranteed not to exceed $18.50 per month) and
$4 thereafter (guaranteed not to exceed $6), plus a monthly charge per $1,000 of
base policy Face Amount at issue for the first ten policy years as follows:
<TABLE>
<CAPTION>
ISSUE AGE CURRENT CHARGE GUARANTEED MAXIMUM CHARGE
---------------------- ---------------------------- ---------------------------------------
<S> <C> <C>
18-39 $.11 $.15
40-49 $.14 $.18
50-59 $.18 $.22
60-80 $.22 $.26
</TABLE>
The current monthly charge per $1,000 of base policy Face Amount at issue is
equal to $.02 during the 11th policy year and later (guaranteed not to exceed
$.06).
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Cost Of Insurance Charges. The base policy cost of insurance charge is
calculated by multiplying the net amount at risk at the beginning of the policy
month by the monthly base policy cost of insurance rate applicable to the
insured person at that time. The net amount at risk is the difference between
the base policy current death benefit and the amount in your Policy Account.
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 cost of any supplemental term insurance rider you purchase will also be
deducted monthly. Your monthly cost of insurance for this rider will equal the
cost of insurance rate for this rider times the amount of coverage (per
thousand) under the rider at the beginning of the policy month.
The monthly cost of insurance rates 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,
which are based on the Commissioner's 1980 Standard Ordinary Male and Female
Smoker and Non-Smoker Mortality Tables. The supplemental term insurance rider
has higher guaranteed maximum cost of insurance charges than the base policy.
The current and guaranteed monthly cost of insurance rates are determined based
on the sex, age, underwriting 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). Lower
current cost of insurance rates generally apply for insured persons who qualify
as non-tobacco users. To qualify, an insured person must meet additional
requirements that relate to tobacco use.
There will be no distinctions based on sex in the cost of insurance rates for IL
COLI II policies sold in Montana. The guaranteed cost of insurance rates for IL
COLI II 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 IL COLI II 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.
Mortality And Expense Risk Charge. A monthly charge for assuming MORTALITY AND
EXPENSE RISKS will be made. The annual current rate is .20% of the unloaned
Policy Account value on the date this charge is assessed. The annual guaranteed
maximum rate is .40%. 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.
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 13, SUBSTITUTION OF INSURED PERSON on page 11,
LIVING BENEFIT OPTION on page 11 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 9. 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, 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 17.
TRUST CHARGES. The Funds purchase shares of the Trust at net asset value. That
price reflects investment management fees, indirect expenses, such as brokerage
commissions, and certain direct operating expenses. The Trust does not impose a
sales charge. See DEDUCTIONS AND CHARGES in the SUMMARY on page 2 and THE
TRUST'S INVESTMENT ADVISER on page 6.
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ADDITIONAL INFORMATION ABOUT IL COLI II
YOUR POLICY CAN TERMINATE. Your insurance coverage under IL COLI II 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 the death benefit guarantee provision prevents this. See
GUARANTEEING THE DEATH BENEFIT on page 10. 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 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 17 for the
potential tax consequences of the termination of a policy.
YOU MAY RESTORE A POLICY AFTER IT TERMINATES. Subject to certain state
variations, you may restore a policy within six months after it terminates if
you provide evidence that the insured person is still insurable, and you make
the premium payment that we require to restore the policy. The required premium
will not be more than an amount sufficient to cover (i) total monthly deductions
for 3 months, calculated from the effective date of restoration; (ii) the
monthly administrative charges from the beginning of the grace period to the
effective date of restoration; and (iii) the charge for taxes and the Premium
Sales Charge associated with this payment. We will determine the amount of this
required premium as if no interest or investment performance were credited to,
or charged against, your Policy Account. The policy will be restored as of the
beginning of the policy month which coincides with or follows the date we
approve your application. Your restored policy will not have any loan balance
even if there was a loan outstanding under the terminated policy.
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. 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. Your
restored policy will be treated as a continuation of the terminated policy for
purposes of determining the level of Premium Sales Charge and monthly
administrative charge still due. See TAX EFFECTS on page 17 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 IL
COLI II 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 9.
Generally, we determine the Register Date based upon when we receive your full
minimum initial premium. In most cases:
o If you submit the full minimum 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 minimum 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. An early Register Date may
also be permitted to provide a younger age at issue. We may also permit
policyowners to delay a Register Date (up to three months) in employer sponsored
cases.
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 minimum initial premium is received at our
Administrative Office before the Register Date. Otherwise, the investment start
date will be the date the full minimum 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 full minimum
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
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<PAGE>
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 9.
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 general understanding of the effect of the
current Federal income tax laws as currently interpreted on IL COLI II policies.
The tax effects on corporate taxpayers, other non-natural owners such as trusts,
non-U.S. residents or non-U.S. citizens, may be different. For example,
corporations may be required to include certain life insurance policy amounts
for purposes of determining Federal alternative minimum taxable income. Further,
the tax treatment of individuals receiving benefits under an employer-sponsored
plan or arrangement attributable to life insurance may be determined under the
Federal tax rules governing such plan or arrangement. 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 IL COLI II 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 IL COLI
II will meet these requirements, and that:
o the death benefit received by the beneficiary under your IL COLI II 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 and administrative 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 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 including distribution of amounts that may be includable in income.
See POLICY CHANGES on page 18.
IF YOUR IL COLI II 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
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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.
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 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. The exceptions
generally do not apply to policies owned by corporations or other entities. 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.
POLICY TERMINATIONS. A policy which has terminated without value may have the
tax consequences described above even though you may be able to reinstate your
policy. For tax purposes, some reinstatements may be treated as the purchase of
a new insurance contract.
LIVING BENEFITS. Amounts received under a life insurance contract on the life of
individuals who are terminally ill, as defined by the tax law, are generally
excludable from gross income as amounts paid by reason of the death of the
insured. We believe that the living benefit which may be payable under your
policy meets the law's definition of terminally ill and can qualify for this
exclusion. This exclusion does not apply, however, to amounts paid to someone
other than the insured if the payee has an insurable interest in the insured's
life because the insured is a director, officer or employee of the payee or by
reason of the insured being financially interested in any trade or business
carried on by the payee.
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 by us 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, and not the owner of the policy, would be considered
the owner of the assets of the Separate Account.
POLICY CHANGES. 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 the Face Amount, 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
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<PAGE>
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 IL COLI II 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.
The particular situation of each policyowner, insured 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 IL COLI II 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 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
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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.
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 IL COLI II
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 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 a substitution of insured person) after the change has been in
effect for two years during the insured person's lifetime.
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. 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.
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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.
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). The Equitable Access Account is not available to
corporate or other non-natural beneficiaries. 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 IL COLI II policy (Plan No. 96-300) has been filed with and approved by
insurance officials in 46 jurisdictions. 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.
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SPECIAL CIRCUMSTANCES
Equitable may vary the charges and other terms of IL COLI II where special
circumstances result in sales or administrative expenses or mortality risks that
are different than those normally associated with IL COLI II policies. These
variations will be made only in accordance with uniform rules that we establish.
DISTRIBUTION
EQ Financial Consultants, Inc., a wholly-owned subsidiary of Equitable, is the
principal underwriter of the Trust under a Distribution Agreement. EQ Financial
Consultants is also the distributor of our variable life insurance policies and
variable annuity contracts under a Distribution and Servicing Agreement. EQ
Financial Consultants' principal business address is 1755 Broadway, New York, NY
10019. EQ Financial Consultants 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. EQ Financial Consultants is
paid a fee for its services as distributor of our policies. For 1994 and 1995,
we paid EQ Financial Consultants fees of $216,920 and $325,380, respectively,
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 EQ Financial Consultants. The agent who sells you this policy
receives sales commissions from Equitable. We pay commissions from our own
resources, including the Premium Sales Charge deducted from your premium.
Generally, the agent will receive an amount equal to a maximum of 15% of the
premiums paid up to one target premium, 7 1/2% of premiums paid up to the next
six target premiums and 3% of the premiums paid in excess of that amount. Use of
a term insurance rider on the insured person in place of an equal amount of
coverage under the base policy reduces commissions. Commissions paid to agents
based upon refunded premiums or policies that are terminated or surrendered in
the early policy years may be recovered. 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 EQ Financial Consultants 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.
LEGAL PROCEEDINGS
We are not involved in any legal proceedings that would be considered material
with respect to a policyowner's interest in the Separate Account.
ACCOUNTING AND ACTUARIAL EXPERTS
The financial statements of Separate Account FP and Equitable included in this
prospectus have been audited for the years ended December 31, 1995, 1994 and
1993 by Price Waterhouse LLP, as stated in their reports. The financial
statements of Separate Account FP and Equitable 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 for the periods ended
September 30, 1996 and 1995 included in this prospectus are unaudited.
The financial statements of Equitable contained in this prospectus should be
considered only as bearing upon the ability of Equitable to meet its obligations
under the IL COLI II policies. They should not be considered as bearing upon the
investment experience of the funds of the Separate Account. The financial
statements of Separate Account FP include periods when Separate Account FP was
part of Equitable Variable, a wholly-owned subsidiary of Equitable. The assets
of Separate Account FP were assumed by Equitable on January 1, 1997 when
Equitable Variable was merged into Equitable.
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.
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MANAGEMENT
Here is a list of our directors and, to the extent they are responsible for
variable life insurance operations, our principal officers and a brief statement
of their business experience for the past five years. Unless otherwise noted,
their address is 1290 Avenue of the Americas, New York, New York 10104.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------- ------------------------
DIRECTORS
<S> <C>
Claude Bebear Director of Equitable since July 1991. Chairman of the Board of the Holding Company (February
AXA S.A. 1996-present) and a Director of other affiliates of Equitable. Chairman and Chief Executive
23, Avenue Matignon Officer of AXA since February 1989. Chief Executive Officer of the AXA Group since 1974 and
75008 Paris, France Chairman or Director of numerous subsidiaries and affiliated companies of the AXA Group.
Christopher J. Brocksom Director of Equitable since July 1992. Chief Executive Officer, AXA Equity & Law Life
AXA Equity & Law Assurance Society ("AXA Equity & Law") and various directorships and officerships with AXA
Amersham Road Equity & Law affiliated companies.
High Wycombe
Bucks HP 13 5 AL, England
Francoise Colloc'h Director of Equitable since July 1992. Executive Vice President, Culture -- Management --
AXA S.A. Communications, AXA, and various positions with AXA affiliated companies.
23, Avenue Matignon
75008 Paris, France
Henri de Castries Director of Equitable since September 1993. Vice Chairman of the Board of the Holding
AXA S.A. Company since February 1996. Executive Vice President Financial Services and Life Insurance
23, Avenue Matignon Activities of AXA since 1993. Prior thereto, General Secretary from 1991 to 1993 and
75008 Paris, France Central Director of Finances from 1989 to 1991. Also Director or Officer of various
subsidiaries and affiliates of the AXA Group. Director of the Holding Company and of other
Equitable affiliates.
Joseph L. Dionne Director of Equitable since May 1982. Chairman (since April 1988) and Chief Executive
The McGraw-Hill Companies Officer (Since April 1983) of The McGraw-Hill Companies. Director of the Holding Company.
1221 Avenue of the Americas
New York, NY 10020
William T. Esrey Director of Equitable since July 1986. Chairman (since April 1990) and Chief Executive
Sprint Corporation Officer (since 1985) and President (1985 to February 1996) of Sprint Corporation. Director
P.O. Box 11315 of the Holding Company.
Kansas City, MO 64112
Jean-Rene Fourtou Director of Equitable since July 1992. Chairman and Chief Executive Officer, Rhone-Poulenc,
Rhone-Poulenc S.A. S.A. since 1986. Director of the Holding Company and AXA.
25 Quai Paul Doumer
92408 Courbevoie Cedex,
France
Norman C. Francis Director of Equitable since March 1989. President, Xavier University of Louisiana.
Xavier University of Louisiana
7325 Palmetto Street
New Orleans, LA 70125
Donald J. Greene Director of Equitable since July 1991. Partner, LeBoeuf, Lamb, Greene & MacRae since 1965.
LeBouef, Lamb, Greene & MacRae Director of the Holding Company.
125 West 55th Street
New York, NY 10019-4513
John T. Hartley Director of Equitable since August 1987. Retired Chairman and Chief Executive Officer of
Harris Corporation Harris Corporation (until July 1995); prior thereto, he held the positions of Chairman of
1025 NASA Boulevard Harris Corporation from 1987, Chief Executive Officer from 1986 and President from October
Melbourne, FL 32919 1987 to April 1993.
John H.F. Haskell, Jr. Director of Equitable since July 1992. Managing Director of Dillon, Read & Co., Inc. since
Dillon, Read & Co., Inc. 1975 and member of its Board of Directors.
535 Madison Avenue
New York, NY 10022
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------- ------------------------
DIRECTORS (continued)
<S> <C>
W. Edwin Jarmain Director of Equitable since July 1992. President of Jarmain Group Inc. since 1979; also an
Jarmain Group Inc. Officer or Director of several affiliated companies. Chairman and Director of FCA
121 King Street West International Ltd.; served as President, CEO and Director from 1992 through 1993. Director of
Suite 2525, Box 36 various AXA affiliated companies. Director of the Holding Company since July 1992.
Toronto, Ontario M5H 3T9,
Canada
G. Donald Johnston, Jr. Director of Equitable since January 1986. Retired Chairman and Chief Executive Officer, JWT
184-400 Ocean Road Group, Inc. and J. Walter Thompson Company.
John's Island
Vero Beach, FL 32963
Winthrop Knowlton Director of Equitable since October 1973. Chairman of the Board of Knowlton Brothers, Inc.
Knowlton Brothers, Inc. since May 1989; also President of Knowlton Associates, Inc. since September 1987; Director
530 Fifth Avenue of the Holding Company.
New York, NY 10036
Arthur L. Liman Director of Equitable since March 1984. Partner, Paul, Weiss, Rifkind, Wharton & Garrison
Paul, Weiss, Rifkind, Wharton since 1966.
and Garrison
1285 Avenue of the Americas
New York, NY 10019
George T. Lowy Director of Equitable since July 1992. Partner, Cravath, Swaine & Moore.
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Didier Pineau-Valencienne Director of Equitable since February 1996. Chairman and Chief Executive Officer of
Schneider S.A. Schneider S.A. since 1981 and Chairman or Director of numerous subsidiaries and affiliated
64-70 Avenue Jean-Baptiste companies of Schneider. Director of AXA and the Holding Company.
Clament
96646 Boulogne-Billancourt
Cedex
France
George J. Sella, Jr. Director of Equitable since May 1987. Retired Chairman and Chief Executive Officer of
P.O. Box 397 American Cyanamid Company (until April 1993); prior thereto, Chairman from 1984, Chief
Newton, NJ 07860 Executive Officer from 1983 and President from 1979 to 1991.
Dave H. Williams Director of Equitable since March 1991. Chairman and Chief Executive Officer of Alliance
Alliance Capital Management since 1977 and Chairman or Director of numerous subsidiaries and affiliated companies of
Corporation Alliance. Director of the Holding Company.
1345 Avenue of the Americas
New York, NY 10105
OFFICERS -- DIRECTORS
James M. Benson Director of Equitable since February 1994. Chief Executive Officer (since February 1996)
and President of Equitable (since February 1994); prior thereto, Chief Operating Officer
(February 1994 to February 1996) and Senior Executive Vice President of Equitable (April
1993 to February 1994). Prior thereto, President, Management Compensation Group (1983 to
February 1993). Previously, President, Chief Executive Officer and a Director of Equitable
Variable Life Insurance Company ("EVLICO"). Senior Executive Vice President of the Holding
Company since February 1994 and Chief Operating Officer since February 1996; Director of
various Equitable affiliated companies; Director of the Holding Company since February 1994.
William T. McCaffrey Director of Equitable since February 1996. Senior Executive Vice President and Chief
Operating Officer of Equitable (all since February 1996). Prior thereto, Executive Vice
President (from February 1986 to February 1996) and Chief Administrative Officer (from
February 1988 to February 1996). Executive Vice President and Chief Administrative Officer
(since February 1994) of the Holding Company. Director of various Equitable affiliated
companies, including EVLICO.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------- ------------------------
OFFICERS -- DIRECTORS (continued)
<S> <C>
Joseph J. Melone Chairman of Equitable since February 1994 and a Director of Equitable since November 1990.
Chief Executive Officer of the Holding Company since February 1996 and President of the
Holding Company since May 1992. Previously, Chief Executive Officer of Equitable from
February 1994, to February 1996; prior to February 1994, President, Chief Executive Officer
and Director of Equitable from September 1992 to February 1994 and President, Chief
Operating Officer and a Director since November 1990. Former Chairman, Chief Executive
Officer and Director of EVLICO. Director of various Equitable and AXA affiliated companies.
OTHER OFFICERS
A. Frank Beaz Senior Vice President, Equitable; prior thereto, Vice President, Equitable (until March
1995). Executive Vice President, EQ Financial Consultants, Inc. ("EQF") (May 1995-present).
Leon B. Billis Senior Vice President, Equitable; prior thereto, Vice President, Equitable (until November
1994); Vice President, EVLICO (July 1996 to December 1996).
Harvey Blitz Senior Vice President and Deputy Chief Financial Officer, Equitable. Senior Vice President,
Holding Company; Director or Chairman of various Equitable affiliated companies; Director
(October 1992 to December 1996) and Vice President, EVLICO (April 1995 to December 1996).
Kevin R. Byrne Vice President and Treasurer, Equitable; Vice President and Treasurer, Holding Company;
Treasurer, EVLICO (until December 1996) and Frontier Trust Company; Director or Officer of
other Equitable affiliated companies.
Jerry M. de St. Paer Executive Vice President, Equitable. Senior Executive Vice President (since May 1996) and
Chief Financial Officer (since May 1992) of the Holding Company. Executive Vice President
and Chief Operating Officer (since September 1994) of Equitable Investment Corporation.
Previously held various officerships with Equitable and its affiliates. Director and Senior
Investment Officer, EVLICO (until December 1996). Director of various Equitable affiliated
companies.
Gordon G. Dinsmore Senior Vice President and Corporate Actuary, Equitable. Executive Vice President, Equico.
Director and Senior Vice President, EVLICO (until December 1996); Director of other
Equitable affiliated companies.
Alvin H. Fenichel Senior Vice President and Controller, Equitable. Senior Vice President and Controller,
Holding Company. Vice President and Controller (until December 1996), EVLICO; Vice
President, The Equitable of Colorado, Inc. ("Colorado").
Paul J. Flora Senior Vice President and Auditor, Equitable. Prior thereto, Vice President and Auditor
(February 1994 to March 1996). Vice President and Auditor, Holding Company (September 1994
to present). Vice President/Auditor, National Westminster Bank (November 1984 to June 1994).
Robert E. Garber Executive Vice President and General Counsel, Equitable; Executive Vice President and General
Counsel, Holding Company. Prior thereto, Senior Vice President and General Counsel of
Equitable and the Holding Company (September 1993 to September 1994) and Senior Vice
President and Deputy General Counsel of Equitable (September 1989 to September 1993).
Donald R. Kaplan Vice President and Acting Chief Compliance Officer, Equitable. Prior thereto, Vice President
and Counsel (until June 1996).
Michael S. Martin Senior Vice President, Equitable. Chairman, EQF; Chairman and Chief Executive Officer,
EquiSource of New York (January 1992 to October 1994) and Frontier (April 1992 to October
1994); Vice President, Hudson River Trust ("HRT") (February 1993 to February 1995);
Director, Vice President and Treasurer, Equitable Distributors, Inc. (August 1993 to
February 1995), also Chairman, President, and Chief Executive Officer (December 1993 to
February 1995); Director, Equitable Underwriting and Sales Agency (Bahamas), Ltd. (May 1996
to present) and Colorado (January 1995 to present).
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------- ------------------------
OTHER OFFICERS (continued)
<S> <C>
Peter D. Noris Executive Vice President and Chief Investment Officer, Equitable. Executive Vice President
(since May 1995) and Chief Investment Officer (since July 1995), Holding Company. Prior
thereto, Vice President/Manager, Insurance Companies Investment Strategies Group, Solomon
Brothers, Inc. (November 1992 to May 1995). Prior thereto, with Morgan Stanley & Co., Inc.,
from October 1984 to November 1992 as Principal, Fixed Income Insurance Group. Former
Director and Senior Vice President of EVLICO. Director of other Equitable affiliates.
Anthony C. Pasquale Senior Vice President, Equitable. Chairman and President, Equitable Realty Assets
Corporation (July 1995 to present). Director of other Equitable affiliates.
Michael J. Rich Senior Vice President, Equitable, since October 1994; prior thereto, Vice President of
Underwriting, John Hancock Mutual Life Insurance Co. since 1988. Director of EVLICO (May
1995 to December 1996).
Pauline Sherman Vice President, Secretary and Associate General Counsel, Equitable; prior thereto, Vice
President and Associate General Counsel (until September 1995). Vice President, Secretary and
Associate General Counsel, Holding Company (September 1995 to present).
Samuel Shlesinger Senior Vice President and Actuary, Equitable; prior thereto, Vice President and Actuary.
Previously, Director and Senior Vice President, EVLICO (February 1988 to December 1996).
Director, Chairman and Chief Executive Officer, Equitable of Colorado. Vice President, HRT.
Jose S. Suquet Executive Vice President and Chief Agency Officer, Equitable, since August 1994; prior
thereto, Agency Manager, Equitable (February 1985 to August 1994).
Stanley B. Tulin Senior Executive Vice President and Chief Financial Officer, Equitable; prior thereto,
Chairman, Insurance Consulting and Actuarial Practice, Coopers & Lybrand (until April 1996);
Executive Vice President, Holding Company.
</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 and Cash Surrender
Values ("policy benefits") under a hypothetical IL COLI II 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 45-year-old preferred risk male non-tobacco user. Planned premium payments
of $10,392 for an initial Face Amount of $200,000 are assumed to be paid at the
beginning of each policy year. The illustration assumes no policy loan has been
taken and that there is no coverage under a supplemental term insurance rider.
The tables illustrate both current and guaranteed charges. The tables assume
.51% per annum for investment management (the average of the effective annual
advisory fees applicable to each Trust portfolio during 1995) and .04% per annum
for direct Trust expenses. The assumption for direct Trust expenses equals the
weighted average of actual Trust expenses incurred by the portfolios of the
Trust for the year ended December 31, 1995 as disclosed in the Trust's
prospectus. The effect of these adjustments is that on a 0% gross rate of return
the net rate of return would be -0.55%, on 6% it would be 5.42%, and on 12% it
would be 11.39%. Remember, however, that investment management fees and direct
Trust expenses vary by portfolio. See THE TRUST'S INVESTMENT ADVISER on page 6.
The tables also assume a charge for taxes of 2% of premiums. The tables
illustrate 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.
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 Cash
Surrender Value. If you request illustrations more than once in any policy year,
we may charge for the illustration.
27
<PAGE>
<TABLE>
IL COLI II
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $10,392 TOTAL INITIAL FACE AMOUNT $200,000
MALE AGE 45
PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION B
ASSUMING CURRENT CHARGES
<CAPTION>
DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED -------------------------------------------------
YEAR PREMIUMS(1) 0% 6% 12%
---- ----------- -- -- ---
<S> <C> <C> <C> <C>
1 $ 10,912 $208,441 $208,968 $209,495
2 22,369 216,734 218,316 219,961
3 34,399 224,902 228,085 231,527
4 47,030 233,095 238,451 244,475
5 60,293 241,156 249,285 258,795
6 74,220 249,139 260,664 274,694
7 88,842 257,030 272,604 292,334
8 104,196 265,382 285,718 312,529
9 120,317 273,579 299,420 334,882
10 137,245 281,635 313,753 359,645
15 235,457 320,376 396,801 531,050
20 (age 65) 360,802 351,525 496,693 813,719
<CAPTION>
CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF
POLICY -------------------------------------------------
YEAR 0% 6% 12%
---- -- -- ---
<S> <C> <C> <C>
1 $ 8,441 $ 8,968 $ 9,495
2 16,734 18,316 19,961
3 24,902 28,085 31,527
4 33,095 38,451 44,475
5 41,156 49,285 58,795
6 49,139 60,664 74,694
7 57,030 72,604 92,334
8 65,382 85,718 112,529
9 73,579 99,420 134,882
10 81,635 113,753 159,645
15 120,376 196,801 331,050
20 (age 65) 151,525 296,693 613,719
</TABLE>
(1) Assumes net interest of 5% compounded annually.
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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.
THE DEATH BENEFIT GUARANTEE PREMIUM FOR THIS POLICY IS $3,568.04.
28
<PAGE>
<TABLE>
IL COLI II
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $10,392 TOTAL INITIAL FACE AMOUNT $200,000
MALE AGE 45
PREFERRED RISK NON-TOBACCO USER DEATH BENEFIT OPTION B
ASSUMING GUARANTEED CHARGES
<CAPTION>
DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED -------------------------------------------------
YEAR PREMIUMS(1) 0% 6% 12%
---- ----------- -- -- ---
<S> <C> <C> <C> <C>
1 $ 10,912 $207,849 $208,356 $208,864
2 22,369 215,569 217,074 218,641
3 34,399 223,159 226,168 229,426
4 47,030 230,764 235,807 241,484
5 60,293 238,228 245,856 254,787
6 74,220 245,547 256,330 269,467
7 88,842 252,708 267,236 285,659
8 104,196 259,700 278,583 303,514
9 120,317 266,512 290,379 323,201
10 137,245 273,127 302,628 344,902
15 235,457 307,258 376,211 497,821
20 (age 65) 360,802 333,804 463,228 746,929
<CAPTION>
CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF
POLICY ------------------------------------------------------
YEAR 0% 6% 12%
---- -- -- ---
<S> <C> <C> <C>
1 $ 7,849 $ 8,356 $ 8,864
2 15,569 17,074 18,641
3 23,159 26,168 29,426
4 30,764 35,807 41,484
5 38,228 45,856 54,787
6 45,547 56,330 69,467
7 52,708 67,236 85,659
8 59,700 78,583 103,514
9 66,512 90,379 123,201
10 73,127 102,628 144,902
15 107,258 176,211 297,821
20 (age 65) 133,804 263,228 546,929
</TABLE>
(1) Assumes net interest of 5% compounded annually.
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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.
THE DEATH BENEFIT GUARANTEE PREMIUM FOR THIS POLICY IS $3,568.04.
29
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditor's Report.......................................................................................... FSA-2
Financial Statements:
Statement of Assets and Liabilities, December 31, 1995.......................................................... FSA-3
Statement of Operations for the Years Ended December 31, 1995, 1994 and 1993.................................... FSA-4
Statement of Changes in Net Assets for the Years Ended December 31, 1995, 1994 and 1993......................... FSA-8
Notes to Financial Statements................................................................................... FSA-12
Interim Financial Statements:
Statement of Assets and Liabilities, September 30, 1996 (unaudited)............................................. FSA-20
Statement of Operations for the Nine Months Ended September 30, 1996 and 1995 (unaudited)....................... FSA-21
Statement of Changes in Net Assets for the Nine Months Ended September 30, 1996 and 1995 (unaudited)............ FSA-24
Notes to Interim Financial Statements (unaudited)............................................................... FSA-27
</TABLE>
FSA-1
<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 statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of Money Market Division,
Intermediate Government Securities Division, Quality Bond Division, High Yield
Division, Growth and Income Division, Equity Index Division, Common Stock
Division, Global Division, International Division, Aggressive Stock Division,
Conservative Investors Division, Balanced Division and Growth Investors
Division, separate investment divisions of Equitable Variable Life Insurance
Company ("Equitable Variable Life") Separate Account FP at December 31, 1995 and
the results of each of their operations and changes in each of their net assets
for each of the periods indicated, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Equitable Variable Life's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of shares in The Hudson River Trust at
December 31, 1995 with the transfer agent, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
New York, NY
February 7, 1996, except as to Note 8 which is as of September 19, 1996
FSA-2
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE
MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY
MARKET SECURITIES BOND YIELD INCOME 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 7)
Cost: $207,548,119..... $207,638,095
37,536,467..... $37,681,989
141,011,715..... $138,906,039
68,700,148..... $72,524,129
17,021,456..... $19,144,802
59,443,291..... $71,895,056
Receivable for sales of
shares of The Hudson
River Trust........... -- -- -- -- -- --
Receivable for policy-
related transactions.. 1,030,719 472,227 195,736 671,870 272,371 214,843
------------ ----------- ------------ ----------- ----------- -----------
Total Assets............ 208,668,814 38,154,216 139,101,775 73,195,999 19,417,173 72,109,899
------------ ----------- ------------ ----------- ----------- -----------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. 1,021,043 488,551 195,429 740,734 272,227 214,856
Payable for policy-
related transactions.. -- -- -- -- -- --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 514,240 516,621 618,900 524,303 526,633 271,428
------------ ----------- ------------ ----------- ---------- -----------
Total Liabilities....... 1,535,283 1,005,172 814,329 1,265,037 798,860 486,284
------------ ----------- ------------ ----------- ---------- -----------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS......... $207,133,531 $37,149,044 $138,287,446 $71,930,962 $18,618,313 $71,623,615
============ =========== ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
COMMON AGGRESSIVE
STOCK GLOBAL INTERNATIONAL STOCK
DIVISION DIVISION DIVISION DIVISION
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 7)
Cost: $966,230,780...... $1,148,055,059
297,303,481...... $333,829,077
11,991,226...... $12,659,132
475,758,260...... $556,029,378
Receivable for sales of
shares of The Hudson
River Trust........... -- -- -- --
Receivable for policy-
related transactions.. 233,000 421,042 137,166 800,569
-------------- ------------ ----------- ------------
Total Assets............ 1,148,288,059 334,250,119 12,796,298 556,829,947
-------------- ------------ ----------- ------------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. 679,729 246,368 143,511 1,121,615
Payable for policy-
related transactions.. -- -- -- --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 1,023,056 506,731 220,849 520,201
-------------- ------------ ----------- ------------
Total Liabilities....... 1,702,785 753,099 364,360 1,641,816
-------------- ------------ ----------- ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS....... $1,146,585,274 $333,497,020 $12,431,938 $555,188,131
============== ============ =========== ============
</TABLE>
See Notes to Financial Statements.
ASSET ALLOCATION SERIES
--------------------------------------------
CONSERVATIVE GROWTH
INVESTORS BALANCED INVESTORS
DIVISION DIVISION DIVISION
------------ ------------ ------------
ASSETS
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 7)
Cost: $162,300,470...... $172,662,590
356,282,500...... $399,379,687
474,917,898...... $556,703,771
Receivable for sales of
shares of The Hudson
River Trust........... 76,736 -- --
Receivable for policy-
related transactions.. -- -- 191,779
------------ ------------ ------------
Total Assets............ 172,739,326 399,379,687 556,895,550
------------ ------------ ------------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. -- 179,701 414,996
Payable for policy-
related transactions.. 81,465 47,918 --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 570,762 586,859 602,888
------------ ------------ ------------
Total Liabilities....... 652,227 814,478 1,017,884
------------ ------------ ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS....... $172,087,099 $398,565,209 $555,877,666
============ ============ ============
See Notes to Financial Statements.
FSA-3
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
MONEY MARKET DIVISION INTERMEDIATE GOVERNMENT SECURITIES DIVISION
------------------------------------ -------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------ --------------------------------------
1995 1994 1993 1995 1994 1993
---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust....... $9,225,401 $5,368,883 $4,163,389 $2,010,283 $ 5,671,984 $14,930,827
Expenses (Note 3):
Mortality and expense risk charges.......... 954,556 826,379 834,113 197,721 527,675 1,470,325
---------- ---------- ---------- ---------- ----------- -----------
NET INVESTMENT INCOME........................... 8,270,845 4,542,504 3,329,276 1,812,562 5,144,309 13,460,502
---------- ---------- ---------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 3,999,846
Realized gain distribution from
The Hudson River Trust.................... -- -- -- -- -- 11,449,074
---------- ---------- ---------- ---------- ----------- -----------
NET REALIZED GAIN (LOSS)........................ (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920
Unrealized appreciation/depreciation on
investments:
Beginning of period......................... 32,760 (14,267) (224,885) (2,736,863) (1,617,237) 1,966,231
End of period............................... 89,976 32,760 (14,267) 145,522 (2,736,863) (1,617,237)
---------- ---------- ---------- ---------- ----------- -----------
Change in unrealized appreciation/depreciation
during the period........................... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468)
---------- ---------- ---------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS................................ (375,131) 142,557 (129,136) 2,071,617 (11,283,602) 11,865,452
---------- ---------- ---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................... $7,895,714 $4,685,061 $3,200,140 $3,884,179 $(6,139,293) $25,325,954
========== ========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
QUALITY BOND DIVISION
-------------------------------------------
OCTOBER 1*
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------- ------------
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust....... $ 7,958,285 $ 8,123,722 $ 1,221,840
Expenses (Note 3):
Mortality and expense risk charges.......... 767,627 689,178 163,308
----------- ------------ ------------
NET INVESTMENT INCOME........................... 7,190,658 7,434,544 1,058,532
----------- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments......... (632,666) (410,697) (106)
Realized gain distribution from
The Hudson River Trust.................... -- -- 130,973
----------- ------------ ------------
NET REALIZED GAIN (LOSS)........................ (632,666) (410,697) 130,867
Unrealized appreciation/depreciation on
investments:
Beginning of period......................... (15,521,200) (1,886,621) --
End of period............................... (2,105,676) (15,521,200) (1,886,621)
----------- ------------ -----------
Change in unrealized appreciation/depreciation
during the period........................... 13,415,524 (13,634,579) (1,886,621)
----------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS................................ 12,782,858 (14,045,276) (1,755,754)
----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................... $19,973,516 $ (6,610,732) $ (697,222)
=========== ============ ===========
</TABLE>
See Notes to Financial Statements.
* Commencement of Operations
FSA-4
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
HIGH YIELD DIVISION
----------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust................. $ 6,518,568 $ 4,578,946 $4,488,259
Expenses (Note 3):
Mortality and expense risk charges.................... 371,369 305,522 285,992
----------- ----------- ----------
NET INVESTMENT INCOME..................................... 6,147,199 4,273,424 4,202,267
----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments................... (179,454) (328,199) 107,852
Realized gain distribution from
The Hudson River Trust.............................. -- -- 1,030,687
----------- ----------- ----------
NET REALIZED GAIN (LOSS).................................. (179,454) (328,199) 1,138,539
Unrealized appreciation/depreciation on investments:
Beginning of period................................... (873,103) 4,734,999 763,746
End of period......................................... 3,823,981 (873,103) 4,734,999
----------- ----------- ----------
Change in unrealized appreciation/depreciation
during the period..................................... 4,697,084 (5,608,102) 3,971,253
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 4,517,630 (5,936,301) 5,109,792
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS......................................... $10,664,829 $(1,662,877) $9,312,059
=========== =========== ==========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION
--------------------------------------- --------------------------
OCTOBER 1* APRIL 1*
TO YEAR ENDED TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------ ------------- ----------- -------------
1995 1994 1993 1995 1994
---------- --------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust................. $ 380,677 $ 108,492 $ 3,394 $ 964,775 $ 596,180
Expenses (Note 3):
Mortality and expense risk charges.................... 69,716 19,204 1,833 289,199 152,789
---------- --------- ------- ----------- ---------
NET INVESTMENT INCOME..................................... 310,961 89,288 1,561 675,576 443,391
---------- --------- ------- ----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments................... 2,791 (11,709) (134) 3,060 (6,949)
Realized gain distribution from
The Hudson River Trust.............................. -- -- -- 536,890 134,154
---------- --------- ------- ----------- ---------
NET REALIZED GAIN (LOSS).................................. 2,791 (11,709) (134) 539,950 127,205
Unrealized appreciation/depreciation on investments:
Beginning of period................................... (141,585) (904) -- (399,286) --
End of period......................................... 2,123,346 (141,585) (904) 12,451,765 (399,286)
---------- --------- ------- ----------- ---------
Change in unrealized appreciation/depreciation
during the period..................................... 2,264,931 (140,681) (904) 12,851,051 (399,286)
---------- --------- ------- ----------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 2,267,722 (152,390) (1,038) 13,391,001 (272,081)
---------- --------- ------- ----------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS......................................... $2,578,683 $ (63,102) $ 523 $14,066,577 $ 171,310
========== ========= ======= =========== =========
</TABLE>
See Notes to Financial Statements.
* Commencement of Operations
FSA-5
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK DIVISION GLOBAL STOCK DIVISION
-------------------------------------------- -----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------------- -----------------------------------------
1995 1994 1993 1995 1994 1993
------------ ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson
River Trust.................... $ 14,259,262 $ 11,755,355 $ 10,311,886 $ 5,152,442 $ 2,768,605 $ 1,060,406
Expenses (Note 3):
Mortality and expense risk
charges........................ 6,050,368 4,741,008 4,005,102 1,743,898 1,211,620 466,897
------------ ------------ ------------ ----------- ----------- -----------
NET INVESTMENT INCOME................ 8,208,894 7,014,347 6,306,784 3,408,544 1,556,985 593,509
------------ ------------ ------------ ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on
investments.................... 16,793,683 292,144 4,176,629 3,049,444 3,347,704 1,333,766
Realized gain distribution from
The Hudson River Trust......... 63,838,178 43,936,280 85,777,775 9,214,950 4,821,242 11,642,904
------------ ------------ ------------ ----------- ----------- -----------
NET REALIZED GAIN (LOSS)............. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670
Unrealized appreciation
(depreciation) on investments:
Beginning of period.............. (2,048,649) 71,350,568 22,647,989 3,130,280 7,062,877 2,783,724
End of period.................... 181,824,279 (2,048,649) 71,350,568 36,525,596 3,130,280 7,062,877
------------ ------------ ------------ ----------- ----------- -----------
Change in unrealized appreciation/
depreciation during the period... 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153
------------ ------------ ------------ ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.............. 264,504,789 (29,170,793) 138,656,983 45,659,710 4,236,349 17,255,823
------------ ------------ ------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.......... $272,713,683 $(22,156,446) $144,963,767 $49,068,254 $ 5,793,334 $17,849,332
============ ============ ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
INTERNATIONAL
DIVISION AGGRESSIVE STOCK DIVISION
-------------- --------------------------------------------
APRIL 3*
TO
DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------- --------------------------------------------
1995 1995 1994 1993
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson
River Trust.................... $195,500 $ 1,268,689 $ 400,102 $ 766,228
Expenses (Note 3):
Mortality and expense risk
charges........................ 36,471 2,702,978 1,944,639 1,757,109
-------- ------------ ------------ ------------
NET INVESTMENT INCOME................ 159,029 (1,434,289) (1,544,537) (990,881)
-------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on
investments.................... (790) 11,560,966 (6,075,250) 35,696,507
Realized gain distribution from
The Hudson River Trust......... 51,741 61,903,470 -- 25,339,962
-------- ------------ ------------ ------------
NET REALIZED GAIN (LOSS)............. 50,951 73,464,436 (6,075,250) 61,036,469
Unrealized appreciation
(depreciation) on investments:
Beginning of period.............. -- 30,761,318 35,185,988 53,885,737
End of period.................... 667,906 80,271,118 30,761,318 35,185,988
-------- ------------ ------------ ------------
Change in unrealized appreciation/
depreciation during the period... 667,906 49,509,800 (4,424,670) (18,699,749)
-------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.............. 718,857 122,974,236 (10,499,920) 42,336,720
-------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.......... $877,886 $121,539,947 $(12,044,457) $ 41,345,839
======== ============ ============ ============
</TABLE>
See Notes to Financial Statements.
*Commencement of Operations
FSA-6
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONCLUDED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
---------------------------------------------------------------------------------
CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION
-------------------------------------- ----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------- ----------------------------------------
1995 1994 1993 1995 1994 1993
----------- ----------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust....... $ 8,169,109 $ 6,205,574 $4,088,977 $12,276,328 $ 10,557,487 $10,062,862
Expenses (Note 3):
Mortality and expense risk charges.......... 921,294 750,164 551,610 2,237,982 2,103,510 2,047,811
----------- ----------- ---------- ----------- ------------ -----------
NET INVESTMENT INCOME........................... 7,247,815 5,455,410 3,537,367 10,038,346 8,453,977 8,015,051
----------- ----------- ---------- ----------- ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments......... (378,551) (421,501) 91,739 (2,466,524) 858,164 1,446,919
Realized gain distribution from
The Hudson River Trust.................... 1,068,272 -- 4,651,717 10,894,130 -- 20,280,817
----------- ----------- ---------- ----------- ------------ -----------
NET REALIZED GAIN (LOSS)........................ 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736
Unrealized appreciation (depreciation) on
investments:
Beginning of period......................... (8,767,697) 1,915,037 2,223,612 (2,878,875) 37,960,661 30,072,900
End of period............................... 10,362,120 (8,767,697) 1,915,037 43,097,187 (2,878,875) 37,960,661
----------- ----------- ---------- ----------- ------------ -----------
Change in unrealized appreciation/depreciation
during the period........................... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761
----------- ----------- ---------- ----------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS................................ 19,819,538 (11,104,236) 4,434,881 54,403,668 (39,981,372) 29,615,497
----------- ----------- ---------- ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................... $27,067,353 $(5,648,826) $7,972,248 $64,442,014 $(31,527,395) $37,630,548
=========== =========== ========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-------------------------------------------
GROWTH INVESTORS DIVISION
-------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust......... $ 15,855,901 $ 10,663,204 $ 5,922,228
Expenses (Note 3):
Mortality and expense risk charges............ 2,796,354 1,995,747 1,274,117
------------ ------------ -----------
NET INVESTMENT INCOME............................. 13,059,547 8,667,457 4,648,111
------------ ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments........... 1,752,185 241,591 52,392
Realized gain distribution from
The Hudson River Trust...................... 7,421,853 -- 14,624,517
------------ ------------ -----------
NET REALIZED GAIN (LOSS).......................... 9,174,038 241,591 14,676,909
Unrealized appreciation (depreciation) on
investments:
Beginning of period........................... (770,693) 20,567,604 12,746,740
End of period................................. 81,785,873 (770,693) 20,567,604
------------ ------------ -----------
Change in unrealized appreciation/depreciation
during the period............................. 82,556,566 (21,338,297) 7,820,864
------------ ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS.................................. 91,730,604 (21,096,706) 22,497,773
------------ ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................. $104,790,151 $(12,429,249) $27,145,884
============ ============ ===========
</TABLE>
See Notes to Financial Statements.
FSA-7
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET DIVISION SECURITIES DIVISION
------------------------------------------ -------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------ -------------------------------------------
1995 1994 1993 1995 1994 1993
------------ ------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............. $ 8,270,845 $ 4,542,504 $ 3,329,276 $ 1,812,562 $ 5,144,309 $ 13,460,502
Net realized gain (loss).......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920
Change in unrealized appreciation/
depreciation on investments..... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468)
------------ ------------ ------------ ----------- ------------- -------------
Net increase (decrease)
from operations................. 7,895,714 4,685,061 3,200,140 3,884,179 (6,139,293) 25,325,954
------------ ------------ ------------ ----------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)............. 96,773,056 82,536,703 64,845,505 11,016,347 18,915,140 26,598,113
Benefits and other policy-related
transactions (Note 3)........... (39,770,849) (32,432,771) (31,747,197) (6,286,070) (5,813,181) (7,539,335)
Net transfers among divisions..... 4,776,165 (25,466,044) (50,510,704) 953,149 (125,116,319) (180,916,946)
------------ ------------ ------------ ----------- ------------- -------------
Net increase (decrease) from
policy-related transactions..... 61,778,372 24,637,888 (17,412,396) 5,683,426 (112,014,360) (161,858,168)
------------ ------------ ------------ ----------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4)...... (36,640) (24,067) 92,890 (72,636) 15,335 (69,330)
------------ ------------ ------------ ----------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS... 69,637,446 29,298,882 (14,119,366) 9,494,969 (118,138,318) (136,601,544)
NET ASSETS, BEGINNING OF PERIOD..... 137,496,085 108,197,203 122,316,569 27,654,075 145,792,393 282,393,937
------------ ------------ ------------ ----------- ------------- -------------
NET ASSETS, END OF PERIOD........... $207,133,531 $137,496,085 $108,197,203 $37,149,044 $ 27,654,075 $ 145,792,393
============ ============ ============ =========== ============= =============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
QUALITY BOND DIVISION
-------------------------------------------
OCTOBER 1*
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------- -----------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............. $ 7,190,658 $ 7,434,544 $ 1,058,532
Net realized gain (loss).......... (632,666) (410,697) 130,867
Change in unrealized appreciation/
depreciation on investments..... 13,415,524 (13,634,579) (1,886,621)
------------ ------------ -----------
Net increase (decrease)
from operations................. 19,973,516 (6,610,732) (697,222)
------------ ------------ -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)............. 2,516,135 850,240 181,283
Benefits and other policy-related
transactions (Note 3)........... (3,189,044) (2,891,278) (441,626)
Net transfers among divisions..... 2,462,969 25,765,197 100,786,909
------------ ------------ -----------
Net increase (decrease) from
policy-related transactions..... 1,790,060 23,724,159 100,526,566
------------ ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4)...... (712,602) 255,654 38,047
------------ ------------ -----------
INCREASE (DECREASE) IN NET ASSETS... 21,050,974 17,369,081 99,867,391
NET ASSETS, BEGINNING OF PERIOD..... 117,236,472 99,867,391 --
------------ ------------ -----------
NET ASSETS, END OF PERIOD........... $138,287,446 $117,236,472 $99,867,391
============ ============ ===========
</TABLE>
See Notes to Financial Statements.
*Commencement of Operations
FSA-8
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
HIGH YIELD DIVISION
------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................... $ 6,147,199 $ 4,273,424 $ 4,202,267
Net realized gain (loss)................................ (179,454) (328,199) 1,138,539
Change in unrealized appreciation/
depreciation on investments........................... 4,697,084 (5,608,102) 3,971,253
----------- ------------ -----------
Net increase (decrease) from operations................. 10,664,829 (1,662,877) 9,312,059
----------- ------------ -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)................................... 15,333,474 14,287,345 10,787,763
Benefits and other policy-related
transactions (Note 3)................................. (8,211,013) (7,162,537) (5,179,424)
Net transfers among divisions........................... 4,789,450 (11,048,174) 1,006,671
----------- ------------ -----------
Net increase (decrease) from policy-related
transactions.......................................... 11,911,911 (3,923,366) 6,615,010
----------- ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE
VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (100,679) 16,028 (31,889)
----------- ------------ -----------
INCREASE (DECREASE) IN NET ASSETS......................... 22,476,061 (5,570,215) 15,895,180
NET ASSETS, BEGINNING OF PERIOD........................... 49,454,901 55,025,116 39,129,936
----------- ------------ -----------
NET ASSETS, END OF PERIOD................................. $71,930,962 $ 49,454,901 $55,025,116
=========== ============ ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION
------------------------------------- --------------------------
OCTOBER 1* APRIL 1*
TO YEAR ENDED TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------- ----------- ----------- -----------
1995 1994 1993 1995 1994
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................... $ 310,961 $ 89,288 $ 1,561 $ 675,576 $ 443,391
Net realized gain (loss)................................ 2,791 (11,709) (134) 539,950 127,205
Change in unrealized appreciation/
depreciation on investments........................... 2,264,931 (140,681) (904) 12,851,051 (399,286)
----------- ---------- -------- ----------- -----------
Net increase (decrease) from operations................. 2,578,683 (63,102) 523 14,066,577 171,310
----------- ---------- -------- ----------- -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)................................... 6,464,035 2,953,965 182,381 10,308,871 690,540
Benefits and other policy-related
transactions (Note 3)................................. (1,385,132) (481,430) (6,581) (2,111,532) (472,818)
Net transfers among divisions........................... 5,274,221 3,033,230 279,153 18,305,589 30,736,505
----------- ---------- -------- ----------- -----------
Net increase (decrease) from policy-related
transactions.......................................... 10,353,124 5,505,765 454,953 26,502,928 30,954,227
----------- ---------- -------- ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE
VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (221,877) 6,113 4,131 (71,293) (134)
----------- ---------- -------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS......................... 12,709,930 5,448,776 459,607 40,498,212 31,125,403
NET ASSETS, BEGINNING OF PERIOD........................... 5,908,383 459,607 -- 31,125,403 --
----------- ---------- -------- ----------- -----------
NET ASSETS, END OF PERIOD................................. $18,618,313 $5,908,383 $459,607 $71,623,615 $31,125,403
=========== ========== ======== =========== ===========
</TABLE>
See Notes to Financial Statements.
*Commencement of Operations
FSA-9
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK DIVISION GLOBAL STOCK DIVISION
-------------------------------------------- ------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------------- ------------------------------------------
1995 1994 1993 1995 1994 1993
-------------- ------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
FROM OPERATIONS:
Net investment income..... $ 8,208,894 $ 7,014,347 $ 6,306,784 $ 3,408,544 $ 1,556,985 $ 593,509
Net realized gain (loss).. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670
Change in unrealized
appreciation/
depreciation on
investments............. 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153
-------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from operations......... 272,713,683 (22,156,446) 144,963,767 49,068,254 5,793,334 17,849,332
-------------- ------------ ------------ ------------ ------------ ------------
FROM POLICY-RELATED
TRANSACTIONS:
Net premiums (Note 3)..... 216,068,996 171,525,812 124,210,476 92,666,618 77,766,997 25,508,452
Benefits and other
policy-related
transactions (Note 3)... (118,456,643) (93,481,219) (77,837,895) (37,507,499) (23,371,745) (8,931,159)
Net transfers among
divisions............... (34,354,864) 19,730,410 (9,498,455) (12,472,104) 47,610,957 59,544,080
-------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from policy-related
transactions............ 63,257,489 97,775,003 36,874,126 42,687,015 102,006,209 76,121,373
-------------- ------------ ------------ ------------ ------------ ------------
NET (INCREASE) DECREASE IN
AMOUNT RETAINED BY
EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP
(Note 4).................. (392,099) 44,948 (124,376) (96,720) (17,737) 4,085
-------------- ------------ ------------ ------------ ------------ ------------
INCREASE IN NET ASSETS...... 335,579,073 75,663,505 181,713,517 91,658,549 107,781,806 93,974,790
NET ASSETS, BEGINNING OF
PERIOD.................... 811,006,201 735,342,696 553,629,179 241,838,471 134,056,665 40,081,875
-------------- ------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF
PERIOD.................... $1,146,585,274 $811,006,201 $735,342,696 $333,497,020 $241,838,471 $134,056,665
============== ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
INTERNATIONAL
DIVISION AGGRESSIVE STOCK DIVISION
----------- ------------------------------------------
APRIL 3*
TO
DECEMBER 31, YEAR ENDED DECEMBER 31,
----------- ------------------------------------------
1995 1995 1994 1993
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
FROM OPERATIONS:
Net investment income..... $ 159,029 $ (1,434,289) $ (1,544,537) $ (990,881)
Net realized gain (loss).. 50,951 73,464,436 (6,075,250) 61,036,469
Change in unrealized
appreciation/
depreciation on
investments............. 667,906 49,509,800 (4,424,670) (18,699,749)
----------- ------------ ------------ ------------
Net increase (decrease)
from operations......... 877,886 121,539,947 (12,044,457) 41,345,839
----------- ------------ ------------ ------------
FROM POLICY-RELATED
TRANSACTIONS:
Net premiums (Note 3)..... 2,028,670 121,962,483 101,932,221 77,930,596
Benefits and other
policy-related
transactions (Note 3)... (339,723) (63,165,185) (48,604,650) (39,462,340)
Net transfers among
divisions............... 9,885,952 19,367,834 4,346,636 (73,890,214)
----------- ------------ ------------ ------------
Net increase (decrease)
from policy-related
transactions............ 11,574,899 78,165,132 57,674,207 (35,421,958)
----------- ------------ ------------ ------------
NET (INCREASE) DECREASE IN
AMOUNT RETAINED BY
EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP
(Note 4).................. (20,847) (188,813) 35,791 (2,220)
----------- ------------ ------------ ------------
INCREASE IN NET ASSETS...... 12,431,938 199,516,266 45,665,541 5,921,661
NET ASSETS, BEGINNING OF
PERIOD.................... 0 355,671,865 310,006,324 304,084,663
----------- ------------ ------------ ------------
NET ASSETS, END OF
PERIOD.................... $12,431,938 $555,188,131 $355,671,865 $310,006,324
=========== ============ ============ ============
</TABLE>
See Notes to Financial Statements.
*Commencement of Operations
FSA-10
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-----------------------------------------------------------------------------------------
CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION
------------------------------------------- ------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------- ------------------------------------------
1995 1994 1993 1995 1994 1993
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.............. $ 7,247,815 $ 5,455,410 $ 3,537,367 $ 10,038,346 $ 8,453,977 $ 8,015,051
Net realized gain (loss)........... 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736
Change in unrealized appreciation/
depreciation on investments...... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from operations.................. 27,067,353 (5,648,826) 7,972,248 64,442,014 (31,527,395) 37,630,548
------------ ------------ ------------ ------------ ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3).............. 41,419,959 48,492,315 43,782,002 63,451,955 70,116,900 67,351,402
Benefits and other policy-related
transactions (Note 3)............ (22,866,003) (21,612,430) (17,644,077) (48,742,571) (45,655,363) (44,497,967)
Net transfers among divisions...... (3,379,296) (2,076,793) 6,165,330 (18,908,540) (19,954,097) (6,834,099)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) from
policy-related transactions...... 15,174,660 24,803,092 32,303,255 (4,199,156) 4,507,440 16,019,336
------------ ------------ ------------ ------------ ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE
IN SEPARATE ACCOUNT FP (Note 4).... (95,412) 22,600 18,535 (93,214) 47,322 256,506
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS.... 42,146,601 19,176,866 40,294,038 60,149,644 (26,972,633) 53,906,390
NET ASSETS, BEGINNING OF PERIOD...... 129,940,498 110,763,632 70,469,594 338,415,565 365,388,198 311,481,808
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF PERIOD............ $172,087,099 $129,940,498 $110,763,632 $398,565,209 $338,415,565 $365,388,198
============ ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
--------------------------------------------
GROWTH INVESTORS DIVISION
--------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.............. $ 13,059,547 $ 8,667,457 $ 4,648,111
Net realized gain (loss)........... 9,174,038 241,591 14,676,909
Change in unrealized appreciation/
depreciation on investments...... 82,556,566 (21,338,297) 7,820,864
------------ ------------ ------------
Net increase (decrease)
from operations.................. 104,790,151 (12,429,249) 27,145,884
------------ ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3).............. 155,616,059 139,140,391 105,136,825
Benefits and other policy-related
transactions (Note 3)............ (68,357,709) (54,863,821) (36,431,873)
Net transfers among divisions...... (3,269,896) 20,294,785 30,908,183
------------ ------------ ------------
Net increase (decrease) from
policy-related transactions...... 83,988,454 104,571,355 99,613,135
------------ ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE
IN SEPARATE ACCOUNT FP (Note 4).... (120,493) 15,372 (27,455)
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS.... 188,658,112 92,157,478 126,731,564
NET ASSETS, BEGINNING OF PERIOD...... 367,219,554 275,062,076 148,330,512
------------ ------------ ------------
NET ASSETS, END OF PERIOD............ $555,877,666 $367,219,554 $275,062,076
============ ============ ============
</TABLE>
See Notes to Financial Statements.
FSA-11
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. General
Equitable Variable Life Insurance Company (Equitable Variable Life), a
wholly-owned subsidiary of The Equitable Life Assurance Society of the
United States (Equitable Life), established Separate Account FP (the
Account) as a unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. The Account
consists of thirteen 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,
the Equity Index Division and the International 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, Incentive Life
Plus,(TM) flexible premium 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.
Incentive Life policies offered with the prospectus dated September 15,
1995, are referred to as Incentive Life Plus Second Series. Incentive Life
Plus policies issued with a prior prospectus are referred to as Incentive
Life Plus Original Series. 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.
Policyowners may allocate amounts in their individual accounts to the
Divisions of the Account and/or (except for SP-Flex policies) to the
guaranteed interest division of Equitable Variable Life's General Account.
Net transfers to the guaranteed interest division of the General Account and
other Separate Accounts of $6,569,372, $35,120,632 and $125,668,098 for the
years ended 1995, 1994 and 1993, 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 Life'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. Significant Accounting Policies
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Investments are made in shares of the Trust and are valued at the net asset
values per share of the respective Portfolios. The net asset value is
determined by the Trust using the market or fair value of the underlying
assets of the Portfolio.
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 Life. Under the provisions of the Policies,
Equitable Variable Life 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 Life pays no tax on investment income and capital gains reflected
in variable life insurance policy reserves. However, Equitable Variable Life
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. Asset Charges
Under the Policies, Equitable Variable Life 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, Incentive Life Plus Second Series and
Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship
2000 policyowners, and 0.85% for SP-Flex policyowners. Incentive Life Plus
Original Series deducts this charge from the Policy Account. Under SP-Flex,
Equitable Variable Life 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.
FSA-12
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Under Incentive Life, Incentive Life Plus and the Series 2000 Policies,
mortality and administrative costs are charged in a different manner than
SP-Flex policies (see Notes 4 and 5).
Before amounts are allocated to the Account for Incentive Life, Incentive
Life Plus and the Series 2000 Policies, Equitable Variable Life deducts a
charge for taxes and either an initial policy fee (Incentive Life) or a
premium sales charge (Incentive Life Plus and Series 2000 Policies) from
premiums. Under SP-Flex, the entire initial premium is allocated to the
Account. Before any additional premiums under SP-Flex are allocated to the
Account, an administrative charge is deducted.
The amounts attributable to Incentive Life, Incentive Life Plus and the
Series 2000 policyowners' accounts are charged monthly by Equitable Variable
Life 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.
4. Amounts Retained by Equitable Variable Life in Separate Account FP
The amount retained by Equitable Variable Life in the Account arises
principally from (1) contributions from Equitable Variable Life, 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 Life are not subject to
charges for mortality and expense risks or mortality and administrative
costs.
Amounts retained by Equitable Variable Life in the Account may be
transferred at any time by Equitable Variable Life to its General Account.
The following table shows the surplus contributions (withdrawals) by
Equitable Variable Life by investment division:
<TABLE>
<CAPTION>
INVESTMENT DIVISION 1995 1994 1993
------------------- ----------- ----------- ----------
<S> <C> <C> <C>
Common Stock $ (630,000) -- --
Money Market (250,000) -- $1,145,000
Balanced -- -- --
Aggressive Stock (350,000) -- --
High Yield (100,000) -- 330,000
Global (130,000) -- (6,895,000)
Conservative Investors -- -- 575,000
Growth Investors -- -- 130,000
Short-Term World Income -- $(5,165,329) --
Intermediate Government Securities (165,000) -- --
Growth & Income (685,000) -- 1,000,000
Quality Bond (4,800,000) -- 5,000,000
Equity Index -- 200,000 --
International 200,000 -- --
----------- ----------- ----------
$(6,910,000) $(4,965,329) $1,285,000
=========== =========== ==========
</TABLE>
5. Distribution and Servicing Agreements
Equitable Variable Life has entered into a Distribution and Servicing
Agreement with Equitable Life 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 Life.
Equitable Variable Life also has entered into an agreement with Equitable
Life under which Equitable Life 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.
6. Share Substitution
On February 22, 1994, Equitable Variable Life, 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 statements of operations and statements of changes in net
assets for the Intermediate Government Securities Portfolio is combined with
the Short-Term World Income Portfolio for periods prior to the merger on
February 22, 1994. The Short-Term World Income Division is not available for
future investment.
FSA-13
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
7. Investment Returns
The Separate Account rates of return attributable to Incentive Life,
Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000
policyowners are different than those attributable to Survivorship 2000,
Incentive Life Plus Original Series and to SP-Flex policyowners because
asset charges are deducted at different rates under each policy (see Note
3).
The tables on this page and 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 whose
policy 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.
RATES OF RETURN:
INCENTIVE LIFE,
- --------------
INCENTIVE LIFE 2000,
- --------------------
INCENTIVE LIFE PLUS SECOND SERIES
- ---------------------------------
AND CHAMPION 2000*
- -----------------
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.18 % 8.24 % 9.18 % 7.32 % 6.63 % 6.05 %
Net return................ 5.11 % 3.39 % 2.35 % 2.94 % 5.55 % 7.59 % 8.53 % 6.68 % 5.99 % 5.47 %
</TABLE>
APRIL 1(A) TO
INTERMEDIATE YEAR ENDED DECEMBER 31, DECEMBER 31,
GOVERNMENT -----------------------------------------------
SECURITIES DIVISION 1995 1994 1993 1992 1991
- ------------------- ---- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37)% 10.58 % 5.60 % 12.26 %
Net return................ 12.65 % (4.95)% 9.88 % 4.96 % 11.60 %
YEAR ENDED OCTOBER 1(A)
DECEMBER 31, DECEMBER 31,
----------------------------------
QUALITY BOND DIVISION 1995 1994 1993
- --------------------- ---- ---- ----
Gross return.............. 17.02 % (5.10)% (0.51)%
Net return................ 16.32 % (5.67)% (0.66)%
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 4.68 % --
Net return................ 19.20 % (3.37)% 22.41 % 11.64 % 23.72 % (1.71)% 4.50 % 9.08 % 4.05 % --
</TABLE>
YEAR ENDED OCTOBER 1(A) TO
DECEMBER 31, DECEMBER 31,
----------------------------------
GROWTH & INCOME DIVISION 1995 1994 1993
- ------------------------- ---- ---- ----
Gross return.............. 24.07 % (0.58)% (0.25)%
Net return................ 23.33 % (1.17)% (0.41)%
YEAR ENDED MARCH 31(A) TO
DECEMBER 31, DECEMBER 31,
-----------------------------------
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % 1.08 %
Net return................ 35.66 % 0.58 %
- -------------------------------
* Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992.
Sales of Incentive Life Plus Second Series commenced on September 15, 1995.
(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>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 32.45 % (2.14)% 24.84 % 3.22 % 37.88 % (8.12)% 25.59 % 22.43 % 7.49 % 15.65 %
Net return................ 31.66 % (2.73)% 24.08 % 2.60 % 37.06 % (8.67)% 24.84 % 21.70 % 6.84 % 15.01 %
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (13.27)%
Net return................ 18.11 % 4.60 % 31.33 % (1.10)% 29.77 % (6.63)% 26.17 % 10.22 % (13.45)%
</TABLE>
APRIL 3(A)
TO
DECEMBER 31,
INTERNATIONAL DIVISION 1995
- ---------------------- ----------
Gross return.............. 11.29 %
Net return................ 10.79 %
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 31.63 % (3.81)% 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % 7.31 % 35.88 %
Net return................ 30.85 % (4.39)% 16.05 % (3.74)% 85.75 % 7.51 % 42.64 % 0.53 % 6.66 % 35.13 %
</TABLE>
<TABLE>
<CAPTION>
JANUARY 26(A) TO
ASSET ALLOCATION SERIES YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------------------------------------------------------------------------------
BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.75 % (8.02)% 12.28 % (2.84)% 41.26 % 0.24 % 25.83 % 13.27 % (0.85)% 29.07 %
Net return................ 19.03 % (8.57)% 11.64 % (3.42)% 40.42 % (0.36)% 25.08 % 12.59 % (1.45)% 28.34 %
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 2(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE --------------------------------------------------------------------------------
INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989
- ------------------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 20.40 % (4.10)% 10.76 % 5.72 % 19.87 % 6.37 % 3.09 %
Net return................ 19.68 % (4.67)% 10.15 % 5.09 % 19.16 % 5.73 % 2.94 %
</TABLE>
<TABLE>
<CAPTION>
GROWTH INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989
- ------------------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 26.37 % (3.15)% 15.26 % 4.90 % 48.89 % 10.66 % 3.98 %
Net return................ 25.62 % (3.73)% 14.58 % 4.27 % 48.01 % 10.00 % 3.82 %
</TABLE>
- ----------------------------
* 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.
RATES OF RETURN:
SURVIVORSHIP 2000
- -----------------
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992
- --------------------- ---- ---- ---- ----
Gross return.............. 5.74 % 4.02 % 3.00 % 1.11 %
Net return................ 4.80 % 3.08 % 2.04 % 0.77 %
INTERMEDIATE GOVERNMENT
SECURITIES DIVISION 1995 1994 1993 1992
- ------------------- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37)% 10.58 % 0.90 %
Net return................ 12.31 % (5.23)% 9.55 % 0.56 %
- ----------
(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-15
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
OCTOBER 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------------------------
QUALITY BOND DIVISION 1995 1994 1993
- --------------------- ---- ---- ----
Gross return.............. 17.02 % (5.10)% (0.51)%
Net return................ 15.97 % (5.95)% (0.73)%
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992
- ------------------- ---- ---- ---- ----
Gross return.............. 19.92 % (2.79)% 23.15 % 1.84 %
Net return................ 18.84 % (3.66)% 22.04 % 1.50 %
OCTOBER 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------
GROWTH & INCOME DIVISION 1995 1994 1993
- ------------------------ ---- ---- ----
Gross return.............. 24.07 % (0.58)% (0.25)%
Net return................ 22.96 % (1.47)% (0.48)%
YEAR ENDED MARCH 1(A) TO
DECEMBER 31, DECEMBER 31,
------------------------------
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % 1.08 %
Net return................ 35.26 % 0.33 %
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992
- --------------------- ---- ---- ---- ----
Gross return.............. 32.45 % (2.14)% 24.84 % 5.28 %
Net return................ 31.26 % (3.02)% 23.70 % 4.93 %
GLOBAL DIVISION
- ---------------
Gross return.............. 18.81 % 5.23 % 32.09 % 4.87 %
Net return................ 17.75 % 4.29 % 30.93 % 4.52 %
APRIL 3(A) TO
DECEMBER 31,
----------------
INTERNATIONAL DIVISION 1995
- ---------------------- ----
Gross return.............. 11.29 %
Net return................ 10.55 %
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992
- ------------------------- ---- ---- ---- ----
Gross return.............. 31.63 % (3.81)% 16.77 % 11.49 %
Net return................ 30.46 % (4.68)% 15.70 % 11.11 %
ASSET ALLOCATION SERIES
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS --------------------------------------------------
DIVISION 1995 1994 1993 1992
- -------- ---- ---- ---- ----
Gross return.............. 20.40 % (4.10)% 10.76 % 1.38 %
Net return................ 19.32 % (4.96)% 9.81 % 1.04 %
BALANCED DIVISION 1995 1994 1993 1992
- ----------------- ---- ---- ---- ----
Gross return.............. 19.75 % (8.02)% 12.28 % 5.37 %
Net return................ 18.68 % (8.84)% 11.30 % 5.02 %
GROWTH INVESTORS DIVISION 1995 1994 1993 1992
- ------------------------- ---- ---- ---- ----
Gross return.............. 26.37 % (3.15)% 15.26 % 6.89 %
Net return................ 25.24 % (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-16
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31,1995
RATES OF RETURN:
INCENTIVE LIFE PLUS ORIGINAL SERIES*(B)
- ---------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------
1995
----
Money Market Division ........... 5.69%
Intermediate Government
Securities Division ............. 13.31%
Quality Bond Division ........... 17.13%
High Yield Division ............. 19.95%
Growth & Income Division ........ 24.38%
Equity Index Division ........... 36.53%
Common Stock Division ........... 33.07%
Global Division ................. 19.38%
APRIL 30 TO DECEMBER 31,
------------------------
1995
----
International Division .......... 11.29%
YEAR ENDED DECEMBER 31,
------------------------
1995
----
Aggressive Stock Division ....... 33.00%
ASSET ALLOCATION SERIES .........
YEAR ENDED DECEMBER 31,
------------------------
1995
----
Conservative Investors Division . 20.59%
Balanced Division ............... 20.32%
Growth Investors Division ....... 26.92%
- --------------------
*Sales of Incentive Life Plus Original Series commenced on January 6, 1995.
(b) There are no Separate Account asset charges for this policy and therefore
the gross and net rates of return are the same. The rate of return for the
period indicated is not an annual rate of return.
FSA-17
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31,1995
RATES OF RETURN:
SP-FLEX
- -------
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.17 % 8.24 % 9.18 % 7.32 % 2.15 %
Net return................ 3.86 % 2.17 % 1.13 % 1.71 % 4.29 % 6.30 % 7.24 % 5.41 % 1.62 %
</TABLE>
APRIL 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
INTERMEDIATE GOVERNMENT --------------------------------------------------
SECURITIES DIVISION 1995 1994 1993 1992 1991
- ------------------- ---- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37) % 10.58 % 5.60 % 12.10 %
Net return................ 11.31 % (6.08) % 8.57 % 3.71 % 10.59 %
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
-------------------------------
QUALITY BOND DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 17.02 % (2.20)%
Net return................ 14.94 % (2.35)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 1.95 %
Net return................ 17.79 % (4.52)% 20.96 % 10.30 % 22.25 % (2.89)% 3.26 % 7.78 % 1.39 %
</TABLE>
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
---------------------------------
GROWTH & INCOME DIVISION 1995 1994
- ------------------------ ---- ----
Gross return.............. 24.07 % (3.40)%
Net return................ 21.87 % (3.55)%
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % (2.54)%
Net return................ 34.06 % (2.69)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 32.45 % 2.14 % 24.84 % 3.23 % 37.87 % (8.12)% 25.59 % 22.43 % (22.57)%
Net return................ 30.10 % (3.88)% 22.60 % 1.38 % 35.43 % (9.76)% 23.36 % 20.26 % (23.00)%
GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (11.40)%
Net return................ 16.70 % 3.36 % 29.77 % (2.28)% 28.23 % (7.75)% 24.67 % 8.90 % (11.86)%
</TABLE>
APRIL 3(A) TO
DECEMBER 31,
-------------
INTERNATIONAL DIVISION 1995
- ---------------------- ----
Gross return.............. 11.29 %
Net return................ 9.82 %
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 31.63 % 3.81 % 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % (24.28)%
Net return................ 29.30 % (5.53)% 14.67 % (4.89)% 83.54 % 6.23 % 40.95 % (0.66)% (24.68)%
</TABLE>
- ------------------------------
(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-18
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
ASSET ALLOCATION SERIES
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS ---------------------------------------
DIVISION 1995 1994
- -------- ---- ----
Gross return.......... 20.40 % (1.83)%
Net return............ 18.26 % (1.98)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------------
BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 19.75 % (8.02)% 12.28 % (2.83)% 41.27 % 0.24 % 25.83 % 13.27 % (20.26)%
Net return............ 17.62 % (9.66)% 10.31 % (4.57)% 38.75 % (1.56)% 23.59 % 11.25 % (20.71)%
</TABLE>
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
GROWTH INVESTORS ------------------------------------
DIVISION 1995 1994
- -------- ---- ----
Gross return........... 26.37 % (3.16)%
Net return............. 24.12 % (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.
8. Subsequent Event
On September 19, 1996 the Board of Directors of Equitable Life approved an
Agreement and Plan of Merger by and between Equitable Life and Equitable
Variable Life (the "Merger Agreement"). The merger is expected to be
effective on January 1, 1997, subject to receipt of all necessary regulatory
approvals. On that date, and in accordance with the provisions of the Merger
Agreement, the separate existence of Equitable Variable Life will cease and
Equitable Life will survive the merger. From and after the effective date of
the merger, Equitable Life will be liable in place of Equitable Variable
Life for the liabilities and obligations of Equitable Variable Life,
including liabilities under policies and contracts issued by Equitable
Variable Life, and all of Equitable Variable Life's assets will become
assets of Equitable Life.
FSA-19
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
FIXED INCOME SERIES EQUITY SERIES
------------------------------------------------------------------ -------------------------------
INTERMEDIATE
MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY COMMON
MARKET SECURITIES BOND YIELD INCOME INDEX STOCK
FUND FUND FUND FUND FUND FUND FUND
------------ ------------ -------------- ------------ ------------- --------------- --------------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C>
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 6)
Cost: $165,564,928....... $165,937,243
43,750,516....... $43,305,378
154,236,243....... $147,904,622
87,558,526....... $95,912,162
27,455,859....... $31,071,304
97,100,736....... $119,477,987
1,194,664,886....... $1,481,486,712
351,595,598.......
33,337,481.......
661,363,283.......
166,617,325.......
381,690,336.......
608,848,116.......
Receivable for shares of
The Hudson River
Trust ................ -- 25,723 95,980 -- -- -- --
Receivable for policy-
related transactions 3,827,870 -- -- -- 86,467 196,738 --
------------ ----------- ------------ ----------- ----------- ------------ --------------
Total Assets ............. 169,765,113 43,331,101 148,000,602 95,912,162 31,157,771 119,674,725 1,481,486,712
------------ ----------- ------------ ----------- ----------- ------------ --------------
LIABILITIES
Payable for purchases of
shares of The Hudson
River Trust .......... 3,912,050 -- -- 43,386 93,070 199,909 197,381
Payable for policy-
related transactions -- 43,270 154,723 3,328 -- -- 169,260
Amount retained by
Equitable Variable
in Separate Account
FP (Note 4) .......... 574,980 528,646 633,857 688,420 579,643 313,444 1,309,288
------------ ----------- ------------ ----------- ----------- ------------ --------------
Total Liabilities ........ 4,487,030 571,916 788,580 735,134 672,713 513,353 1,675,929
------------ ----------- ------------ ----------- ----------- ------------ --------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS ...... $165,278,083 $42,759,185 $147,212,022 $95,177,028 $30,485,058 $119,161,372 $1,479,810,783
============ =========== ============ =========== =========== ============ ==============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
EQUITY SERIES ASSET ALLOCATION SERIES
------------------------------------------- -------------------------------------------
AGGRESSIVE CONSERVATIVE GROWTH
GLOBAL INTERNATIONAL STOCK INVESTORS BALANCED INVESTORS
FUND FUND FUND FUND FUND FUND
-------------- ------------- ------------- ------------- -------------- --------------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 6)
Cost: $165,564,928.......
43,750,516.......
154,236,243.......
87,558,526.......
27,455,859.......
97,100,736.......
1,194,664,886.......
351,595,598....... $403,967,887
33,337,481....... $35,007,334
661,363,283....... $745,660,006
166,617,325....... $170,418,342
381,690,336....... $415,550,419
608,848,116....... $659,684,627
Receivable for shares of
The Hudson River
Trust ................ -- -- 3,329,166 98,112 207,444 --
Receivable for policy-
related transactions 368,849 120,728 -- -- -- --
------------ ----------- ------------ ------------ ------------ ------------
Total Assets ............. 404,336,736 35,128,062 748,989,172 170,516,454 415,757,863 659,684,627
------------ ----------- ------------ ------------ ------------ ------------
LIABILITIES
Payable for purchases of
shares of The Hudson
River Trust .......... 181,369 96,161 -- -- -- 250,106
Payable for policy-
related transactions -- -- 3,650,196 129,358 478,338 78,373
Amount retained by
Equitable Variable
in Separate Account
FP (Note 4) .......... 576,659 237,480 715,086 584,802 690,475 677,559
------------ ----------- ------------ ------------ ------------ ------------
Total Liabilities ........ 758,028 333,641 4,365,282 714,160 1,168,813 1,006,038
------------ ----------- ------------ ------------ ------------ ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS ...... $403,578,708 $34,794,421 $744,623,890 $169,802,294 $414,589,050 $658,678,589
============ =========== ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
FSA-20
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET FUND SECURITIES FUND
-------------------------- -------------------------
1996 1995 1996 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 6,300,108 $6,517,222 $1,696,840 $1,479,090
Expenses (Note 3):
Mortality and expense risk charges ............... 738,965 647,879 177,582 143,478
----------- ---------- ---------- ----------
NET INVESTMENT INCOME .................................... 5,561,143 5,869,343 1,519,258 1,335,612
----------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (149,139) (208,460) (408,620) (768,233)
Realized gain distribution from
The Hudson River Trust ........................ -- -- -- --
----------- ---------- ---------- ----------
NET REALIZED GAIN (LOSS) ................................. (149,139) (208,460) (408,620) (768,233)
----------- ---------- ---------- ----------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 89,976 32,760 145,522 2,736,863
End of period .................................... 372,315 (240,472) (445,138) (463,025)
----------- ---------- ---------- ----------
Change in unrealized appreciation (depreciation)
during the period ................................ 282,339 (273,232) (590,660) 2,273,838
----------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 133,200 (481,692) (999,280) 1,505,605
----------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING .....................
FROM OPERATIONS ...................................... $ 5,694,343 $5,387,651 $ 519,978 $2,841,217
=========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
QUALITY BOND FUND HIGH YIELD FUND
-------------------------- -------------------------
1996 1995 1996 1995
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $6,372,295 $ 6,057,328 $6,020,378 $4,515,142
Expenses (Note 3):
Mortality and expense risk charges ............... 639,290 564,909 365,819 266,220
---------- ----------- ---------- ----------
NET INVESTMENT INCOME .................................... 5,733,005 5,492,419 5,654,559 4,248,922
---------- ----------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (220,874) (377,247) 372,478 (275,035)
Realized gain distribution from
The Hudson River Trust ........................ -- -- 3,227,791 --
---------- ----------- ---------- ----------
NET REALIZED GAIN (LOSS) ................................. (220,874) (377,247) 3,600,269 (275,035)
---------- ----------- ---------- ----------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. (2,105,676) (15,521,200) 3,823,981 (873,103)
End of period .................................... (6,331,621) (6,084,645) 8,353,636 2,942,319
---------- ----------- ---------- ----------
Change in unrealized appreciation (depreciation)
during the period ................................ (4,225,945) 9,436,555 4,529,655 3,815,422
---------- ----------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... (4,446,819) 9,059,308 8,129,924 3,540,387
---------- ----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING .....................
FROM OPERATIONS ...................................... $1,286,186 $14,551,727 $13,784,483 $7,789,309
========== =========== =========== ==========
</TABLE>
See Notes to Financial Statements.
FSA-21
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONTINUED)
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH & INCOME EQUITY INDEX
FUND FUND
------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 381,846 $ 257,323 $ 1,390,087 $ 651,968
Expenses (Note 3):
Mortality and expense risk charges ............... 105,544 45,104 415,358 191,805
---------- ---------- ----------- -----------
NET INVESTMENT INCOME .................................... 276,302 212,219 974,729 460,163
---------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (4,941) (1,023) (21,227) (9)
Realized gain distribution from
The Hudson River Trust ........................ 568,408 -- 338,110 --
---------- ---------- ----------- -----------
NET REALIZED GAIN (LOSS) ................................. 563,467 (1,023) 316,883 (9)
---------- ---------- ----------- -----------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 2,123,346 (141,585) 12,451,765 (399,286)
End of period .................................... 3,615,445 1,604,757 22,377,251 9,547,751
---------- ---------- ----------- -----------
Change in unrealized appreciation (depreciation)
during the period ................................ 1,492,099 1,746,342 9,925,486 9,947,037
---------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 2,055,566 1,745,319 10,242,369 9,947,028
---------- ---------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $2,331,868 $1,957,538 $11,217,098 $10,407,191
========== ========== =========== ===========
</TABLE>
See Notes to Financial Statements.
*Commencement of operations on April 3.
<TABLE>
<CAPTION>
COMMON STOCK GLOBAL STOCK
FUND FUND
----------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 9,004,982 $ 9,752,460 $ 4,146,524 $ 4,033,348
Expenses (Note 3):
Mortality and expense risk charges ............... 5,915,587 4,375,532 1,674,106 1,255,121
------------ ------------ ----------- -----------
NET INVESTMENT INCOME .................................... 3,089,395 5,376,928 2,472,418 2,778,227
------------ ------------ ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. 5,062,716 14,917,528 2,370,310 2,236,458
Realized gain distribution from
The Hudson River Trust ........................ 61,461,578 -- 9,397,912 --
------------ ------------ ----------- -----------
NET REALIZED GAIN (LOSS) ................................. 66,524,294 14,917,528 11,768,222 2,236,458
------------ ------------ ----------- -----------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 181,824,279 (2,048,649) 36,525,596 3,049,444
End of period .................................... 286,821,826 222,292,389 52,372,289 39,743,464
------------ ------------ ----------- -----------
Change in unrealized appreciation (depreciation)
during the period ................................ 104,997,547 224,341,038 15,846,693 36,694,020
------------ ------------ ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 171,521,841 239,258,566 27,614,915 38,930,478
------------ ------------ ----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $174,611,236 $244,635,494 $30,087,333 $41,708,705
============ ============ =========== ===========
</TABLE>
See Notes to Financial Statements.
*Commencement of operations on April 3.
<TABLE>
<CAPTION>
INTERNATIONAL
FUND
-----------------------
1996 1995*
---------- --------
<S> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 268,735 $ 56,215
Expenses (Note 3):
Mortality and expense risk charges ............... 107,106 20,602
---------- --------
NET INVESTMENT INCOME .................................... 161,629 35,613
---------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (17,105) (275)
Realized gain distribution from
The Hudson River Trust ........................ 312,086 --
---------- --------
NET REALIZED GAIN (LOSS) ................................. 294,981 (275)
---------- --------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 667,906 --
End of period .................................... 1,669,853 435,057
---------- --------
Change in unrealized appreciation (depreciation)
during the period ................................ 1,001,947 435,057
---------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 1,296,928 434,782
---------- --------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $1,458,557 $470,395
========== ========
</TABLE>
See Notes to Financial Statements.
*Commencement of operations on April 3.
FSA-22
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONCLUDED)
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
------------------------------
CONSERVATIVE INVESTORS
AGGRESSIVE STOCK FUND FUND
-------------------------------- ------------------------------
1996 1995 1996 1995
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 1,105,507 $ 1,083,866 $ 5,867,240 $ 6,040,445
Expenses (Note 3):
Mortality and expense risk charges ............... 2,923,580 1,915,033 777,140 666,346
------------- ------------- ------------ ------------
NET INVESTMENT INCOME .................................... (1,818,073) (831,167) 5,090,100 5,374,099
------------- ------------- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. 23,657,174 4,846,290 (560,234) (379,912)
Realized gain distribution from
The Hudson River Trust ........................ 85,627,087 -- 2,804,963 --
------------- ------------- ------------ ------------
NET REALIZED GAIN (LOSS) ................................. 109,284,261 4,846,290 2,244,729 (379,912)
------------- ------------- ------------ ------------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 80,271,118 11,560,966 10,362,120 (8,767,697)
End of period .................................... 84,296,723 105,041,544 3,801,017 5,707,618
------------- ------------- ------------ ------------
Change in unrealized appreciation (depreciation)
during the period ................................ 4,025,605 93,480,578 (6,561,103) 14,475,315
------------- ------------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 113,309,866 98,326,868 (4,316,374) 14,095,403
------------- ------------- ------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $ 111,491,793 $ 97,495,701 $ 773,726 $ 19,469,502
============= ============= ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
----------------------------------------------------------------
BALANCED FUND GROWTH INVESTORS FUND
------------------------------- ------------------------------
1996 1995 1996 1995
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ............ $ 9,585,426 $ 9,067,337 $ 10,945,015 $ 11,331,010
Expenses (Note 3):
Mortality and expense risk charges ............... 1,833,659 1,639,489 2,710,777 1,986,105
------------ ------------ ------------ ------------
NET INVESTMENT INCOME .................................... 7,751,767 7,427,848 8,234,238 9,344,905
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (913,215) (1,988,151) 894,207 1,539,280
Realized gain distribution from
The Hudson River Trust ........................ 26,596,466 -- 63,035,263 --
------------ ------------ ------------ ------------
NET REALIZED GAIN (LOSS) ................................. 25,683,251 (1,988,151) 63,929,470 1,539,280
------------ ------------ ------------ ------------
Unrealized appreciation (depreciation) on investments:
Beginning of period .............................. 43,097,187 (2,878,875) 81,785,873 (770,693)
End of period .................................... 33,860,083 42,508,029 50,836,511 73,394,942
------------ ------------ ------------ ------------
Change in unrealized appreciation (depreciation)
during the period ................................ (9,237,104) 45,386,904 (30,949,362) 74,165,635
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ....................................... 16,446,147 43,398,753 32,980,108 75,704,915
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $ 24,197,914 $ 50,826,601 $ 41,214,346 $ 85,049,820
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
FSA-23
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
Intermediate Government
MONEY MARKET FUND Securities Fund
-------------------------------- -----------------------------
1996 1995 1996 1995
-------------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income .................... $ 5,561,143 $ 5,869,343 $ 1,519,258 $ 1,335,612
Net realized gain (loss) ................. (149,139) (208,460) (408,620) (768,233)
Change in unrealized appreciation
(depreciation) on investments ........ 282,339 (273,232) (590,660) 2,273,838
------------- ------------- ------------ ------------
Net increase (decrease)
from operations ...................... 5,694,343 5,387,651 519,978 2,841,217
------------- ------------- ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) .................... 73,901,686 70,231,391 7,713,294 8,391,577
Benefits and other policy-related
transactions (Note 3) ................ (27,123,574) (29,452,310) (5,367,810 (4,950,311)
Net transfers among Funds ................ (94,267,163) 17,093,189 2,756,705 136,079
------------- ------------- ------------ ------------
Net increase (decrease) from
policy-related transactions .......... (47,489,051) 57,872,270 5,102,189 3,577,345
------------- ------------- ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ............. (60,740) (30,797) (12,026) (55,730)
------------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO POLICYHOLDERS ......................... (41,855,448) 63,229,124 5,610,141 6,362,832
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
BEGINNING OF PERIOD ...................... 207,133,531 137,496,085 37,149,044 27,654,075
------------- ------------- ------------ -----------
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
END OF PERIOD ............................ $ 165,278,083 $ 200,725,209 $42,729,185 $34,016,907
============= ============= ============ ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
QUALITY BOND FUND HIGH YIELD FUND
------------------------------- ------------------------------
1996 1995 1996 1995
------------ ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income .................... $ 5,733,005 $ 5,492,419 $ 5,654,559 $ 4,248,922
Net realized gain (loss) ................. (220,874) (377,247) 3,600,269 (275,035)
Change in unrealized appreciation
(depreciation) on investments ........ (4,225,945) 9,436,555 4,529,655 3,815,422
------------ ------------- ------------ ------------
Net increase (decrease)
from operations ...................... 1,286,186 14,551,727 13,784,483 7,789,309
------------- ------------- ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) .................... 4,698,961 1,895,869 13,765,625 11,553,599
Benefits and other policy-related
transactions (Note 3) ................ (2,816,687) (2,565,098) (7,942,483) (5,852,984)
Net transfers among Funds ................ 5,771,073 1,565,156 3,802,558 2,835,740
------------- ------------- ------------ ------------
Net increase (decrease) from
policy-related transactions .......... 7,653,347 895,927 9,625,700 8,536,355
------------- ------------- ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ............. (14,957) (583,778) (164,117) (77,962)
------------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO POLICYHOLDERS ......................... 8,924,576 14,863,876 23,246,066 16,247,702
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
BEGINNING OF PERIOD ...................... 138,287,446 117,236,472 71,930,962 49,454,901
------------- ------------- ------------ ------------
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
END OF PERIOD ............................ $ 147,212,022 $ 132,100,348 $ 95,177,028 $ 65,702,603
============= ============= ============ ============
</TABLE>
See Notes to Financial Statements.
FSA-24
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH & INCOME FUND EQUITY INDEX FUND
------------------------------ -------------------------------
1996 1995 1996 1995*
------------ ------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ............ $ 276,302 $ 212,219 $ 974,729 $ 460,163
Net realized gain (loss) ......... 563,467 (1,023) 316,883 (9)
Change in unrealized appreciation
(depreciation) on investments 1,492,099 1,746,342 9,925,486 9,947,037
------------ ------------ ------------- -----------
Net increase (decrease)
from operations .............. 2,331,868 1,957,538 11,217,098 10,407,191
------------ ------------ ------------- ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 8,373,294 4,359,667 24,299,229 6,034,578
Benefits and other policy-related
transactions (Note 3) ........ (2,102,400) (961,902) (5,365,898) (1,188,165)
Net transfers among Funds ........ 3,316,994 3,789,319 17,429,345 13,078,752
------------ ------------- ------------ ------------
Net increase from Assets
policy-related transactions .. 9,587,888 7,187,084 36,362,676 17,925,165
------------ ------------- ------------- ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... (53,011) (195,384) (42,017) (57,807)
------------ ------------ ------------- ------------
INCREASE IN NET ASSETS ATTRIBUTABLE
TO POLICYHOLDERS ................. 11,866,745 8,949,238 47,537,757 28,274,549
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, BEGINNING OF PERIOD 18,618,313 5,908,383 71,623,615 31,125,403
------------- ------------ ------------- ------------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, END OF PERIOD ..... $ 30,485,058 $ 14,857,621 $ 119,161,372 $ 59,399,952
============ ============ ============= ============
</TABLE>
See Notes to Financial Statements.
*Commencement of operations on April 3.
<TABLE>
<CAPTION>
COMMON STOCK FUND GLOBAL STOCK FUND
------------------------------------ -------------------------------
1996 1995 1996 1995
--------------- --------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ............ $ 3,089,395 $ 5,376,928 $ 2,472,418 $ 2,778,227
Net realized gain (loss) ......... 66,524,294 14,917,528 11,768,222 2,236,458
Change in unrealized appreciation
(depreciation) on investments 104,997,547 224,341,038 15,846,693 36,694,020
--------------- --------------- ------------- -------------
Net increase (decrease)
from operations .............. 174,611,236 244,635,494 30,087,333 41,708,705
--------------- --------------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 202,074,526 160,014,740 73,729,435 72,248,903
Benefits and other policy-related
transactions (Note 3) ........ (112,009,732) (86,608,436) (31,604,430) (26,985,045)
Net transfers among Funds ........ 68,835,712 (38,614,310) (2,060,721) (10,330,932)
--------------- --------------- ------------- -------------
Net increase from Assets
policy-related transactions .. 158,900,506 34,791,994 40,064,284 34,932,926
--------------- --------------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... (286,233) (371,006) (69,929) (89,566)
--------------- --------------- ------------- -------------
INCREASE IN NET ASSETS ATTRIBUTABLE
TO POLICYHOLDERS ................. 333,225,509 279,056,482 70,081,688 76,552,065
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, BEGINNING OF PERIOD 1,146,585,274 811,006,200 333,497,020 241,838,471
---------------- --------------- ------------- -------------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, END OF PERIOD ..... $ 1,479,810,783 $ 1,090,062,682 $ 403,578,708 $ 318,390,536
=============== =============== ============= =============
</TABLE>
See Notes to Financial Statements.
*Commencement of operations on April 3.
INTERNATIONAL FUND
-----------------------------
1996 1995*
------------ -----------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS:
FROM OPERATIONS:
Net investment income ............ $ 161,629 $ 35,613
Net realized gain (loss) ......... 294,981 (275)
Change in unrealized appreciation
(depreciation) on investments 1,001,947 435,057
------------ -----------
Net increase (decrease)
from operations .............. 1,458,557 470,395
------------ -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 8,182,092 804,351
Benefits and other policy-related
transactions (Note 3) ........ (1,516,547) (150,197)
Net transfers among Funds ........ 14,255,013 7,399,293
------------ -----------
Net increase from Assets
policy-related transactions .. 20,920,558 8,053,447
------------ -----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... (16,632) (13,498)
------------ -----------
INCREASE IN NET ASSETS ATTRIBUTABLE
TO POLICYHOLDERS ................. 22,362,483 8,510,344
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, BEGINNING OF PERIOD 12,431,938 0
------------- -----------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, END OF PERIOD ..... $ 34,794,421 $ 8,510,344
============ ===========
See Notes to Financial Statements.
*Commencement of operations on April 3.
FSA-25
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
FOR NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-------------------------------
AGGRESSIVE STOCK CONSERVATIVE INVESTORS
FUND FUND
-------------------------------- -------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ............... $ (1,818,073) $ (831,167) $ 5,090,100 $ 5,374,099
Net realized gain (loss) ............ 109,284,261 4,846,290 2,244,729 (379,912)
Change in unrealized appreciation
(depreciation) on investments ... 4,025,605 93,480,578 (6,561,103) 14,475,315
------------- ------------- ------------- -------------
Net increase (decrease)
from operations ................. 111,491,793 97,495,701 773,726 19,469,502
------------- ------------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............... 122,205,511 89,700,780 29,624,479 31,286,054
Benefits and other policy-related
transactions (Note 3) ........... (61,714,088) (46,154,214) (19,045,888) (17,525,531)
Net transfers among Funds ........... 17,647,426 15,707,464 (13,623,081) (2,274,604)
------------- ------------- ------------- -------------
Net increase (decrease) from
policy-related transactions ..... 78,138,849 59,254,030 (3,044,490) 11,485,919
------------- ----------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ........ (194,883) (172,982) (14,041) (72,273)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYHOLDERS ....... 189,435,759 156,576,749 (2,284,805) 30,883,148
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
BEGINNING OF PERIOD................. 555,188,131 355,671,865 172,087,099 129,940,498
------------- ------------- ------------- -------------
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
END OF PERIOD ....................... $ 744,623,890 $ 512,248,614 $ 169,802,294 $ 160,823,646
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-------------------------------------------------------------------
GROWTH INVESTORS
BALANCED FUND FUND
------------------------------- -------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS:
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ............... $ 7,751,767 $ 7,427,848 $ 8,234,238 $ 9,344,905
Net realized gain (loss) ............ 25,683,251 (1,988,151) 63,929,470 1,539,280
Change in unrealized appreciation
(depreciation) on investments ... (9,237,104) 45,386,904 (30,949,362) 74,165,635
------------- ------------- ------------- -------------
Net increase (decrease)
from operations ................. 24,197,914 50,826,601 41,214,346 85,049,820
------------- ------------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............... 47,887,117 49,301,601 122,316,625 118,766,910
Benefits and other policy-related
transactions (Note 3) ........... (38,894,806) (37,166,454) (60,278,616) (49,995,250)
Net transfers among Funds ........... (17,062,769) (13,985,044) (376,762) (4,344,785)
------------- ------------- ------------- -------------
Net increase (decrease) from
policy-related transactions ..... (8,070,458) (1,849,897) 61,661,247 64,426,875
------------- ------------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ........ (103,615) (79,293) (74,670) (107,675)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYHOLDERS ....... 16,023,841 48,897,411 102,800,923 149,369,020
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
BEGINNING OF PERIOD................. 398,565,209 338,415,565 555,877,666 367,219,554
------------- ------------- ------------- -------------
NET ASSETS ATTRIBUTABLE TO POLICYOWNERS,
END OF PERIOD ....................... $ 414,589,050 $ 387,312,976 $ 658,678,589 $ 516,588,574
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
FSA-26
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
1. General
Equitable Variable Life Insurance Company (Equitable Variable Life), a
wholly-owned subsidiary of The Equitable Life Assurance Society of the
United States (Equitable Life), established Separate Account FP (the
Account) as a unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. The Account
consists of thirteen investment funds: the Money Market Fund, the
Intermediate Government Securities Fund, the High Yield Fund, the Balanced
Fund, the Common Stock Fund, the Global Fund, the Aggressive Stock Fund,
the Conservative Investors Fund, the Growth Investors Fund, the Growth &
Income Fund, the Quality Bond Fund, the Equity Index Fund and the
International Fund. The assets in each Fund 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, flexible premium
variable life insurance policies, Incentive Life 2000, flexible premium
variable life insurance policies, Champion 2000, modified premium variable
whole life insurance policies, Survivorship 2000, flexible premium joint
survivorship variable life insurance policies, Incentive Life Plus,(SM)
flexible premium variable life insurance policies, IL Protector,(SM)
flexible premium variable life insurance policies, IL COLI II, flexible
premium variable life insurance policies, and SP-Flex, 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. Incentive Life Plus
policies offered with a prospectus dated on or after September 15, 1995,
are referred to as Incentive Life Plus Second Series. Incentive Life Plus
policies issued with a prior prospectus are referred to as Incentive Life
Plus Original Series. 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.
Policyowners may allocate amounts in their individual accounts to the
Funds of the Account and/or (except for SP-Flex policies) to the
guaranteed interest fund of Equitable Variable Life's General Account. Net
transfers to (from) the guaranteed interest fund of the General Account
and other Separate Accounts of ($6,424,330) and $7,944,683 for the nine
months ended 1996 and 1995, respectively, are included in Net Transfers
Among Funds. The net assets of any Fund of the Account may not be less
than the aggregate of the policyowners' accounts allocated to that Fund.
Additional assets are set aside in Equitable Variable Life'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. Significant Accounting Policies
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. These statements should be read in conjunction with the
financial statements of Separate Account FP for the year ended December
31, 1995. The results of operations for the nine months ended September
30, 1996 are not necessarily indicative of the results to be expected for
the full year.
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 Life. Under the provisions of the Policies,
Equitable Variable Life 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 Life pays no tax on investment income and capital gains reflected
in variable life insurance policy reserves. However, Equitable Variable
Life 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.
FSA-27
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
SEPTEMBER 30, 1996
3. Asset Charges
Under the Policies, Equitable Variable Life 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, Incentive Life Plus Second Series
and Champion 2000 policyowners, 0.90% of net assets attributable to
Survivorship 2000 policyowners, 0.80% for IL Protector policyowners, and
0.85% for SP-Flex policyowners. Incentive Life Plus Original Series, IL
COLI, and IL COLI II deduct this charge from the Policy Account. Under
SP-Flex, Equitable Variable Life 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, Incentive Life Plus, the Series 2000 Policies, IL
Protector and IL COLI II mortality and administrative charges are assessed
in a different manner than SP-Flex policies (see Notes 4 and 5).
Before amounts are allocated to the Account for Incentive Life, Incentive
Life Plus, IL COLI, IL COLI II and the Series 2000 Policies, Equitable
Variable Life deducts a charge for taxes and either an initial policy fee
(Incentive Life) or a premium sales charge (Incentive Life Plus, IL COLI
II and Series 2000 Policies) from premiums. Under SP-Flex, the entire
initial premium is allocated to the Account. Before any additional
premiums under SP-Flex are allocated to the Account, an administrative
charge is deducted.
The amounts attributable to Incentive Life, Incentive Life Plus, IL
Protector, IL COLI, IL COLI II, and the Series 2000 policyowners' accounts
are assessed monthly by Equitable Variable Life with mortality and
administrative charges. 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.
4. Amounts Retained by Equitable Variable Life in Separate Account FP
The amount retained by Equitable Variable Life in the Account arises
principally from (1) contributions from Equitable Variable Life, 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 Life are not subject
to charges for mortality and expense risks or mortality and administrative
costs.
Amounts retained by Equitable Variable Life in the Account may be
transferred at any time by Equitable Variable Life to its General Account.
During the nine months ended September 30, 1995 surplus contribution of
$200,000 were made by EVLICO into the International Fund.
5. Distribution and Servicing Agreements
Equitable Variable Life has entered into a Distribution and Servicing
Agreement with Equitable Life and EQ Financial Consultants Inc., whereby
registered representatives of EQ Financial Consultants Inc., 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 Life.
Equitable Variable Life also has entered into an agreement with Equitable
Life under which Equitable Life 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.
6. Investment Returns
The Separate Account rates of return attributable to Incentive Life,
Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000
policyowners are different than those attributable to Survivorship 2000,
Incentive Life Plus Original Series, IL Protector, IL COLI, IL COLI II and
to SP-Flex policyowners because asset charges are deducted at different
rates under each policy (see Note 3).
The tables on this page and the following pages show the gross and net
investment returns with respect to the Funds for the periods shown. The
net return for each Fund is based upon net assets for a policy whose
policy commences with the beginning date of such period and is not based
on the average net assets in the Fund during such period. Gross return is
equal to the total return earned by the underlying Trust investment.
FSA-28
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
INCENTIVE LIFE
- --------------
INCENTIVE LIFE 2000*
- -------------------
INCENTIVE LIFE PLUS SECOND SERIES*
- ---------------------------------
AND CHAMPION 2000*
- ------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
------------------- -------------------------------------------------------------- -------------------
MONEY MARKET FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 3.91% 4.30% 5.74% 4.02% 3.00% 3.56% 6.18% 8.24% 9.18% 7.32% 6.63% 6.05%
Net return........... 3.44% 3.83% 5.11% 3.39% 2.35% 2.94% 5.55% 7.59% 8.53% 6.68% 5.99% 5.47%
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE NINE MONTHS ENDED(B) APRIL 1(A)(B) TO
GOVERNMENT SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
SECURITIES FUND -------------------- -------------------------------------- ------------------
- --------------- 1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 1.71% 9.94% 13.33% (4.37)% 10.58% 5.60% 12.26%
Net return........... 1.25% 9.45% 12.65% (4.95)% 9.88% 4.96% 11.60%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEARS ENDED OCTOBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
-------------------- -------------------- -------------------
QUALITY BOND FUND 1996 1995 1995 1994 1993
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return......... 1.28% 12.37% 17.02% (5.10)% (0.51)%
Net return........... 0.82% 11.86% 16.32% (5.67)% (0.66)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B)
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
-------------------- ----------------------------------------------------------------------
HIGH YIELD FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 18.79% 14.89% 19.92% (2.79)% 23.15% 12.31% 24.46% (1.12)% 5.13% 9.73% 4.68%
Net return........... 18.25% 14.37% 19.20% (3.37)% 22.41% 11.64% 23.72% (1.71)% 4.50% 9.08% 4.05%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEARS ENDED OCTOBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
-------------------- --------------------- ----------------------
GROWTH & INCOME FUND 1996 1995 1995 1994 1993
- -------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return......... 9.89% 19.76% 24.07% (0.58)% (0.25)%
Net return........... 9.39% 19.23% 23.33% (1.17)% (0.41)%
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30(A)(B)
NINE MONTHS ENDED(B) YEAR ENDED TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------------------- ----------------------- ----------------------
EQUITY INDEX FUND 1996 1995 1995 1994
- ----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return........ 13.10% 28.97% 36.48% 1.08%
Net return.......... 12.59% 28.39% 35.66% 0.58%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ----------------------------------------------------------------------- ---------------
COMMON STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 14.25% 28.99% 32.45% (2.14)% 24.84% 3.22% 37.88% (8.12)% 25.59% 22.43% 7.49% 15.65%
Net return........... 13.73% 28.42% 31.66% (2.73)% 24.08% 2.60% 37.06% (8.67)% 24.84% 21.70% 6.84% 15.01%
</TABLE>
- ------------------
*Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992.
Sales of Incentive Life Plus Second Series commenced on September 15, 1995.
(a) Date as of which net premiums under the policies were first allocated to the
Fund.
(b) The gross return and the net return for the periods indicated are not annual
rates of return.
FSA-29
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
INCENTIVE LIFE
- --------------
INCENTIVE LIFE 2000*
- -------------------
INCENTIVE LIFE PLUS SECOND SERIES*
- ---------------------------------
AND CHAMPION 2000*
- ------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ----------------------------------------------------------------- -----------------
GLOBAL FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 8.96% 16.02% 18.81% 5.23% 32.09% (0.50)% 30.55% (6.07)% 26.93% 10.88% (13.27)%
Net return............ 8.47% 15.50% 18.11% 4.60% 31.33% (1.10)% 29.77% (6.63)% 26.17% 10.22% (13.45)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO
SEPTEMBER 30, DECEMBER 31,
-------------------- ----------------
INTERNATIONAL FUND 1996 1995 1995
- ------------------ ---- ---- ----
<S> <C> <C> <C>
Gross return.......... 7.29% 5.71% 11.29%
Net return............ 6.80% 6.94% 10.79%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- --------------------------------------------------------------------- ---------------
AGGRESSIVE STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 19.52% 25.74% 31.63% (3.81)% 16.77% (3.16)% 86.86% 8.17% 43.50% 1.17% 7.31% 35.88%
Net return............ 18.98% 25.17% 30.85% (4.39)% 16.05% (3.74)% 85.75% 7.51% 42.64% 0.53% 6.66% 35.13%
</TABLE>
ASSET ALLOCATION SERIES
- -----------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) JANUARY 26(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ------------------------------------------------------------------------ --------------
BALANCED FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 6.63% 15.50% 19.75% (8.02)% 12.28% (2.84)% 41.26% 0.24% 25.83% 13.27% (0.85)% 29.07%
Net return............ 6.15% 14.98% 19.03% (8.57)% 11.64% (3.42)% 40.42% (0.36)% 25.08% 12.59% (1.45)% 28.34%
</TABLE>
<TABLE>
<CAPTION>
CONSERVATIVE NINE MONTHS ENDED(B) OCTOBER 2(A)(B) TO
INVESTORS FUND SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
- -------------- ------------------ ----------------------------------------------------- ------------------
1996 1995 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 0.94% 14.87% 20.40% (4.10)% 10.76% 5.72% 19.87% 6.37% 3.09%
Net return............ 0.48% 14.35% 19.68% (4.67)% 10.15% 5.09% 19.16% 5.73% 2.94%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) OCTOBER 2(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ---------------------------------------------------- -----------------
GROWTH INVESTORS FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 7.39% 21.63% 26.37% (3.15)% 15.26% 4.90% 48.89% 10.66% 3.98%
Net return............ 6.90% 21.09% 25.62% (3.73)% 14.58% 4.27% 48.01% 10.00% 3.82%
</TABLE>
- ----------
*Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992.
Sales of Incentive Life Plus Second Series commenced on September 15, 1995.
(a) Date as of which net premiums under the policies were first allocated to the
Fund.
(b) The gross return and the net return for the periods indicated are not annual
rates of return.
FSA-30
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
SURVIVORSHIP 2000
- -----------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
---------------------- -------------------------------- ---------------------
MONEY MARKET FUND 1996 1995 1995 1994 1993 1992
- ----------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return..................... 3.91% 4.30% 5.74% 4.02% 3.00% 1.11%
Net return....................... 3.20% 3.60% 4.80% 3.08% 2.04% 0.77%
INTERMEDIATE GOVERNMENT
SECURITIES FUND
- ---------------
Gross return..................... 1.71% 9.94% 13.33% (4.37)% 10.58% 0.90%
Net return....................... 1.02% 9.20% 12.31% (5.23)% 9.55% 0.56%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) OCTOBER 1(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
---------------------- ------------------------ ------------------
QUALITY BOND FUND 1996 1995 1995 1994 1993
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return..................... 1.28% 12.37% 17.02% (5.10)% (0.51)%
Net return....................... 0.59% 11.61% 15.97% (5.95)% (0.73)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------------- ----------------------------------------- -------------------
HIGH YIELD FUND 1996 1995 1995 1994 1993 1992
- --------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return..................... 18.79% 14.89% 19.92% (2.79)% 23.15% 1.84%
Net return....................... 17.98% 14.12% 18.84% (3.66)% 22.04% 1.50%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) OCTOBER 1(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
---------------------- ------------------------- -----------------------
GROWTH &
INCOME FUND 1996 1995 1995 1994 1993
- ----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return..................... 9.89% 19.76% 24.07% (0.58)% (0.25)%
Net return....................... 9.14% 18.96% 22.96% (1.47)% (0.48)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEAR ENDED MARCH 1 (A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
---------------------- ------------------ -------------------
EQUITY INDEX FUND 1996 1995 1995 1994
- ----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return..................... 13.10% 28.97% 36.48% 1.08%
Net return....................... 12.33% 28.10% 35.26% 0.33%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
---------------------- -------------------------------------- ----------------------
COMMON STOCK FUND 1996 1995 1995 1994 1993 1992
- ----------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return..................... 14.25% 28.99% 32.45% (2.14)% 24.84% 5.28%
Net return....................... 13.47% 28.13% 31.26% (3.02)% 23.70% 4.93%
GLOBAL FUND
- -----------
Gross return..................... 8.96% 16.02% 18.81% 5.23% 32.09% 4.87%
Net return....................... 8.22% 15.25% 17.75% 4.29% 30.93% 4.52%
AGGRESSIVE STOCK FUND
- ---------------------
Gross return..................... 19.52% 25.74% 31.63% (3.81)% 16.77% 11.49%
Net return....................... 18.71% 24.89% 30.46% (4.68)% 15.70% 11.11%
</TABLE>
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO
SEPTEMBER 30, DECEMBER 31,
---------------------- ------------------
INTERNATIONAL FUND 1996 1995 1995
- ------------------ ---- ---- ----
Gross return..................... 7.29% 5.71% 11.29%
Net return....................... 6.56% 6.78% 10.55%
ASSET ALLOCATION SERIES
- -----------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 17(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE ----------------------- ---------------------------------------- ----------------------
INVESTORS FUND 1996 1995 1995 1994 1993 1992
- -------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return..................... 0.94% 14.87% 20.40% (4.10)% 10.76% 1.38%
Net return....................... 0.25% 14.09% 19.32% (4.96)% 9.81% 1.04%
BALANCED FUND
- -------------
Gross return..................... 6.63% 15.50% 19.75% (8.02)% 12.28% 5.37%
Net return....................... 5.90% 14.72% 18.68% (8.84)% 11.30% 5.02%
GROWTH INVESTORS FUND
- ---------------------
Gross return..................... 7.39% 21.63% 26.37% (3.15)% 15.26% 6.89%
Net return....................... 6.65% 20.81% 25.24% (4.02)% 14.24% 6.53%
</TABLE>
- ----------
(a) Date as of which net premiums under the policies were first allocated to the
Fund.
(b) The gross return and the net return for the periods indicated are not annual
rates of return.
FSA-31
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
INCENTIVE LIFE PLUS ORIGINAL SERIES*(A)
- -----------------------------------
IL COLI**(A)
- -------
<TABLE>
<CAPTION>
INCENTIVE LIFE PLUS ORIGINAL SERIES IL COLI
---------------------------------------------- -------------------------------------------------
NINE MONTHS NINE MONTHS
ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15 TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
--------------- -------------- ------------- --------------- --------------- ---------------
1996 1995 1995 1996 1995 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund........... 3.91% 4.25% 5.69% 3.91% 0.19% 1.58%
Intermediate Government
Securities Fund............. 1.71% 9.92% 13.31% 1.71% 0.00% 3.08%
Quality Bond Fund........... 1.28% 12.47% 17.13% 1.28% 0.16% 4.31%
High Yield Fund............. 18.79% 14.92% 19.95% 18.79% 0.31% 4.70%
Growth & Income Fund........ 9.89% 20.05% 24.38% 9.89% 0.30% 3.91%
Equity Index Fund........... 13.10% 29.01% 36.53% 13.10% 0.24% 6.08%
Common Stock Fund........... 14.25% 29.60% 33.07% 14.25% (1.13)% 1.51%
Global Fund................. 8.96% 16.57% 19.38% 8.96% 0.25% 2.67%
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED APRIL 30 TO APRIL 30 TO ENDED APRIL 30 TO APRIL 30 TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
--------------- -------------- ------------- --------------- --------------- ---------------
1996 1995 1995 1996 1995 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
International Fund.......... 7.29% 7.26% 11.29% 7.29% 0.71% 4.49%
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15 TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
--------------- -------------- ------------- --------------- --------------- ---------------
1996 1995 1995 1996 1995 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Aggressive Stock Fund....... 19.52% 27.02% 33.00% 19.52% (0.38)% 4.28%
ASSET ALLOCATION SERIES
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED JANUARY 6 TO JANUARY 6 TO ENDED SEPTEMBER 15 TO SEPTEMBER 15
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
--------------- -------------- ------------- --------------- --------------- ---------------
1996 1995 1995 1996 1995 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Conservative Investors Fund.. 8.96% 15.05% 20.59% 8.96% 0.07% 4.91%
Balanced Fund................ 6.63% 16.05% 20.32% 6.63% (0.47)% 3.18%
Growth Investors Fund........ 7.39% 22.16% 26.92% 7.39% 0.90% 4.83%
</TABLE>
- ----------------------------
*Sales of Incentive Life Plus Original Series commenced on January 6, 1995.
**Sales of IL COLI commenced on September 15, 1995.
(a)There are no Separate Account asset charges for this policy and therefore
the gross and net rates of return are the same. The rates of return for the
periods indicated are not annual rates of return.
FSA-32
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
SP-FLEX
- -------
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ------------------------------------------------------------ ----------------
MONEY MARKET FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return................. 3.91% 4.30% 5.74% 4.02% 3.00% 3.56% 6.17% 8.24% 9.18% 7.32% 2.15%
Net return................... 2.51% 2.91% 3.86% 2.17% 1.13% 1.71% 4.29% 6.30% 7.24% 5.41% 1.62%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) APRIL 1(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
INTERMEDIATE GOVERNMENT -------------------- --------------------------------- ------------------
SECURITIES FUND 1996 1995 1995 1994 1993 1992 1991
- --------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return................. 1.71% 9.94% 13.33% (4.37)% 10.58% 5.60% 12.10%
Net return................... 0.34% 8.47% 11.31% (6.08)% 8.57% 3.71% 10.59%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
-------------------- ----------------- -------------------
QUALITY BOND FUND 1996 1995 1995 1994
- ----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return................. 1.28% 12.37% 17.02% (2.20)%
Net return................... (0.09)% 10.86% 14.94% (2.35)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- --------------------------------------------------------------- ---------------
HIGH YIELD FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return................. 18.79% 14.89% 19.92% (2.79)% 23.15% 12.31% 24.46% (1.12)% 5.13% 9.73% 1.95%
Net return................... 17.19% 13.35% 17.79% (4.52)% 20.96% 10.30% 22.25% (2.89)% 3.26% 7.78% 1.39%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
GROWTH & -------------------- ------------------------------------
INCOME FUND 1996 1995 1995 1994
- ----------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return................. 9.89% 19.76% 24.07% (3.40)%
Net return................... 8.40% 18.16% 21.87% (3.55)%
EQUITY INDEX FUND
- -----------------
Gross return................. 13.10% 28.97% 36.48% (2.54)%
Net return................... 11.58% 27.25% 34.06% (2.69)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ---------------------------------------------------------------- --------------
COMMON STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return................. 14.25% 28.99% 32.45% (2.14)% 24.84% 3.23% 37.87% (8.12)% 25.59% 22.43% (22.57)%
Net return................... 12.70% 27.27% 30.10% (3.88)% 22.60% 1.38% 35.43% (9.76)% 23.36% 20.26% (23.00)%
GLOBAL FUND
- -----------
Gross return................. 8.96% 16.02% 18.81% 5.23% 32.09% (0.50)% 30.55% (6.07)% 26.93% 10.88% (11.40)%
Net return................... 7.49% 14.47% 16.70% 3.36% 29.77% (2.28)% 28.23% (7.75)% 24.67% 8.90% (11.86)%
</TABLE>
NINE MONTHS ENDED(B) APRIL 3(A)(B) TO
SEPTEMBER 30, DECEMBER 31,
-------------------- ---------------
INTERNATIONAL FUND 1996 1995 1995
- ------------------ ---- ---- ----
Gross return................ 7.29% 5.71% 11.29%
Net return.................. 5.84% 6.31% 9.82%
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ---------------------------------------------------------------- ----------------
AGGRESSIVE STOCK FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return................ 19.52% 25.74% 31.63% (3.81)% 16.77% (3.16)% 86.86% 8.17% 43.50% 1.17% (24.28)%
Net return.................. 17.91% 24.06% 29.30% (5.53)% 14.67% (4.89)% 83.54% 6.23% 40.95% (0.66)% (24.68)%
</TABLE>
- ----------
(a) Date as of which net premiums under the policies were first allocated to the
Fund.
(b) The gross return and the net return for the periods indicated are not annual
rates of return.
FSA-33
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONCLUDED)
ASSET ALLOCATION SERIES
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
CONSERVATIVE -------------------- -------------------------------------
INVESTORS FUND 1996 1995 1995 1994
- -------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return................. 0.94% 14.87% 20.40% (1.83)%
Net return................... (0.43)% 13.33% 18.26% (1.98)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) AUGUST 31(A)(B) TO
SEPTEMBER 30, YEARS ENDED DECEMBER 31, DECEMBER 31,
-------------------- ---------------------------------------------------------------- --------------
BALANCED FUND 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return................. 6.63% 15.50% 19.75% (8.02)% 12.28% (2.83)% 41.27% 0.24% 25.83% 13.27% (20.26)%
Net return................... 5.19% 13.96% 17.62% (9.66)% 10.31% (4.57)% 38.75% (1.56)% 23.59% 11.25% (20.71)%
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED(B) YEAR ENDED SEPTEMBER 1(A)(B) TO
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
GROWTH -------------------- --------------------------------------
INVESTORS FUND 1996 1995 1995 1994
- -------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return................. 7.39% 21.63% 26.37% (3.16)%
Net return................... 5.93% 20.01% 24.12% (3.31)%
</TABLE>
- ----------
(a) Date as of which net premiums under the policies were first allocated to the
Fund.
(b) The gross return and the net return for the periods indicated are not annual
rates of return.
FSA-34
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
IL PROTECTOR*
- ----------------------------
AUGUST 22 TO
SEPTEMBER 30,(A)
-----------------
1996
------
Money Market Fund................. 1.80%
Intermediate Government
Securities Fund................... 2.62%
Quality Bond...................... 3.89%
High Yield Fund................... 10.33%
Growth & Income Fund.............. 6.01%
Equity Index Fund................. 7.65%
Common Stock Fund................. 8.18%
Global Fund....................... 1.73%
International Fund................ (0.03)%
Aggressive Stock Fund............. 4.10%
ASSET ALLOCATION SERIES
AUGUST 5 TO
SEPTEMBER 30,(A)
-----------------
1996
------
Conservative Investors Fund....... 3.77%
Balanced Fund..................... 3.97%
Growth Investors Fund............. 4.52%
- ----------
*Sales of IL Protector commenced on August 22, 1996.
(a) Date as of which net premiums under the policies were first allocated to the
Fund. The gross return and the net return for the periods indicated are not
annual rates of return.
7. Subsequent Event
On September 19, 1996 the Board of Directors of Equitable Life approved an
Agreement and Plan of Merger by and between Equitable Life and Equitable
Variable Life (the "Merger Agreement"). The merger is expected to be
effective on January 1, 1997, subject to receipt of all necessary regulatory
approvals. On that date, and in accordance with the provisions of the Merger
Agreement, the separate existence of Equitable Variable Life will cease and
Equitable Life will survive the merger. From and after the effective date of
the merger, Equitable Life will be liable in place of Equitable Variable
Life for the liabilities and obligations of Equitable Variable Life,
including liabilities under policies and contracts issued by Equitable
Variable Life, and all of Equitable Variable Life's assets will become
assets of Equitable Life.
FSA-35
<PAGE>
INDEX TO FINANCIAL STATEMENTS
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
<TABLE>
<S> <C>
Independent Auditors' Report....................................................................................F-2
Consolidated Financial Statements:
Consolidated Balance Sheets, December 31, 1995 and 1994...................................................F-3
Consolidated Statements of Earnings for the Years Ended December 31, 1995, 1994
and 1993...............................................................................................F-4
Consolidated Statements of Equity for the Years Ended December 31, 1995, 1994
and 1993...............................................................................................F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994
and 1993...............................................................................................F-6
Notes to Consolidated Financial Statements................................................................F-7
Unaudited Interim Consolidated Financial Statements:
Consolidated Balance Sheets, September 30, 1996 and December 31, 1995....................................F-42
Consolidated Statements of Earnings for the Three and Nine Months Ended
September 30, 1996 and 1995...........................................................................F-43
Consolidated Statements of Equity for the Nine Months Ended
September 30, 1996 and 1995...........................................................................F-44
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995...........................................................................F-45
Notes to Consolidated Financial Statements...............................................................F-46
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
The Equitable Life Assurance Society of the United States
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of The
Equitable Life Assurance Society of the United States and its subsidiaries
("Equitable Life") at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of Equitable Life's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 2 to the consolidated financial statements, Equitable Life
changed its methods of accounting for loan impairments in 1995, for
postemployment benefits in 1994 and for investment securities in 1993.
PRICE WATERHOUSE LLP
New York, New York
February 7, 1996
F-2
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value............................. $ 15,899.9 $ 7,586.0
Held to maturity, at amortized cost..................................... - 5,223.0
Mortgage loans on real estate............................................. 3,638.3 4,018.0
Equity real estate........................................................ 3,916.2 4,446.4
Policy loans.............................................................. 1,976.4 1,731.2
Other equity investments.................................................. 621.1 678.5
Investment in and loans to affiliates..................................... 636.6 560.2
Other invested assets..................................................... 706.1 489.3
----------------- -----------------
Total investments..................................................... 27,394.6 24,732.6
Cash and cash equivalents................................................... 774.7 693.6
Deferred policy acquisition costs........................................... 3,083.3 3,221.1
Amounts due from discontinued GIC Segment................................... 2,097.1 2,108.6
Other assets................................................................ 2,713.1 2,078.6
Closed Block assets......................................................... 8,612.8 8,105.5
Separate Accounts assets.................................................... 24,566.6 20,469.5
----------------- -----------------
TOTAL ASSETS................................................................ $ 69,242.2 $ 61,409.5
================= =================
LIABILITIES
Policyholders' account balances............................................. $ 21,752.6 $ 21,238.0
Future policy benefits and other policyholders' liabilities................. 4,171.8 3,840.8
Short-term and long-term debt............................................... 1,899.3 1,337.4
Other liabilities........................................................... 3,379.5 2,300.1
Closed Block liabilities.................................................... 9,507.2 9,069.5
Separate Accounts liabilities............................................... 24,531.0 20,429.3
----------------- -----------------
Total liabilities..................................................... 65,241.4 58,215.1
----------------- -----------------
Commitments and contingencies (Notes 10, 12, 13, 14 and 15)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value 2.0 million shares authorized, issued
and outstanding........................................................... 2.5 2.5
Capital in excess of par value.............................................. 2,913.6 2,913.6
Retained earnings........................................................... 781.6 484.0
Net unrealized investment gains (losses).................................... 338.2 (203.0)
Minimum pension liability................................................... (35.1) (2.7)
----------------- -----------------
Total shareholder's equity............................................ 4,000.8 3,194.4
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................................. $ 69,242.2 $ 61,409.5
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and investment-type product policy fee
income...................................................... $ 771.0 $ 715.0 $ 644.5
Premiums...................................................... 606.8 625.6 599.1
Net investment income......................................... 2,127.7 2,030.9 2,599.3
Investment gains, net......................................... 5.3 91.8 533.4
Commissions, fees and other income............................ 886.8 845.4 1,717.2
Contribution from the Closed Block............................ 124.4 151.0 128.3
----------------- ----------------- -----------------
Total revenues.......................................... 4,522.0 4,459.7 6,221.8
----------------- ----------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances.......... 1,244.2 1,201.3 1,330.0
Policyholders' benefits....................................... 1,011.3 920.6 1,003.9
Other operating costs and expenses............................ 1,856.5 1,943.1 3,584.2
----------------- ----------------- -----------------
Total benefits and other deductions..................... 4,112.0 4,065.0 5,918.1
----------------- ----------------- -----------------
Earnings before Federal income taxes and cumulative
effect of accounting change................................. 410.0 394.7 303.7
Federal income taxes.......................................... 112.4 101.2 91.3
----------------- ----------------- -----------------
Earnings before cumulative effect of accounting change........ 297.6 293.5 212.4
Cumulative effect of accounting change, net of Federal
income taxes................................................ - (27.1) -
----------------- ----------------- -----------------
Net Earnings.................................................. $ 297.6 $ 266.4 $ 212.4
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Common stock, at par value, beginning of year................. $ 2.5 $ 2.5 $ 2.0
Increase in par value......................................... - - .5
----------------- ----------------- -----------------
Common stock, at par value, end of year....................... 2.5 2.5 2.5
----------------- ----------------- -----------------
Capital in excess of par value, beginning of year............. 2,913.6 2,613.6 2,273.9
Additional capital in excess of par value..................... - 300.0 340.2
Increase in par value......................................... - - (.5)
----------------- ----------------- -----------------
Capital in excess of par value, end of year................... 2,913.6 2,913.6 2,613.6
----------------- ----------------- -----------------
Retained earnings, beginning of year.......................... 484.0 217.6 5.2
Net earnings.................................................. 297.6 266.4 212.4
----------------- ----------------- -----------------
Retained earnings, end of year................................ 781.6 484.0 217.6
----------------- ----------------- -----------------
Net unrealized investment (losses) gains, beginning of year... (203.0) 131.9 78.8
Change in unrealized investment gains (losses)................ 541.2 (334.9) (9.5)
Effect of adopting new accounting standard.................... - - 62.6
----------------- ----------------- -----------------
Net unrealized investment gains (losses), end of year......... 338.2 (203.0) 131.9
----------------- ----------------- -----------------
Minimum pension liability, beginning of year.................. (2.7) (15.0) -
Change in minimum pension liability........................... (32.4) 12.3 (15.0)
----------------- ----------------- -----------------
Minimum pension liability, end of year........................ (35.1) (2.7) (15.0)
----------------- ----------------- -----------------
TOTAL SHAREHOLDER'S EQUITY, END OF YEAR....................... $ 4,000.8 $ 3,194.4 $ 2,950.6
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net earnings.................................................. $ 297.6 $ 266.4 $ 212.4
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Net change in trading activities and broker-dealer
related receivables/payables.............................. - - (4,177.8)
Increase in matched resale agreements....................... - - (2,900.5)
Increase in matched repurchase agreements................... - - 2,900.5
Investment gains, net of dealer and trading gains........... (5.3) (91.8) (160.8)
Change in amounts due from discontinued GIC Segment......... - 57.3 47.8
General Account policy charges.............................. (769.7) (711.9) (623.4)
Interest credited to policyholders' account balances........ 1,244.2 1,201.3 1,330.0
Changes in Closed Block assets and liabilities, net......... (69.6) (95.1) (73.3)
Other, net.................................................. 627.1 7.8 (416.1)
----------------- ----------------- -----------------
Net cash provided (used) by operating activities.............. 1,324.3 634.0 (3,861.2)
----------------- ----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................... 1,863.1 2,319.7 3,479.6
Sales....................................................... 8,901.4 5,661.9 7,399.2
Return of capital from joint ventures and limited
partnerships.............................................. 65.2 39.0 119.5
Purchases................................................... (11,675.5) (7,417.6) (11,184.2)
Decrease (increase) in loans to discontinued GIC Segment.... 1,226.9 (40.0) (880.0)
Cash received on sale of 61% interest in DLJ................ - - 346.7
Other, net.................................................. (625.5) (371.1) (317.0)
----------------- ----------------- -----------------
Net cash (used) provided by investing activities.............. (244.4) 191.9 (1,036.2)
----------------- ----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits.................................................. 2,414.9 2,082.7 2,410.7
Withdrawals............................................... (2,692.7) (2,887.4) (2,433.5)
Net (decrease) increase in short-term financings............ (16.4) (173.0) 4,717.2
Additions to long-term debt................................. 599.7 51.8 97.7
Repayments of long-term debt................................ (40.7) (199.8) (64.4)
Proceeds from issuance of Alliance units.................... - 100.0 -
Payment of obligation to fund accumulated deficit of
discontinued GIC Segment.................................. (1,215.4) - -
Capital contribution from the Holding Company............... - 300.0 -
Other, net.................................................. (48.2) - -
----------------- ----------------- -----------------
Net cash (used) provided by financing activities.............. (998.8) (725.7) 4,727.7
----------------- ----------------- -----------------
Change in cash and cash equivalents........................... 81.1 100.2 (169.7)
Cash and cash equivalents, beginning of year.................. 693.6 593.4 763.1
----------------- ----------------- -----------------
Cash and Cash Equivalents, End of Year........................ $ 774.7 $ 693.6 $ 593.4
================= ================= =================
Supplemental cash flow information
Interest Paid............................................... $ 89.6 $ 34.9 $ 1,437.2
================= ================= =================
Income Taxes (Refunded) Paid................................ $ (82.7) $ 49.2 $ 41.0
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) ORGANIZATION
The Equitable Life Assurance Society of the United States ("Equitable
Life") 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"). Equitable Life's insurance business, which is
comprised of an Individual Insurance and Annuities segment and a Group
Pension segment is conducted principally by Equitable Life and its
wholly owned life insurance subsidiary, Equitable Variable Life
Insurance Company ("EVLICO"). Equitable Life's investment management
business, which comprises the Investment Services segment, is conducted
principally by Alliance Capital Management L.P. ("Alliance"), Equitable
Real Estate Investment Management, Inc. ("EREIM") and Donaldson, Lufkin
and Jenrette, Inc. ("DLJ"), an investment banking and brokerage
affiliate. AXA, a French holding company for an international group of
insurance and related financial services companies is the Holding
Company's largest shareholder, owning approximately 60.6% at December
31, 1995 (63.5% assuming conversion of Series E Convertible Preferred
Stock held by AXA and 54.2% if all securities convertible into, or
options on, common stock were to be converted or exercised).
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
-----------------------------------------------------
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles ("GAAP").
The accompanying consolidated financial statements include the accounts
of Equitable Life and its wholly owned life insurance subsidiaries
(collectively, the "Insurance Group"); non-insurance subsidiaries,
principally Alliance, an investment advisory subsidiary and EREIM, a
real estate investment management subsidiary; and those partnerships and
joint ventures in which the Company has control and a majority economic
interest (collectively, including its consolidated subsidiaries, the
"Company"). The consolidated statement of earnings and cash flow for the
year ended December 31, 1993 include the results of operations and cash
flow of DLJ, an investment banking and brokerage affiliate, on a
consolidated basis through December 15, 1993 (see Note 20). Subsequent
to that date, DLJ is accounted for on the equity basis. The Closed Block
assets and liabilities and results of operations are presented in the
consolidated financial statements as single line items (see Note 6).
Unless specifically stated, all disclosures contained herein supporting
the consolidated financial statements exclude the Closed Block related
amounts.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
All significant intercompany transactions and balances have been
eliminated in consolidation other than intercompany transactions and
balances with the Closed Block and the discontinued Guaranteed Interest
Contract ("GIC") Segment (see Note 7).
Certain reclassifications have been made in the amounts presented for
prior periods to conform these periods with the 1995 presentation.
F-7
<PAGE>
Closed Block
------------
As of July 22, 1992, Equitable Life established the Closed Block for the
benefit of certain classes of individual participating policies for
which Equitable Life had a dividend scale payable in 1991 and which were
in force on that date. Assets were allocated to the Closed Block in an
amount which, together with anticipated revenues from policies included
in the Closed Block, was reasonably expected to be sufficient to support
such business, including provision for payment of claims, certain
expenses and taxes, and for continuation of dividend scales payable in
1991, assuming the experience underlying such scales continues.
Assets allocated to the Closed Block inure solely to the benefit of the
holders of policies included in the Closed Block and will not revert to
the benefit of the Holding Company. The plan of demutualization
prohibits the reallocation, transfer, borrowing or lending of assets
between the Closed Block and other portions of Equitable Life's General
Account, any of its Separate Accounts or to any affiliate of Equitable
Life without the approval of the New York Superintendent of Insurance.
Closed Block assets and liabilities are carried on the same basis as
similar assets and liabilities held in the General Account.
The excess of Closed Block liabilities over Closed Block assets
represents the expected future post-tax contribution from the Closed
Block which would be recognized in income over the period the policies
and contracts in the Closed Block remain in force. If the actual
contribution from the Closed Block in any given period equals or exceeds
the expected contribution for such period as determined at the
establishment of the Closed Block, the expected contribution would be
recognized in income for that period. Any excess of the actual
contribution over the expected contribution would also be recognized in
income to the extent that the aggregate expected contribution for all
prior periods exceeded the aggregate actual contribution. Any remaining
excess of actual contribution over expected contributions would be
accrued in the Closed Block as a liability for future dividends to be
paid to the Closed Block policyholders. If, over the period the policies
and contracts in the Closed Block remain in force, the actual
contribution from the Closed Block is less than the expected
contribution from the Closed Block, only such actual contribution would
be recognized in income.
Discontinued Operations
-----------------------
In 1991, the Company's management adopted a plan to discontinue the
business operations of the GIC Segment, consisting of the Guaranteed
Interest Contract and Group Non-Participating Wind-Up Annuities lines of
business. The Company established a pre-tax provision for the estimated
future losses of the GIC line of business and a premium deficiency
reserve for the Group Non-Participating Wind-Up Annuities. Subsequent
losses incurred have been charged to the allowance for future losses and
the premium deficiency reserve. Total allowances are based upon
management's best judgment and there is no assurance that the ultimate
losses will not differ.
Accounting Changes
------------------
In the first quarter of 1995, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan". This statement applies to all loans, including
loans restructured in a troubled debt restructuring involving a
modification of terms. This statement addresses the accounting for
impairment of a loan by specifying how allowances for credit losses
should be determined. Impaired loans within the scope of this statement
are measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, at the loan's
observable market price or the fair value of the collateral if the loan
is collateral dependent. The Company provides for impairment of loans
through an allowance for possible losses. The adoption of this statement
did not have a material effect on the level of these allowances or on
the Company's consolidated statements of earnings and shareholder's
equity.
F-8
<PAGE>
In the fourth quarter of 1994 (effective as of January 1, 1994), the
Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," which required 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
$27.1 million, net of a Federal income tax benefit of $14.6 million.
At December 31, 1993, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which expanded 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 $62.6
million, net of deferred policy acquisition costs, amounts attributable
to participating group annuity contracts and deferred Federal income
tax. Beginning coincident with issuance of SFAS No. 115 implementation
guidance in November 1995, the Financial Accounting Standards Board
("FASB") permitted companies a one-time opportunity, through December
31, 1995, to reassess the appropriateness of the classification of all
securities held at that time. On December 1, 1995, the Company
transferred $4,794.9 million of securities classified as held to
maturity to the available for sale portfolio. As a result consolidated
shareholder's equity increased by $126.2 million, net of deferred policy
acquisition costs, amounts attributable to participating group annuity
contracts and deferred Federal income tax.
New Accounting Pronouncements
-----------------------------
In January 1995, the FASB issued SFAS No. 120, "Accounting and Reporting
by Mutual Life Insurance Enterprises and by Insurance Enterprises for
Certain Long-Duration Participating Contracts," which permits, but does
not require, stock life insurance companies with participating life
contracts to account for those contracts in accordance with Statement of
Position No. 95-1, "Accounting for Certain Insurance Activities of
Mutual Life Insurance Enterprises". The Company has decided to retain
the existing methodology to account for traditional participating
policies and, therefore, will not adopt this statement.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of such assets may not be
recoverable. The Company will implement this statement as of January 1,
1996. The cumulative effect of this accounting change will be a charge
of $23.4 million, net of a Federal income tax benefit of $12.1 million,
due to the writedown to fair value of building improvements relating to
facilities being vacated beginning in 1996. The Company currently
provides allowances for possible losses for other assets under the scope
of this statement. Management has not yet determined the impact of this
statement on assets to be held and used.
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights," which requires a mortgage banking enterprise to
recognize rights to service mortgage loans for others as separate assets
however those servicing rights are acquired. It further requires
capitalized mortgage servicing rights be assessed for impairment based
on the fair value of those rights. The Company will implement this
statement as of January 1, 1996. Implementation of this statement will
not have a material effect on the Company's consolidated financial
statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". This statement defines a fair value based
method of accounting for stock-based employee compensation plans while
continuing to allow an entity to measure compensation cost for such
plans using the intrinsic value based method of accounting. Management
has decided to retain the current compensation cost methodology
prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees".
F-9
<PAGE>
Valuation of Investments
------------------------
Fixed maturities, which the Company has both the ability and the intent
to hold to maturity, are stated principally at amortized cost. Fixed
maturities identified as available for sale are reported at estimated
fair value. The amortized cost of fixed maturities is adjusted for
impairments in value deemed to be other than temporary.
Mortgage loans on real estate are stated at unpaid principal balances,
net of unamortized discounts and valuation allowances. Effective with
the adoption of SFAS No. 114 on January 1, 1995, the valuation
allowances are based on the present value of expected future cash flows
discounted at the loan's original effective interest rate or the
collateral value if the loan is collateral dependent. However, if
foreclosure is or becomes probable, the measurement method used is
collateral value. Prior to the adoption of SFAS No. 114, the valuation
allowances were 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 management believed may not be collectible
in full. In establishing valuation allowances, management previously
considered, among other things the estimated fair value of the
underlying collateral.
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 the Company's cost of funds; valuation allowances on
real estate available for sale are computed using the lower of current
estimated fair value, net of disposition costs, or depreciated cost.
Policy loans are stated at unpaid principal balances.
Partnerships and joint venture interests in which the Company does not
have control and a majority economic interest are reported on the equity
basis of accounting and are included either with equity real estate or
other equity investments, as appropriate.
Common stocks are carried at estimated fair value and are included in
other equity investments.
Short-term investments are stated at amortized cost which approximates
fair value and are included with other invested assets.
Cash and cash equivalents includes cash on hand, amounts due from banks
and highly liquid debt instruments purchased with an original maturity
of three months or less.
All securities are recorded in the consolidated financial statements on
a trade date basis.
Investment Results and Unrealized Investment Gains (Losses)
-----------------------------------------------------------
Net investment income and realized investment gains and losses
(collectively, "investment results") related to certain participating
group annuity contracts are passed through to the contractholders as
interest credited to policyholders' account balances.
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 held by the Company are accounted for as a
separate component of shareholder's equity, net of related deferred
Federal income taxes, amounts attributable to the discontinued GIC
Segment, Closed Block, participating group annuity contracts and
deferred policy acquisition costs related to universal life and
investment-type products.
F-10
<PAGE>
Recognition of Insurance Income and Related Expenses
----------------------------------------------------
Premiums from universal life and investment-type contracts are reported
as deposits to policyholders' account balances. Revenues from these
contracts consist of amounts assessed during the period against
policyholders' account balances for mortality charges, policy
administration charges and surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the
period in excess of related policyholders' account balances.
Premiums from traditional life and annuity policies with life
contingencies generally are recognized as income when due. Benefits and
expenses are matched with such income so as to result in the recognition
of profits over the life of the contracts. This match is accomplished by
means of the provision for liabilities for future policy benefits and
the deferral and subsequent amortization of policy acquisition costs.
For contracts with a single premium or a limited number of premium
payments due over a significantly shorter period than the total period
over which benefits are provided, premiums are recorded as income when
due with any excess profit deferred and recognized in income in a
constant relationship to insurance in force or, for annuities, the
amount of expected future benefit payments.
Premiums from individual health contracts are recognized as income over
the period to which the premiums relate in proportion to the amount of
insurance protection provided.
Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
underwriting, agency and policy issue expenses, all of which vary with
and are primarily related to the production of new business, are
deferred. 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 effect on
the amortization of deferred policy acquisition costs of revisions to
estimated gross profits is reflected in earnings in the period such
estimated gross profits are revised. The effect on the deferred policy
acquisition cost asset that would result from realization of unrealized
gains (losses) is recognized with an offset to unrealized gains (losses)
in consolidated shareholder's equity as of the balance sheet date.
For traditional life and annuity policies with life contingencies,
deferred policy acquisition costs are amortized in proportion to
anticipated premiums. Assumptions as to anticipated premiums are
estimated at the date of policy issue and are consistently applied
during the life of the contracts. Deviations from estimated experience
are reflected in earnings in the period such deviations occur. For these
contracts, the amortization periods generally are for the estimated life
of the policy.
For individual health benefit insurance, deferred policy acquisition
costs are amortized over the expected average life of the contracts (10
years for major medical policies and 20 years for disability income
products) in proportion to anticipated premium revenue at time of issue.
Policyholders' Account Balances and Future Policy Benefits
----------------------------------------------------------
Policyholders' account balances for universal life and investment-type
contracts are equal to the policy account values. The policy account
values represent an accumulation of gross premium payments plus credited
interest less expense and mortality charges and withdrawals.
F-11
<PAGE>
For traditional life insurance policies, future policy benefit and
dividend liabilities are estimated using a net level premium method on
the basis of actuarial assumptions as to mortality, persistency and
interest established at policy issue. Assumptions established at policy
issue as to mortality and persistency are based on the Insurance Group's
experience which, together with interest and expense assumptions,
provide a margin for adverse deviation. When the liabilities for future
policy benefits plus the present value of expected future gross premiums
for a product are insufficient to provide for expected future policy
benefits and expenses for that product, deferred policy acquisition
costs are written off and thereafter, if required, a premium deficiency
reserve is established by a charge to earnings. Benefit liabilities for
traditional annuities during the accumulation period are equal to
accumulated contractholders' fund balances and after annuitization are
equal to the present value of expected future payments. Interest rates
used in establishing such liabilities range from 2.25% to 11.5% for life
insurance liabilities and from 2.25% to 13.5% for annuity liabilities.
Individual health benefit liabilities for active lives are estimated
using the net level premium method, and assumptions as to future
morbidity, withdrawals and interest which provide a margin for adverse
deviation. Benefit liabilities for disabled lives are estimated using
the present value of benefits method and experience assumptions as to
claim terminations, expenses and interest.
Claim reserves and associated liabilities for individual disability
income and major medical policies were $639.6 million, $570.6 million at
December 31, 1995 and 1994, respectively. Incurred benefits (benefits
paid plus changes in claim reserves) and benefits paid for individual
disability income and major medical policies are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Incurred benefits related to current year.......... $ 176.0 $ 188.6 $ 193.1
Incurred benefits related to prior years........... 67.8 28.7 106.1
----------------- ---------------- -----------------
Total Incurred Benefits............................ $ 243.8 $ 217.3 $ 299.2
================= ================ =================
Benefits paid related to current year.............. $ 37.0 $ 43.7 $ 48.9
Benefits paid related to prior years............... 137.8 132.3 123.1
----------------- ---------------- -----------------
Total Benefits Paid................................ $ 174.8 $ 176.0 $ 172.0
================= ================ =================
</TABLE>
The amount of policyholders' dividends to be paid (including those on
policies included in the Closed Block) is determined annually by
Equitable Life's Board of Directors. The aggregate amount of
policyholders' dividends is related to actual interest, mortality,
morbidity and expense experience for the year and judgment as to the
appropriate level of statutory surplus to be retained by Equitable Life.
Equitable Life is subject to limitations on the amount of statutory
profits which can be retained with respect to certain classes of
individual participating policies that were in force on July 22, 1992
which are not included in the Closed Block and with respect to
participating policies issued subsequent to July 22, 1992. Excess
statutory profits, if any, will be distributed over time to such
policyholders and will not be available to Equitable Life's shareholder.
Earnings in excess of limitations are accrued as policyholders'
dividends.
At December 31, 1995, participating policies including those in the
Closed Block represent approximately 27.2% ($58.4 billion) of directly
written life insurance in force, net of amounts ceded. Participating
policies represent primarily all of the premium income as reflected in
the consolidated statements of earnings and in the results of the Closed
Block.
F-12
<PAGE>
Federal Income Taxes
--------------------
Equitable Life and its life insurance and non-life insurance
subsidiaries file a consolidated Federal income tax return with the
Holding Company and its non-life insurance subsidiaries. Current Federal
income taxes are charged or credited to operations based upon amounts
estimated to be payable or recoverable as a result of taxable operations
for the current year. Deferred income tax assets and liabilities are
recognized based on the difference between financial statement carrying
amounts and income tax bases of assets and liabilities using enacted
income tax rates and laws.
Separate Accounts
-----------------
Separate Accounts are established in conformity with the New York State
Insurance Law and generally are not chargeable with liabilities that
arise from any other business of the Insurance Group. Separate Accounts
assets are subject to General Account claims only to the extent the
value of such assets exceeds 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, and for which the
Insurance Group does not bear the investment risk, are shown as separate
captions in the consolidated balance sheets. The Insurance Group bears
the investment risk on assets held in one Separate Account, therefore,
such assets are carried on the same basis as similar assets held in the
General Account portfolio. Assets held in the other Separate Accounts
are carried at quoted market values or, where quoted values are not
available, at estimated fair values as determined by the Insurance
Group.
The investment results of Separate Accounts on which the Insurance Group
does not bear the investment risk are reflected directly in Separate
Accounts liabilities. For the years ended December 31, 1995, 1994 and
1993, investment results of such Separate Accounts were $1,956.3
million, $676.3 million and $1,676.5 million, respectively.
Deposits to all Separate Accounts are reported as increases in Separate
Accounts liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges on all Separate Accounts are
included in revenues.
F-13
<PAGE>
3) INVESTMENTS
The following tables provide additional information relating to fixed
maturities and equity securities:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------------- ----------------- ---------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
-----------------
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 10,910.7 $ 617.6 $ 118.1 $ 11,410.2
Mortgage-backed.................... 1,838.0 31.2 1.2 1,868.0
U.S. Treasury securities and
U.S. government and
agency securities................ 2,257.0 77.8 4.1 2,330.7
States and political subdivisions.. 45.7 5.2 - 50.9
Foreign governments................ 124.5 11.0 .2 135.3
Redeemable preferred stock......... 108.1 5.3 8.6 104.8
----------------- ----------------- ---------------- ---------------
Total Available for Sale............... $ 15,284.0 $ 748.1 $ 132.2 $ 15,899.9
================= ================= ================ ===============
Equity Securities:
Common stock......................... $ 97.3 $ 49.1 $ 18.0 $ 128.4
================= ================= ================ ===============
December 31, 1994
-----------------
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 5,663.4 $ 34.6 $ 368.0 $ 5,330.0
Mortgage-backed.................... 686.0 2.9 44.8 644.1
U.S. Treasury securities and
U.S. government and
agency securities................ 1,519.3 6.7 71.9 1,454.1
States and political subdivisions.. 23.4 .1 .7 22.8
Foreign governments................ 43.8 .3 4.2 39.9
Redeemable preferred stock......... 108.4 .4 13.7 95.1
----------------- ----------------- ---------------- ---------------
Total Available for Sale............... $ 8,044.3 $ 45.0 $ 503.3 $ 7,586.0
================= ================= ================ ===============
Held to Maturity:
Corporate.......................... $ 4,661.0 $ 67.9 $ 233.8 $ 4,495.1
U.S. Treasury securities and
U.S. government and
agency securities................ 428.9 4.6 44.2 389.3
States and political subdivisions.. 63.4 .9 3.7 60.6
Foreign governments................ 69.7 4.2 2.0 71.9
================= ================= ================ ===============
Total Held to Maturity................. $ 5,223.0 $ 77.6 $ 283.7 $ 5,016.9
================= ================= ================ ===============
Equity Securities:
Common stock......................... $ 126.4 $ 31.2 $ 23.5 $ 134.1
================= ================= ================ ===============
</TABLE>
F-14
<PAGE>
For publicly traded fixed maturities and equity securities, estimated
fair value is determined using quoted market prices. For fixed
maturities without a readily ascertainable market value, the Company has
determined an estimated fair value using a discounted cash flow
approach, including provisions for credit risk, generally based 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 the Company.
Such estimated fair values do not necessarily represent the values for
which these securities could have been sold at the dates of the
consolidated balance sheets. At December 31, 1995 and 1994, securities
without a readily ascertainable market value having an amortized cost of
$3,748.9 million and $3,980.4 million, respectively, had estimated fair
values of $3,981.8 million and $3,858.7 million, respectively.
The contractual maturity of bonds at December 31, 1995 is shown below:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
------------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less................................................ $ 357.9 $ 360.0
Due in years two through five.......................................... 3,773.1 3,847.1
Due in years six through ten........................................... 4,709.8 4,821.8
Due after ten years.................................................... 4,497.1 4,898.2
Mortgage-backed securities............................................. 1,838.0 1,868.0
---------------- -----------------
Total.................................................................. $ 15,175.9 $ 15,795.1
================ =================
</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 prepayment penalties.
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balances, beginning of year........................ $ 284.9 $ 355.6 $ 512.0
Additions charged to income........................ 136.0 51.0 92.8
Deductions for writedowns and asset dispositions... (95.6) (121.7) (249.2)
----------------- ---------------- -----------------
Balances, End of Year.............................. $ 325.3 $ 284.9 $ 355.6
================= ================ =================
Balances, end of year comprise:
Mortgage loans on real estate.................... $ 65.5 $ 64.2 $ 144.4
Equity real estate............................... 259.8 220.7 211.2
----------------- ---------------- -----------------
Total.............................................. $ 325.3 $ 284.9 $ 355.6
================= ================ =================
</TABLE>
Deductions for writedowns and asset dispositions for 1993 include an
$87.1 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, 1995, 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 $37.2 million
of fixed maturities and $84.7 million of mortgage loans on real estate.
F-15
<PAGE>
The Insurance Group's fixed maturity investment portfolio includes
corporate high yield securities consisting of public high yield bonds,
redeemable preferred stocks and directly negotiated debt in leveraged
buyout transactions. The Insurance Group seeks to minimize the higher
than normal credit risks associated with such securities by monitoring
the total investments in any single issuer or total investment in a
particular industry group. Certain of these corporate high yield
securities are classified as other than investment grade by the various
rating agencies, i.e., a rating below Baa or National Association of
Insurance Commissioners ("NAIC") designation of 3 (medium grade), 4 or 5
(below investment grade) or 6 (in or near default). At December 31,
1995, approximately 15.57% of the $15,139.9 million aggregate amortized
cost of bonds held by the Insurance Group were considered to be other
than investment grade.
In addition to its holdings of corporate high yield securities, the
Insurance Group is an equity investor in limited partnership interests
which primarily invest in securities considered to be other than
investment grade.
The Company has restructured or modified the terms of certain fixed
maturity investments. The fixed maturity portfolio, based on amortized
cost, includes $15.9 million and $30.5 million at December 31, 1995 and
1994, 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 $1.6 million
and $9.7 million as of December 31, 1995 and 1994, respectively. Gross
interest income that would have been recorded in accordance with the
original terms of restructured fixed maturities amounted to $3.0
million, $7.5 million and $11.7 million in 1995, 1994 and 1993,
respectively. Gross interest income on these fixed maturities included
in net investment income aggregated $2.9 million, $6.8 million and $9.7
million in 1995, 1994 and 1993, respectively.
At December 31, 1995 and 1994, 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 $87.7 million (2.4% of total
mortgage loans on real estate) and $96.9 million (2.3% 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 $531.5
million and $447.9 million at December 31, 1995 and 1994, respectively.
These amounts include $3.8 million and $1.0 million of problem mortgage
loans on real estate at December 31, 1995 and 1994, 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 $52.1 million, $44.9 million and $51.8 million in 1995, 1994
and 1993, respectively. Gross interest income on these loans included in
net investment income aggregated $37.4 million, $32.8 million and $46.0
million in 1995, 1994 and 1993, respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
December 31, 1995
-------------------
(IN MILLIONS)
<S> <C>
Impaired mortgage loans with provision for losses....................................... $ 310.1
Impaired mortgage loans with no provision for losses.................................... 160.8
-------------------
Recorded investment in impaired mortgage loans.......................................... 470.9
Provision for losses.................................................................... 62.7
-------------------
Net Impaired Mortgage Loans............................................................. $ 408.2
===================
</TABLE>
F-16
<PAGE>
Impaired mortgage loans with no provision for losses are loans where the
fair value of the collateral or the net present value of the loan equals
or exceeds the recorded investment. Interest income earned on loans
where the collateral value is used to measure impairment is recorded on
a cash basis. Interest income on loans where the present value method is
used to measure impairment is accrued on the net carrying value amount
of the loan at the interest rate used to discount the cash flows.
Changes in the present value attributable to changes in the amount or
timing of expected cash flows are reported as investment gains or
losses.
During the year ended December 31, 1995, the Company's average recorded
investment in impaired mortgage loans was $429.0 million. Interest
income recognized on these impaired mortgage loans totaled $27.9 million
for the year ended December 31, 1995, including $13.4 million recognized
on a cash basis.
At December 31, 1995, investments owned of any one issuer, including its
affiliates, for which the aggregate carrying values are 10% or more of
total shareholders' equity, were $508.3 million relating to Trammell
Crow and affiliates (including holdings of the Closed Block and the
discontinued GIC Segment). The amount includes restructured mortgage
loans on real estate with an amortized cost of $152.4 million. A $294.0
million commercial loan package which was in bankruptcy at the beginning
of the year was resolved in 1995, with part of the package reclassified
as restructured and the remainder reclassified as equity real estate.
The Insurance Group's investment in equity real estate is through direct
ownership and through investments in real estate joint ventures. At
December 31, 1995 and 1994, the carrying value of equity real estate
available for sale amounted to $255.5 million and $447.8 million,
respectively. For the years ended December 31, 1995, 1994 and 1993,
respectively, real estate of $35.3 million, $189.8 million and $261.8
million was acquired in satisfaction of debt. At December 31, 1995 and
1994, the Company owned $862.7 million and $1,086.9 million,
respectively, of real estate acquired in satisfaction of debt.
Depreciation of real estate is computed using the straight-line method
over the estimated useful lives of the properties, which generally range
from 40 to 50 years. Accumulated depreciation on real estate was $662.4
million and $703.1 million at December 31, 1995 and 1994, respectively.
Depreciation expense on real estate totaled $121.7 million, $117.0
million and $115.3 million for the years ended December 31, 1995, 1994
and 1993, respectively.
F-17
<PAGE>
4) JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information of real estate joint ventures
(38 and 47 individual ventures as of December 31, 1995 and 1994,
respectively) and of limited partnership interests accounted for under
the equity method, in which the Company has an investment of $10.0
million or greater and an equity interest of 10% or greater is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
FINANCIAL POSITION
Investments in real estate, at depreciated cost........................ $ 2,684.1 $ 2,786.7
Investments in securities, generally at estimated fair value........... 2,459.8 3,071.2
Cash and cash equivalents.............................................. 489.1 359.8
Other assets........................................................... 270.8 398.7
---------------- -----------------
Total assets........................................................... 5,903.8 6,616.4
---------------- -----------------
Borrowed funds - third party........................................... 1,782.3 1,759.6
Borrowed funds - the Company........................................... 220.5 238.0
Other liabilities...................................................... 593.9 987.7
---------------- -----------------
Total liabilities...................................................... 2,596.7 2,985.3
---------------- -----------------
Partners' Capital...................................................... $ 3,307.1 $ 3,631.1
================ =================
Equity in partners' capital included above............................. $ 902.2 $ 964.2
Equity in limited partnership interests not included above............. 212.8 224.6
Excess (deficit) of equity in partners' capital over investment cost
and equity earnings.................................................. 3.6 (1.8)
Notes receivable from joint venture.................................... 5.3 6.1
---------------- -----------------
Carrying Value......................................................... $ 1,123.9 $ 1,193.1
================ =================
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures............. $ 463.5 $ 537.7 $ 602.7
Revenues of other limited partnership interests.... 242.3 103.4 319.1
Interest expense - third party..................... (135.3) (114.9) (118.8)
Interest expense - the Company..................... (41.0) (36.9) (52.1)
Other expenses..................................... (397.7) (430.9) (531.7)
----------------- ---------------- -----------------
Net Earnings....................................... $ 131.8 $ 58.4 $ 219.2
================= ================ =================
Equity in net earnings included above.............. $ 49.1 $ 18.9 $ 71.6
Equity in net earnings of limited partnerships
interests not included above..................... 44.8 25.3 46.3
Excess of earnings in joint ventures over equity
ownership percentage and amortization of
differences in bases............................. .9 1.8 9.2
Interest on notes receivable....................... .1 - .5
----------------- ---------------- -----------------
Total Equity in Net Earnings....................... $ 94.9 $ 46.0 $ 127.6
================= ================ =================
</TABLE>
F-18
<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,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................... $ 1,151.0 $ 1,024.5 $ 981.7
Trading account securities......................... - - 709.3
Securities purchased under resale agreements....... - - 533.8
Mortgage loans on real estate...................... 329.0 384.3 457.4
Equity real estate................................. 560.4 561.8 539.1
Other equity investments........................... 76.9 35.7 110.4
Policy loans....................................... 144.4 122.7 117.0
Broker-dealer related receivables.................. - - 292.2
Other investment income............................ 279.7 336.3 304.9
----------------- ---------------- -----------------
Gross investment income.......................... 2,541.4 2,465.3 4,045.8
----------------- ---------------- -----------------
Interest expense to finance short-term trading
instruments...................................... - - 983.4
Other investment expenses.......................... 413.7 434.4 463.1
----------------- ---------------- -----------------
Investment expenses.............................. 413.7 434.4 1,446.5
----------------- ---------------- -----------------
Net Investment Income.............................. $ 2,127.7 $ 2,030.9 $ 2,599.3
================= ================ =================
</TABLE>
Investment gains (losses), net, including changes in the valuation
allowances, are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................... $ 119.9 $ (14.1) $ 123.1
Mortgage loans on real estate...................... (40.2) (43.1) (65.1)
Equity real estate................................. (86.6) 20.6 (18.5)
Other equity investments........................... 12.8 76.0 119.5
Dealer and trading gains........................... - - 372.5
Sales of newly issued Alliance Units............... - 52.4 -
Other.............................................. (.6) - 1.9
----------------- ---------------- -----------------
Investment Gains, Net.............................. $ 5.3 $ 91.8 $ 533.4
================= ================ =================
</TABLE>
Writedowns of fixed maturities amounted to $46.7 million, $30.8 million
and $5.4 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
For the years ended December 31, 1995 and 1994, respectively, proceeds
received on sales of fixed maturities classified as available for sale
amounted to $8,206.0 million and $5,253.9 million. Gross gains of $211.4
million and $65.2 million and gross losses of $64.2 million and $50.8
million, respectively, were realized on these sales. The change in
unrealized investment gains (losses) related to fixed maturities
classified as available for sale for the years ended December 31, 1995
and 1994 amounted to $1,077.2 million and $(742.2) million,
respectively.
Gross gains of $188.5 million and gross losses of $145.0 million were
realized on sales of investments in fixed maturities held for investment
and available for sale for the year ended December 31, 1993.
F-19
<PAGE>
During each of the years ended December 31, 1995 and 1994, one security
classified as held to maturity was sold and during the eleven months
ended November 30, 1995 and the year ended December 31, 1994,
respectively, twelve and six securities so classified were transferred
to the available for sale portfolio. All actions were taken as a result
of a significant deterioration in creditworthiness. The aggregate
amortized cost of the securities sold were $1.0 million and $19.9
million with a related investment gain of $-0- million and $.8 million
recognized in 1995 and 1994, respectively; the aggregate amortized cost
of the securities transferred was $116.0 million and $42.8 million with
gross unrealized investment losses of $3.2 million and $3.1 million
charged to consolidated shareholders' equity for the eleven months ended
November 30, 1995 and the year ended December 31, 1994, respectively. On
December 1, 1995, the Company transferred $4,794.9 million of securities
classified as held to maturity to the available for sale portfolio. As a
result, unrealized gains on fixed maturities increased $307.0 million,
offset by deferred policy acquisition costs of $73.7 million, amounts
attributable to participating group annuity contracts of $39.2 million
and deferred Federal income tax of $67.9 million.
Investment gains from other equity investments for the year ended
December 31, 1993, included $79.9 million generated by DLJ's involvement
in long-term corporate development investments.
For the years ended December 31, 1995, 1994 and 1993, investment results
passed through to certain participating group annuity contracts as
interest credited to policyholders' account balances amounted to $131.2
million, $175.8 million and $243.2 million, respectively.
During 1995, Alliance entered into an agreement to acquire the business
of Cursitor-Eaton Asset Management Company and Cursitor Holdings Limited
(collectively, "Cursitor") for approximately $141.5 million consisting
of $84.9 million in cash, 1,764,115 of Alliance's publicly traded units
("Alliance Units"), 6% notes aggregating $21.5 million payable ratably
over four years, and substantial additional consideration which will be
determined at a later date. The transaction, which is expected to be
completed during the first quarter of 1996, is subject to the receipt of
consents, regulatory approvals, and certain other closing conditions,
including client approval of the transfer of Cursitor accounts. Upon
completion of this transaction, the Company's ownership percentage of
Alliance will be reduced.
In 1994, Alliance sold 4.96 million newly issued Alliance Units to third
parties at prevailing market prices. The sales decreased the Company's
ownership of Alliance's Units from 63.2% to 59.2%. In addition, the
Company continues to hold its 1% general partnership interest in
Alliance. The Company recognized an investment gain of $52.4 million as
a result of these transactions.
The Company's ownership interest in Alliance will be further reduced
upon the exercise of options granted to certain Alliance employees. At
December 31, 1995, Alliance had options outstanding to purchase an
aggregate of 4.8 million Alliance Units at a price ranging from $6.0625
to $22.25 per unit. Options are exercisable at a rate of 20% on each of
the first five anniversary dates from the date of grant.
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of equity and the changes for the
corresponding years, are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year......................... $ (203.0) $ 131.9 $ 78.8
Changes in unrealized investment (losses) gains.... 1,117.7 (823.8) (14.1)
Effect of adopting SFAS No. 115.................... - - 283.9
Changes in unrealized investment (gains)
losses attributable to:
Participating group annuity contracts.......... (78.1) 40.8 (36.2)
Deferred policy acquisition costs.............. (208.4) 269.5 (150.5)
Deferred Federal income taxes.................. (290.0) 178.6 (30.0)
----------------- ---------------- -----------------
Balance, End of Year............................... $ 338.2 $ (203.0) $ 131.9
================= ================ =================
</TABLE>
F-20
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, end of year comprises:
Unrealized investment (losses) gains on:
Fixed maturities............................... $ 615.9 $ (461.3) $ 283.9
Other equity investments....................... 31.1 7.7 75.8
Other.......................................... 31.6 14.5 25.0
----------------- ---------------- -----------------
Total........................................ 678.6 (439.1) 384.7
Amounts of unrealized investment (gains)
losses attributable to:
Participating group annuity contracts........ (72.2) 5.9 (34.9)
Deferred policy acquisition costs............ (89.4) 119.0 (150.5)
Deferred Federal income taxes................ (178.8) 111.2 (67.4)
----------------- ---------------- -----------------
Total.............................................. $ 338.2 $ (203.0) $ 131.9
================= ================ =================
</TABLE>
6) CLOSED BLOCK
Summarized financial information of the Closed Block follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Fixed Maturities:
Available for sale, at estimated fair value (amortized cost,
$3,662.8 and $1,270.3)........................................... $ 3,896.2 $ 1,197.0
Held to maturity, at amortized cost (estimated fair value of
$1,785.0 in 1994)................................................ - 1,927.8
Mortgage loans on real estate........................................ 1,368.8 1,543.7
Policy loans......................................................... 1,797.2 1,827.9
Cash and other invested assets....................................... 440.9 442.5
Deferred policy acquisition costs.................................... 823.6 878.1
Other assets......................................................... 286.1 288.5
----------------- -----------------
Total Assets......................................................... $ 8,612.8 $ 8,105.5
================= =================
Liabilities
Future policy benefits and policyholders' account balances........... $ 9,346.7 $ 8,965.3
Other liabilities.................................................... 160.5 104.2
----------------- -----------------
Total Liabilities.................................................... $ 9,507.2 $ 9,069.5
================= =================
</TABLE>
F-21
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other revenue......................... $ 753.4 $ 798.1 $ 860.2
Investment income (net of investment
expenses of $26.7, $19.0 and $17.3).............. 538.9 523.0 526.5
Investment losses, net............................. (20.2) (24.0) (15.0)
----------------- ---------------- -----------------
Total revenues............................... 1,272.1 1,297.1 1,371.7
----------------- ---------------- -----------------
Benefits and Other Deductions
Policyholders' benefits and dividends.............. 1,085.1 1,075.6 1,141.4
Other operating costs and expenses................. 62.6 70.5 102.0
----------------- ---------------- -----------------
Total benefits and other deductions.......... 1,147.7 1,146.1 1,243.4
----------------- ---------------- -----------------
Contribution from the Closed Block................. $ 124.4 $ 151.0 $ 128.3
================= ================ =================
</TABLE>
The fixed maturity portfolio, based on amortized cost, includes $4.3
million and $23.8 million at December 31, 1995 and 1994, respectively,
of restructured securities which includes problem fixed maturities of
$1.9 million and $6.4 million, respectively.
During the eleven months ended November 30, 1995, one security
classified as held to maturity was sold and ten securities classified as
held to maturity were transferred to the available for sale portfolio.
All actions resulted from a significant deterioration in
creditworthiness. The amortized cost of the security sold was $4.2
million. The aggregate amortized cost of the securities transferred was
$81.3 million with gross unrealized investment losses of $.1 million
transferred to equity. At December 1, 1995, $1,750.7 million of
securities classified as held to maturity were transferred to the
available for sale portfolio. As a result, unrealized gains of $88.5
million on fixed maturities were recognized and offset by an increase to
the deferred dividend liability. Implementation of SFAS No. 115 for the
valuation of fixed maturities at December 31, 1993 resulted in the
recognition of a deferred dividend liability of $49.6 million.
At December 31, 1995 and 1994, problem mortgage loans on real estate had
an amortized cost of $36.5 million and $27.6 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had an amortized cost of $137.7 million and $179.2 million,
respectively. At December 31, 1995 and 1994, the restructured mortgage
loans on real estate amount included $8.8 million and $.7 million,
respectively, of problem mortgage loans on real estate.
Valuation allowances amounted to $18.4 million and $46.2 million on
mortgage loans on real estate and $4.3 million and $2.6 million on
equity real estate at December 31, 1995 and 1994, respectively.
Writedowns of fixed maturities amounted to $16.8 million and $15.9
million and $1.7 million for the years ended December 31, 1995, 1994 and
1993, respectively.
Many expenses related to Closed Block operations are charged to
operations outside of the Closed Block; accordingly, the contribution
from the Closed Block does not represent the actual profitability of the
Closed Block operations. Operating costs and expenses outside of the
Closed Block are, therefore, disproportionate to the business outside of
the Closed Block.
F-22
<PAGE>
7) DISCONTINUED OPERATIONS
Summarized financial information of the GIC Segment follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Mortgage loans on real estate........................................ $ 1,485.8 $ 1,730.5
Equity real estate................................................... 1,122.1 1,194.8
Other invested assets................................................ 665.2 978.8
Other assets......................................................... 579.3 529.5
----------------- -----------------
Total Assets......................................................... $ 3,852.4 $ 4,433.6
================= =================
Liabilities
Policyholders' liabilities........................................... $ 1,399.8 $ 1,924.0
Allowance for future losses.......................................... 164.2 185.6
Amounts due to continuing operations................................. 2,097.1 2,108.6
Other liabilities.................................................... 191.3 215.4
----------------- -----------------
Total Liabilities.................................................... $ 3,852.4 $ 4,433.6
================= =================
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Investment income (net of investment expenses
of $143.8, $174.0 and $175.8).................... $ 325.1 $ 395.0 $ 535.1
Investment (losses) gains, net..................... (22.9) 26.8 (22.6)
Policy fees, premiums and other income............. .7 .3 8.7
----------------- ---------------- -----------------
Total revenues..................................... 302.9 422.1 521.2
Benefits and other deductions...................... 328.0 443.8 545.9
----------------- ---------------- -----------------
Losses Charged to Allowance for Future Losses...... $ (25.1) $ (21.7) $ (24.7)
================= ================ =================
</TABLE>
In 1991, the Company established a pre-tax provision of $396.7 million
for the estimated future losses of the GIC Segment. At December 31,
1993, implementation of SFAS No. 115 for the valuation of fixed
maturities resulted in a benefit of $13.1 million, offset by a
corresponding addition to the allowance for future losses.
The amounts due to continuing operations at December 31, 1994 consisted
of $3,324.0 million borrowed by the GIC Segment from continuing
operations, offset by $1,215.4 million representing an obligation of
continuing operations to provide assets to fund the accumulated deficit
of the GIC Segment. In January 1995, continuing operations transferred
$1,215.4 million in cash to the GIC Segment in settlement of its
obligation. Subsequently, the GIC Segment remitted $1,155.4 million in
cash to continuing operations in partial repayment of borrowings by the
GIC Segment. No gains or losses were recognized on these transactions.
Amounts due to continuing operations at December 31, 1995, consisted of
$2,097.1 million borrowed by the discontinued GIC Segment.
F-23
<PAGE>
Investment income included $88.2 million and $97.7 million of interest
income for the years ended December 31, 1994 and 1993, respectively, on
amounts due from continuing operations. Benefits and other deductions
includes $154.6 million, $219.7 million and $197.1 million of interest
expense related to amounts borrowed from continuing operations in 1995,
1994 and 1993, respectively.
Valuation allowances amounted to $19.2 million and $50.2 million on
mortgage loans on real estate and $77.9 million and $74.7 million on
equity real estate at December 31, 1995 and 1994, respectively.
Writedowns of fixed maturities amounted to $8.1 million, $17.8 million
and $1.1 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
The fixed maturity portfolio, based on amortized cost, includes $15.1
million and $43.3 million at December 31, 1995 and 1994, respectively,
of restructured securities. These amounts include problem fixed
maturities of $6.1 million and $9.7 million at December 31, 1995 and
1994, respectively.
At December 31, 1995 and 1994, problem mortgage loans on real estate had
amortized costs of $35.4 million and $14.9 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had amortized costs of $289.3 million and $371.2 million,
respectively.
At December 31, 1995 and 1994, the GIC Segment had $310.9 million and
$312.2 million, respectively, of real estate acquired in satisfaction of
debt.
8) SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1995 1994
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Short-term debt...................................................... $ - $ 20.0
----------------- -----------------
Long-term debt:
Equitable Life:
Surplus notes, 6.95%, scheduled to mature 2005..................... 399.3 -
Surplus notes, 7.70%, scheduled to mature 2015..................... 199.6 -
Eurodollar notes, 10.375% due 1995................................. - 34.6
Eurodollar notes, 10.5% due 1997................................... 76.2 76.2
Zero coupon note, 11.25% due 1997.................................. 120.1 107.8
Other.............................................................. 16.3 14.3
----------------- -----------------
Total Equitable Life........................................... 811.5 232.9
----------------- -----------------
Wholly Owned and Joint Venture Real Estate:
Mortgage notes, 4.98% - 12.75% due through 2019.................... 1,084.4 1,080.6
----------------- -----------------
Alliance:
Other.............................................................. 3.4 3.9
----------------- -----------------
Total long-term debt................................................. 1,899.3 1,317.4
----------------- -----------------
Total Short-term and Long-term Debt.................................. $ 1,899.3 $ 1,337.4
================= =================
</TABLE>
Short-term Debt
---------------
Equitable Life has a $350.0 million bank credit facility available to
fund short-term working capital needs and to facilitate the securities
settlement process. The credit facility consists of two types of
borrowing options with varying interest rates. The interest rates are
based on external indices dependent on the type of borrowing and at
December 31, 1995 range from 5.8% (the London Interbank Offering Rate
plus 22.5 basis points) to 8.5% (the prime rate). There were no
borrowings outstanding under this bank credit facility at December 31,
1995.
F-24
<PAGE>
Equitable Life has a commercial paper program with an issue limit of
$500.0 million. This program is available for general corporate purposes
used to support Equitable Life's liquidity needs and is supported by
Equitable Life's existing $350.0 million five-year bank credit facility.
There were no borrowings outstanding under this program at December 31,
1995.
In 1994, Alliance established a $100.0 million revolving credit facility
with several banks. On March 31, 1997, the revolving credit facility
converts into a term loan payable in quarterly installments through
March 31, 1999. Outstanding borrowings generally bear interest at the
Eurodollar rate plus .875% per annum through March 31, 1997 and at the
Eurodollar rate plus 1.125% per annum after conversion through March 31,
1999. In addition, a quarterly commitment fee of .25% per annum is paid
on the average daily unused amount. At December 31, 1995, there were no
amounts outstanding under the facility.
In 1994, Alliance also established a $100.0 million commercial paper
program and entered into a three-year $100.0 million revolving credit
facility with a group of commercial banks to support commercial paper to
be issued under the program and for general corporate purposes. Amounts
outstanding under the facility bear interest at an annual rate ranging
from the Eurodollar rate plus .225% to the Eurodollar rate plus .2875%.
A fee of .125% per annum is paid quarterly on the entire facility. At
December 31, 1995, Alliance had not issued any commercial paper and
there were no amounts outstanding under the revolving credit facility.
During 1994, EREIM established two bank lines of credit totaling $30.0
million of which $20.0 million was outstanding at December 31, 1994.
Long-term Debt
--------------
Several of the long-term debt agreements have restrictive covenants
related to the total amount of debt, net tangible assets and other
matters. The Company is in compliance with all debt covenants.
On December 18, 1995, Equitable Life issued, in accordance with Section
1307 of the New York Insurance Law, $400.0 million of surplus notes
having an interest rate of 6.95% scheduled to mature in 2005 and $200.0
million of surplus notes having an interest rate of 7.70% scheduled to
mature in 2015. Proceeds from the issuance of the surplus notes were
$596.6 million, net of related issuance costs. The unamortized discount
on the surplus notes was $1.1 million at December 31, 1995. Payments of
interest on or principal of the surplus notes are subject to prior
approval by the New York Insurance Department.
The Company has pledged real estate, mortgage loans, cash and securities
amounting to $1,629.7 million and $1,744.4 million at December 31, 1995
and 1994, respectively, as collateral for certain long-term debt.
At December 31, 1995, aggregate maturities of the long-term debt based
on required principal payments at maturity for 1996 and the succeeding
four years are $124.0 million, $466.6 million, $309.5 million, $15.8
million, respectively, and $1,015.0 million thereafter.
9) FEDERAL INCOME TAXES
A summary of the Federal income tax expense (benefit) in the
consolidated statements of earnings is shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current.......................................... $ (11.7) $ 4.0 $ 115.8
Deferred......................................... 124.1 97.2 (24.5)
----------------- ---------------- -----------------
Total.............................................. $ 112.4 $ 101.2 $ 91.3
================= ================ =================
</TABLE>
F-25
<PAGE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings before
Federal income taxes and cumulative effect of accounting change by the
expected Federal income tax rate of 35%. The sources of the difference
and the tax effects of each are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Expected Federal income tax expense................ $ 143.5 $ 138.1 $ 106.3
Differential earnings amount....................... - (16.8) (23.2)
Adjustment of tax audit reserves................... 4.1 (4.6) 22.9
Tax rate adjustment................................ - - (5.0)
Other.............................................. (35.2) (15.5) (9.7)
----------------- --------------- -----------------
Federal Income Tax Expense......................... $ 112.4 $ 101.2 $ 91.3
================= ================ =================
</TABLE>
Prior to the date of demutualization, Equitable Life reduced its
deduction for policyholder dividends by the differential earnings
amount. This amount was computed, for each tax year, by multiplying
Equitable Life's average equity base, as determined for tax purposes, by
an estimate of the excess of an imputed earnings rate for stock life
insurance companies over the average mutual life insurance companies'
earnings rate. The differential earnings amount for each tax year was
subsequently recomputed when actual earnings rates were published by the
Internal Revenue Service. As a stock life insurance company, Equitable
Life is no longer required to reduce its policyholder dividend deduction
by the differential earnings amount, but differential earnings amounts
for pre-demutualization years were still being recomputed in 1994 and
1993.
The components of the net deferred Federal income tax asset are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 December 31, 1994
--------------------------------- ---------------------------------
ASSETS LIABILITIES Assets Liabilities
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Deferred policy acquisition costs,
reserves and reinsurance............. $ - $ 303.2 $ - $ 220.3
Investments............................ - 326.9 - 18.7
Compensation and related benefits...... 293.0 - 307.3 -
Other.................................. - 32.3 - 5.8
--------------- ---------------- --------------- ---------------
Total.................................. $ 293.0 $ 662.4 $ 307.3 $ 244.8
=============== ================ =============== ===============
</TABLE>
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,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Deferred policy acquisition costs, reserves
and reinsurance.................................. $ 55.1 $ 13.0 $ (46.7)
Investments........................................ 13.0 89.3 60.4
Compensation and related benefits.................. 30.8 10.0 (50.1)
Other.............................................. 25.2 (15.1) 11.9
----------------- ---------------- -----------------
Deferred Federal Income Tax Expense (Benefit)...... $ 124.1 $ 97.2 $ (24.5)
================= ================ =================
</TABLE>
F-26
<PAGE>
The Internal Revenue Service completed its audit of the Company's
Federal income tax returns for the years 1984 through 1988. There was no
material effect on the Company's consolidated results of operations.
10) REINSURANCE AGREEMENTS
The Insurance Group assumes and cedes reinsurance with other insurance
companies. The Insurance Group evaluates the financial condition of its
reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies. The effect of reinsurance (excluding group life and
health) is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums.................................... $ 474.2 $ 476.7 $ 458.8
Reinsurance assumed................................ 171.3 180.5 169.9
Reinsurance ceded.................................. (38.7) (31.6) (29.6)
----------------- ---------------- -----------------
Premiums........................................... $ 606.8 $ 625.6 $ 599.1
================= ================ =================
Universal Life and Investment-type Product
Policy Fee Income Ceded.......................... $ 38.9 $ 27.5 $ 33.7
================= ================ =================
Policyholders' Benefits Ceded...................... $ 48.2 $ 20.7 $ 72.3
================= ================ =================
Interest Credited to Policyholders' Account
Balances Ceded................................... $ 28.5 $ 25.4 $ 24.1
================= ================ =================
</TABLE>
In February 1993, management established a practice limiting the risk
retention on new policies issued by the Insurance Group to a maximum of
$5.0 million. In addition, effective January 1, 1994, all in force
business above $5.0 million was reinsured. The Insurance Group also
reinsures the entire risk on certain substandard underwriting risks as
well as in certain other cases.
The Insurance Group cedes 100% of its group life and health business to
a third party insurance company. Premiums ceded totaled $260.6 million,
$241.0 million and $895.1 million for the years ended December 31, 1995,
1994 and 1993, respectively. Ceded death and disability benefits totaled
$188.1 million, $235.5 million and $787.8 million for the years ended
December 31, 1995, 1994 and 1993, respectively. Insurance liabilities
ceded totaled $724.2 million and $833.4 million at December 31, 1995 and
1994, respectively.
11) EMPLOYEE BENEFIT PLANS
The Company sponsors qualified and non-qualified defined benefit plans
covering substantially all employees (including certain qualified
part-time employees), managers and certain agents. The pension plans are
non-contributory and benefits are based on a cash balance formula or
years of service and final average earnings, if greater, under certain
grandfathering rules in the plans. The Company's funding policy is to
make the minimum contribution required by the Employee Retirement Income
Security Act of 1974.
Components of net periodic pension (credit) cost for the qualified and
non-qualified plans are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost....................................... $ 30.0 $ 30.3 $ 29.8
Interest cost on projected benefit obligations..... 122.0 111.0 108.0
Actual return on assets............................ (309.2) 24.4 (178.6)
Net amortization and deferrals..................... 155.6 (142.5) 55.3
----------------- ---------------- -----------------
Net Periodic Pension (Credit) Cost................. $ (1.6) $ 23.2 $ 14.5
================= ================ =================
</TABLE>
F-27
<PAGE>
The funded status of the qualified and non-qualified pension plans is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of obligations:
Vested............................................................... $ 1,642.4 $ 1,295.5
Non-vested........................................................... 10.9 8.7
--------------- -----------------
Accumulated Benefit Obligation......................................... $ 1,653.3 $ 1,304.2
================ =================
Plan assets at fair value.............................................. $ 1,503.8 $ 1,193.5
Projected benefit obligation........................................... 1,743.0 1,403.4
---------------- -----------------
Projected benefit obligation in excess of plan assets.................. (239.2) (209.9)
Unrecognized prior service cost........................................ (25.5) (33.2)
Unrecognized net loss from past experience different from that
assumed.............................................................. 368.2 298.9
Unrecognized net asset at transition................................... (7.3) (20.8)
Additional minimum liability........................................... (51.9) (37.8)
---------------- -----------------
Prepaid (Accrued) Pension Cost......................................... $ 44.3 $ (2.8)
================ =================
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of projected benefit
obligations were 7.25% and 4.50%, respectively, at December 31, 1995 and
8.75% and 4.88%, respectively, at December 31, 1994. As of January 1,
1995 and 1994, the expected long-term rate of return on assets for the
retirement plan was 11% and 10%, respectively.
The Company recorded, as a reduction of shareholder's equity, an
additional minimum pension liability of $35.1 million and $2.7 million,
net of Federal income taxes, at December 31, 1995 and 1994,
respectively, representing the excess of the accumulated benefit
obligation over the fair value of plan assets and accrued pension
liability.
The pension plan's assets include corporate and government debt
securities, equity securities, equity real estate and shares of Group
Trusts managed by Alliance.
As of December 31, 1993, the Company changed the method of determining
the market-related value of plan assets from fair value to a calculated
value. This change in estimate had no material effect on the Company's
consolidated statements of earnings.
Prior to 1987, the qualified plan funded participants' benefits through
the purchase of non-participating annuity contracts from Equitable Life.
Benefit payments under these contracts were approximately $36.4 million,
$38.1 million and $39.9 million for the years ended December 31, 1995,
1994 and 1993, respectively.
The Company provides certain medical and life insurance benefits
(collectively, "postretirement benefits") for qualifying employees,
managers and agents retiring from the Company on or after attaining age
55 who have at least 10 years of service. The life insurance benefits
are related to age and salary at retirement. The costs of postretirement
benefits are recognized in accordance with the provisions of SFAS No.
106. The Company continues to fund postretirement benefits costs on a
pay-as-you-go basis and, for the years ended December 31, 1995, 1994 and
1993, the Company made estimated postretirement benefits payments of
$31.1 million, $29.8 million and $29.7 million, respectively.
F-28
<PAGE>
The following table sets forth the postretirement benefits plan's
status, reconciled to amounts recognized in the Company's consolidated
financial statements:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost....................................... $ 4.0 $ 3.9 $ 5.3
Interest cost on accumulated postretirement
benefits obligation.............................. 34.7 28.6 29.2
Unrecognized prior service cost.................... (2.3) (3.9) (6.9)
Net amortization and deferrals..................... - - 1.5
----------------- ---------------- -----------------
Net Periodic Postretirement Benefits Costs......... $ 36.4 $ 28.6 $ 29.1
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefits obligation:
Retirees............................................................. $ 391.8 $ 300.4
Fully eligible active plan participants.............................. 50.4 33.0
Other active plan participants....................................... 64.2 44.0
---------------- -----------------
506.4 377.4
Unrecognized benefit of plan amendments................................ - 3.2
Unrecognized prior service cost........................................ 56.3 61.9
Unrecognized net loss from past experience different from that
assumed and from changes in assumptions.............................. (181.3) (64.7)
---------------- -----------------
Accrued Postretirement Benefits Cost................................... $ 381.4 $ 377.8
================ =================
</TABLE>
In 1993, the Company amended the cost sharing provisions of
postretirement medical benefits. At January 1, 1994, medical benefits
available to retirees under age 65 are the same as those offered to
active employees and medical benefits will be limited to 200% of 1993
costs for all participants.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefits obligation was 10% in 1995,
gradually declining to 3.5% in the year 2008 and in 1994 was 10%,
gradually declining to 5% in the year 2004. The discount rate used in
determining the accumulated postretirement benefits obligation was 7.25%
and 8.75% at December 31, 1995 and 1994, respectively.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefits obligation as of December 31, 1995
would be increased 6.5%. The effect of this change on the sum of the
service cost and interest cost would be an increase of 6.7%.
12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives
-----------
The Insurance Group primarily uses derivatives for asset/liability risk
management and for hedging individual securities. Derivatives mainly are
utilized to reduce the Insurance Group's exposure to interest rate
fluctuations. Accounting for interest rate swap transactions is on an
accrual basis. Gains and losses related to interest rate swap
transactions are amortized as yield adjustments over the remaining life
of the underlying hedged security. Income and expense resulting from
interest rate swap activities are reflected in net investment income
except for hedging transactions related to insurance liabilities. The
notional amount of matched interest rate swaps outstanding at December
31, 1995 was $1,120.8 million. The average unexpired terms at December
31, 1995 range from 2.5 to 3.0 years. At December 31, 1995, the cost of
terminating outstanding matched swaps in a loss position was $15.9
million and the unrealized gain on
F-29
<PAGE>
outstanding matched swaps in a gain position was $19.0 million. The
Company has no intention of terminating these contracts prior to
maturity. During 1995, 1994 and 1993, net gains (losses) of $1.4
million, $(.2) million and $-0- million, respectively, were recorded in
connection with interest rate swap activity. Equitable Life has
implemented an interest rate cap program designed to hedge crediting
rates on interest-sensitive individual annuities contracts. The
outstanding notional amounts at December 31, 1995 of contracts purchased
and sold were $2,625.0 million and $300.0 million, respectively. The net
premium paid by Equitable Life on these contracts was $12.5 million and
is being amortized ratably over the contract periods ranging from 3 to 5
years. Income and expense resulting from this program are reflected as
an adjustment to interest credited to policyholders' account balances.
Substantially all of DLJ's business related derivatives is by its nature
trading activities which are primarily for the purpose of customer
accommodations. DLJ's derivative activities consist of option writing
and trading in forward and futures contracts. Derivative financial
instruments have both on-and-off balance sheet implications depending on
the nature of the contracts. DLJ's involvement in swap contracts is not
significant.
Fair Value of Financial Instruments
-----------------------------------
The Company defines fair value as the quoted market prices for those
instruments that are actively traded in financial markets. In cases
where quoted market prices are not available, fair values are estimated
using present value or other valuation techniques. The fair value
estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument,
including estimates of 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
the Company's entire holdings of a particular financial instrument, nor
do they consider the tax impact of the realization of unrealized gains
or losses. In many cases, the fair value estimates cannot be
substantiated by comparison to independent markets, nor can the
disclosed value be realized in immediate settlement of the instrument.
Certain financial instruments are excluded, particularly insurance
liabilities other than financial guarantees and investment contracts.
Fair market value of off-balance-sheet financial instruments of the
Insurance Group was not material at December 31, 1995 and 1994.
Fair value for mortgage loans on real estate are estimated by
discounting future contractual cash flows using interest rates at which
loans with similar characteristics and credit quality would be made.
Fair values for foreclosed mortgage loans and problem mortgage loans are
limited to the estimated fair value of the underlying collateral if
lower.
The estimated fair values for the Company's liabilities under GIC and
association plan contracts are estimated using contractual cash flows
discounted based on the T. Rowe Price GIC Index Rate for the appropriate
duration. For durations in excess of the published index rate, the
appropriate Treasury rate is used plus a spread equal to the longest
duration GIC rate spread published.
The estimated fair values for those group annuity contracts which are
classified as investment contracts are measured at the estimated fair
value of the underlying assets. Deposit administration contracts
(included with group annuity contracts) classified as insurance
contracts are measured at estimated fair value of the underlying assets.
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.
Fair value for long-term debt is determined using published market
values, where available, or contractual cash flows discounted at market
interest rates. The estimated fair values for non-recourse mortgage debt
are determined by discounting contractual cash flows at a rate which
takes into account the level of current market interest rates and
collateral risk. The estimated fair values for recourse mortgage debt
are determined by discounting contractual cash flows at a rate based
upon current interest rates of other companies with credit ratings
similar to the Company. The Company's fair value of short-term
borrowings approximates their carrying value.
F-30
<PAGE>
The following table discloses carrying value and estimated fair value
for financial instruments not otherwise disclosed in Notes 3, 6 and 7:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1995 1994
--------------------------------- ---------------------------------
CARRYING ESTIMATED Carrying Estimated
VALUE FAIR VALUE Value Fair Value
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Consolidated Financial Instruments:
-----------------------------------
Mortgage loans on real estate.......... $ 3,638.3 $ 3,973.6 $ 4,018.0 $ 3,919.4
Other joint ventures................... 492.7 492.7 544.4 544.4
Policy loans........................... 1,976.4 2,057.5 1,731.2 1,676.6
Policyholders' account balances:
Association plans.................... 101.0 100.0 141.0 141.0
Group annuity contracts.............. 2,335.0 2,395.0 2,450.0 2,469.0
SPDA................................. 1,265.8 1,272.0 1,744.3 1,732.7
Annuities certain and SCNILC......... 649.1 680.7 599.1 624.7
Long-term debt......................... 1,899.3 1,962.9 1,317.4 1,249.2
Closed Block Financial Instruments:
-----------------------------------
Mortgage loans on real estate.......... 1,368.8 1,461.4 1,543.7 1,477.8
Other equity investments............... 151.6 151.6 179.5 179.5
Policy loans........................... 1,797.2 1,891.4 1,827.9 1,721.9
SCNILC liability....................... 34.8 34.5 39.5 37.0
GIC Segment Financial Instruments:
----------------------------------
Mortgage loans on real estate.......... 1,485.8 1,666.1 1,730.5 1,743.7
Fixed maturities....................... 107.4 107.4 219.3 219.3
Other equity investments............... 455.9 455.9 591.8 591.8
Guaranteed interest contracts.......... 329.0 352.0 835.0 855.0
Long-term debt......................... 135.1 136.0 134.8 127.9
</TABLE>
13) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has provided, from time to time, certain guarantees or
commitments to affiliates, investors and others. These arrangements
include commitments by the Company, under certain conditions: to make
liquidity advances to cover delinquent principal and interest and
property protection expenses with respect to loan servicing agreements
for securitized mortgage loans which at December 31, 1995 totaled $2.8
billion (as of December 31, 1995, $4.0 million have been advanced under
these commitments); to make capital contributions of up to $246.7
million to affiliated real estate joint ventures; to provide equity
financing to certain limited partnerships of $129.4 million at December
31, 1995, under existing loan or loan commitment agreements; and to
provide short-term financing loans which at December 31, 1995 totaled
$45.8 million. Management believes the Company will not incur any
material losses as a result of these commitments.
Equitable Life is the obligor under certain structured settlement
agreements which it had entered into with unaffiliated insurance
companies and beneficiaries. To satisfy its obligations under these
agreements, Equitable Life owns single premium annuities issued by
previously wholly owned life insurance subsidiaries. Equitable Life has
directed payment under these annuities to be made directly to the
beneficiaries under the structured settlement agreements. A contingent
liability exists with respect to these agreements should the previously
wholly owned subsidiaries be unable to meet their obligations.
Management believes the satisfaction of those obligations by Equitable
Life is remote.
At December 31, 1995, the Insurance Group had $29.0 million of letters
of credit outstanding.
F-31
<PAGE>
14) LITIGATION
A number of lawsuits have been filed against life and health insurers in
the jurisdictions in which Equitable Life and its subsidiaries do
business involving insurers' sales practices, alleged agent misconduct,
failure to properly supervise agents, and other matters. Some of the
lawsuits have resulted in the award of substantial judgments against
other insurers, including material amounts of punitive damages, or in
substantial settlements. In some states juries have substantial
discretion in awarding punitive damages. Equitable Life and its
insurance subsidiaries, like other life and health insurers, from time
to time are involved in such litigation. To date, no such lawsuit has
resulted in an award or settlement of any material amount against the
Company. Among litigations pending against Equitable Life and its
insurance subsidiaries of the type referred to in this paragraph are the
litigations described in the following two paragraphs.
An action entitled Golomb et al. v. The Equitable Life Assurance Society
of the United States was filed on January 20, 1995 in New York County
Supreme Court. The action purports to be brought on behalf of a class of
persons insured after 1983 under Lifetime Guaranteed Renewable Major
Medical Insurance Policies issued by Equitable Life (the "policies").
The complaint alleges that premium increases for these policies after
1983, all of which were filed with and approved by the New York State
Insurance Department and certain other state insurance departments,
breached the terms of the insurance policies, and that statements in the
policies and elsewhere concerning premium increases constituted
fraudulent concealment, misrepresentations in violation of New York
Insurance Law Section 4226 and deceptive practices under New York
General Business Law Section 349. The complaint seeks a declaratory
judgment, injunctive relief restricting the methods by which Equitable
Life increases premiums on the policies in the future, a refund of
premiums, and punitive damages. Plaintiffs also have indicated that they
will seek damages in an unspecified amount. Equitable Life has moved to
dismiss the complaint in its entirety on the grounds that it fails to
state a claim and that uncontroverted documentary evidence establishes a
complete defense to the claims. That motion is awaiting decision by the
court. In January 1996, separate actions were filed in Pennsylvania and
Texas state courts (entitled, respectively, Malvin et al. v. The
Equitable Life Assurance Society of the United States and Bowler et al.
v. The Equitable Life Assurance Society of the United States), making
claims similar to those in the New York action described above. These
new actions are asserted on behalf of proposed classes of Pennsylvania
issued or renewed policyholders and Texas issued or renewed
policyholders, insured under the policies. The Pennsylvania and Texas
actions seek compensatory and punitive damages and injunctive relief
restricting the methods by which Equitable Life increases premiums in
the future based on the common law and statutes of those states.
Although the outcome of any litigation cannot be predicted with
certainty, particularly in the early stages of an action, Equitable
Life's management believes that the ultimate resolution of those
litigations should not have a material adverse effect on the financial
position of the Company. Due to the early stage of such litigation,
Equitable Life's management cannot make an estimate of loss, if any, or
predict whether or not such litigation will have a material adverse
effect on the Company's results of operations in any particular period.
An action was instituted on April 6, 1995 against Equitable Life and its
wholly owned subsidiary, The Equitable of Colorado, Inc. ("EOC"), in New
York State Court, entitled Sidney C. Cole et al. v. The Equitable Life
Assurance Society of the United States and The Equitable of Colorado,
Inc., No. 95/108611 (N.Y. County). The action is brought by the holders
of a joint survivorship whole life policy issued by EOC. The action
purports to be on behalf of a class consisting of all persons who from
January 1, 1984 purchased life insurance policies sold by Equitable Life
and EOC based upon their allegedly uniform sales presentations and
policy illustrations. The complaint puts in issue various alleged sales
practices that plaintiffs assert, among other things, misrepresented the
stated number of years that the annual premium would need to be paid.
Plaintiffs seek damages in an unspecified amount, imposition of a
constructive trust, and seek to enjoin Equitable Life and EOC from
engaging in the challenged sales practices. Equitable Life and EOC
intend to defend vigorously and believe that they have meritorious
defenses which, if successful, would dispose of the action completely.
Equitable Life and EOC further do not believe that this case is an
appropriate class action. Although the outcome of any litigation cannot
be predicted with certainty, particularly in the early stages of an
action, Equitable Life's management believes that the ultimate
F-32
<PAGE>
resolution of this litigation should not have a material adverse effect
on the financial position of the Company. Due to the early stage of such
litigation, the Company's management cannot make an estimate of loss, if
any, or predict whether or not such litigation will have a material
adverse effect on the Company's results of operations in any particular
period.
Equitable Casualty Insurance Company ("Casualty"), a captive property
and casualty insurance company organized under the laws of Vermont,
which is an indirect wholly owned subsidiary of Equitable Life, is a
party to an arbitration proceeding that commenced in August 1995 with
the selection of three arbitrators. The arbitration will resolve a
dispute among Casualty, Houston General Insurance Company ("Houston
General"), and GEICO General Insurance Company ("GEICO General")
regarding the interpretation of a reinsurance agreement that was entered
into as part of a 1980 transaction whereby Equitable General Insurance
Company ("Equitable General"), formerly an indirect subsidiary of
Equitable Life and the predecessor of GEICO General, sold its commercial
lines business along with the stock of Houston General to subsidiaries
of Tokio Marine & Fire Insurance Company, Ltd. ("Tokio Marine").
Casualty and GEICO General maintain that, under the reinsurance
agreement, Houston General assumed liability for all losses insured
under commercial lines policies written by Equitable General and its
predecessors in order to effect the transfer of that business to Tokio
Marine's subsidiaries. Houston General contends that it did not assume
reinsurance liability for losses insured under certain of those
commercial lines policies. The arbitration panel determined to begin
hearing evidence in the arbitration in June 1996. The result of the
arbitration is expected to resolve two litigations that were commenced
by Houston General and that have been stayed by the presiding courts
pending the completion of the arbitration (in one case, Houston General
named as a defendant only GEICO General but Casualty intervened as a
defendant with GEICO General, and in the other case, Houston General
named GEICO General and Equitable Life). The arbitration is expected to
be completed during the second half of 1996. While the ultimate outcome
of the arbitration cannot be predicted with certainty, the Company's
management believes that the arbitrators will recognize that Houston
General's position is without merit and contrary to the way in which the
reinsurance industry operates and therefore the ultimate resolution of
this matter should not have a material adverse effect on the Company's
financial position or results of operations.
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Complaint") was filed against the Alliance North American Government
Income Trust, Inc. (the "Fund"), Alliance and certain other defendants
affiliated with Alliance, including the Holding Company, alleging
violations of Federal securities laws, fraud and breach of fiduciary
duty in connection with the Fund's investments in Mexican and Argentine
securities. A similar complaint was filed on November 7, 1995 and was
subsequently consolidated with the Complaint. The Complaint, which seeks
certification of a plaintiff class of persons who purchased or owned
Class A, B or C shares of the Fund from March 27, 1992 through December
23, 1994, seeks an unspecified amount of damages, costs, attorneys' fees
and punitive damages. The principal allegations of the Complaint are
that the Fund purchased debt securities issued by the Mexican and
Argentine governments in amounts that were not permitted by the Fund's
investment objective, and that there was no shareholder vote to change
the investment objective to permit purchases in such amounts. The
Complaint further alleges that the decline in the value of the Mexican
and Argentine securities held by the Fund caused the Fund's net asset
value to decline to the detriment of the Fund's shareholders. On
September 26, 1995, the defendants jointly filed a motion to dismiss the
Complaint which has not yet been decided by the Court. Alliance believes
that the allegations in the Complaint are without merit and intends to
vigorously defend against these claims. While the ultimate results of
this action cannot be determined, management of Alliance does not expect
that this action will have a material adverse effect on Alliance's
business.
On January 26, 1996, a purported purchaser of certain notes and warrants
to purchase shares of common stock of Rickel Home Centers, Inc.
("Rickel") filed a class action complaint against Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC"), a wholly owned subsidiary of
DLJ, and certain other defendants for unspecified compensatory and
punitive damages in the United States District Court for the Southern
District of New York. The suit was brought on behalf of the purchasers
of 126,457 units consisting of $126,457,000 aggregate principal amount
of 13 1/2% senior notes due 2001 and 126,457 warrants to purchase shares
of common stock of Rickel (the "Units") issued by Rickel in October
1994. The complaint alleges violations of Federal securities laws and
common law fraud against DLJSC, as the underwriter of
F-33
<PAGE>
the Units and as an owner of 7.3% of the common stock of Rickel, Eos
Partners, L.P., and General Electric Capital Corporation, each as owners
of 44.2% of the common stock of Rickel, and members of the Board of
Directors of Rickel, including a DLJSC Managing Director. The complaint
seeks to hold DLJSC liable for alleged misstatements and omissions
contained in the prospectus and registration statement filed in
connection with the offering of the Units, alleging that the defendants
knew of financial losses and a decline in value of Rickel in the months
prior to the offering and did not disclose such information. The
complaint also alleges that Rickel failed to pay its semi-annual
interest payment due on the Units on December 15, 1995 and that Rickel
filed a voluntary petition for reorganization pursuant to Chapter 11 of
the United States Bankruptcy Code on January 10, 1996. DLJSC intends to
defend itself vigorously against all of the allegations contained in the
complaint. Although there can be no assurance, DLJ does not believe the
outcome of this litigation will have a material adverse effect on its
financial condition. Due to the early stage of this litigation, based on
the information currently available to it, DLJ's management cannot make
an estimate of loss or predict whether or not such litigation will have
a material adverse effect on DLJ's results of operations in any
particular period.
On June 12, 1995, a purported purchaser of certain securities issued by
Spectravision, Inc. ("Spectravision") filed a class action complaint
against DLJSC and certain other defendants for unspecified damages in
the U.S. District Court for the Northern District of Texas. The suit was
brought on behalf of the purchasers of $260,795,000 of securities issued
by Spectravision in November 1992, and alleges violations of the Federal
securities laws and the Texas Securities Act, common law fraud and
negligent misrepresentation. The securities were issued by Spectravision
pursuant to a prepackaged bankruptcy reorganization plan. DLJSC served
as financial advisor to Spectravision in its reorganization and as
Dealer Manager for Spectravision's 1992 issuance of the securities.
DLJSC is also being sued as a seller of certain notes of Spectravision
acquired and resold by DLJSC. The complaint seeks to hold DLJSC liable
for various alleged misstatements and omissions contained in
prospectuses and other materials issued between July 1992 and June 1994.
DLJSC intends to defend itself vigorously against all of the allegations
contained in the complaint. On June 8, 1995, Spectravision filed a
Chapter 11 petition in the United States Bankruptcy Court for the
District of Delaware. On January 5, 1996, the district court in the
litigation involving DLJSC ordered a partial stay of discovery until
Spectravision has emerged from bankruptcy or six months from the date of
the stipulated stay (whichever comes first). Accordingly, discovery of
DLJSC has not yet occurred. Although there can be no assurance, DLJ does
not believe that the ultimate outcome of this litigation will have a
material adverse effect on its financial condition. Due to the early
stage of such litigation, based upon information currently available to
it, DLJ's management cannot make an estimate of loss or predict whether
or not such litigation will have a material adverse effect on DLJ's
results of operations in any particular period. Plaintiff's counsel in
the class action against DLJSC described above has also filed another
securities class action based on similar factual allegations. Such suit
names as defendants Spectravision and its directors, and was brought on
behalf of a class of purchasers of $209.0 million of stock and $77.0
million of notes issued by Spectravision in October 1993. DLJSC served
as the managing underwriter for both of these issuances. DLJSC has not
been named as a defendant in this suit, although it has been reported to
DLJSC that plaintiff's counsel is contemplating seeking to amend the
complaint to add DLJSC as a defendant in that action.
In October 1995, DLJSC was named as a defendant in a purported class
action filed in a Texas State Court on behalf of the holders of $550.0
million principal amount of subordinated redeemable discount debentures
of National Gypsum Corporation ("NGC") canceled in connection with a
Chapter 11 plan of reorganization for NGC consummated in July 1993. The
named plaintiff in the State Court action also filed an adversary
proceeding in the Bankruptcy Court for the Northern District of Texas
seeking a declaratory judgment that the confirmed NGC plan of
reorganization does not bar the class action claims. Subsequent to the
consummation of NGC's plan of reorganization, NGC's shares traded for
values substantially in excess of, and in 1995 NGC was acquired for a
value substantially in excess of, the values upon which NGC's plan of
reorganization was based. The two actions arise out of DLJSC's
activities as financial advisor to NGC in the course of NGC's Chapter 11
reorganization proceedings. The class action complaint alleges that the
plan of reorganization submitted by NGC was based upon projections by
NGC and DLJSC which intentionally understated forecasts, and provided
misleading and incorrect information in order to hide NGC's true value
and that defendants breached their fiduciary duties by, among other
things, providing false, misleading or incomplete information to
deliberately understate the value of NGC. The class action complaint
seeks compensatory and punitive damages purportedly sustained by the
class. The Texas State
F-34
<PAGE>
Court action has subsequently been removed to the Bankruptcy Court,
which removal is being opposed by the plaintiff. DLJSC intends to defend
itself vigorously against all of the allegations contained in the
complaint. Although there can be no assurance, DLJ does not believe that
the ultimate outcome of this litigation will have a material adverse
effect on its financial condition. Due to the early stage of such
litigation, based upon the information currently available to it, DLJ's
management cannot make an estimate of loss or predict whether or not
such litigation will have a material adverse effect on DLJ's results of
operations in any particular period.
In November and December 1995, DLJSC, along with various other parties,
was named as a defendant in a number of purported class actions filed in
the U.S. District Court for the Eastern District of Louisiana. The
complaints allege violations of the Federal securities laws arising out
of a public offering in 1994 of $435.0 million of first mortgage notes
of Harrah's Jazz Company and Harrah's Jazz Finance Corp. The complaints
seek to hold DLJSC liable for various alleged misstatements and
omissions contained in the prospectus dated November 9, 1994. DLJSC
intends to defend itself vigorously against all of the allegations
contained in the complaints. Although there can be no assurance, DLJ
does not believe that the ultimate outcome of this litigation will have
a material adverse effect on its financial condition. Due to the early
stage of this litigation, based upon the information currently available
to it, DLJ's management cannot make an estimate of loss or predict
whether or not such litigation will have a material adverse effect on
DLJ's results of operations in any particular period.
In addition to the matters described above, Equitable Life and its
subsidiaries and DLJ and its subsidiaries are involved in various legal
actions and proceedings in connection with their businesses. Some of the
actions and proceedings have been brought on behalf of various alleged
classes of claimants and certain of these claimants seek damages of
unspecified amounts. While the ultimate outcome of such matters cannot
be predicted with certainty, in the opinion of management no such matter
is likely to have a material adverse effect on the Company's
consolidated financial position or results of operations.
15) LEASES
The Company has entered into operating leases for office space and
certain other assets, principally data processing equipment and office
furniture and equipment. Future minimum payments under noncancelable
leases for 1996 and the succeeding four years are $114.8 million, $101.8
million, $90.0 million, $73.6 million, $57.7 million and $487.0 million
thereafter. Minimum future sublease rental income on these noncancelable
leases for 1996 and the succeeding four years are $11.0 million, $8.7
million, $6.9 million, $4.6 million, $2.9 million and $1.1 million
thereafter.
At December 31, 1995, the minimum future rental income on noncancelable
operating leases for wholly owned investments in real estate for 1996
and the succeeding four years are $292.9 million, $271.2 million, $248.1
million, $226.4 million, $195.5 million and $1,018.8 million thereafter.
F-35
<PAGE>
16) OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Compensation costs................................. $ 595.9 $ 690.0 $ 1,452.3
Commissions........................................ 314.3 313.0 551.1
Short-term debt interest expense................... 11.4 19.0 317.1
Long-term debt interest expense.................... 108.1 98.3 86.0
Amortization of policy acquisition costs........... 320.4 318.1 275.9
Capitalization of policy acquisition costs......... (391.0) (410.9) (397.8)
Rent expense, net of sub-lease income.............. 124.8 128.9 159.5
Other.............................................. 772.6 786.7 1,140.1
----------------- ---------------- -----------------
Total.............................................. $ 1,856.5 $ 1,943.1 $ 3,584.2
================= ================ =================
</TABLE>
During the years ended December 31, 1995, 1994 and 1993, the Company
restructured certain operations in connection with cost reduction
programs and recorded pre-tax provisions of $32.0 million, $20.4 million
and $96.4 million, respectively. The amounts paid during 1995,
associated with the 1995 and 1994 cost reduction programs, totaled $24.0
million. At December 31, 1995, the liabilities associated with the 1995
and 1994 cost reduction programs amounted to $37.8 million. The 1995
cost reduction program included relocation expenses, including the
accelerated amortization of building improvements associated with the
relocation of the home office. The 1994 cost reduction program included
costs associated with the termination of operating leases and employee
severance benefits in connection with the consolidation of 16 insurance
agencies. The 1993 cost reduction program primarily reflected severance
benefits of terminated employees in connection with the combination of a
wholly owned subsidiary of the Company with Alliance.
17) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION
Equitable Life is restricted as to the amounts it may pay as dividends
to the Holding Company. Under the New York Insurance Law, the New York
Superintendent has broad discretion to determine whether the financia1
condition of a stock life insurance company would support the payment of
dividends to its shareholders. For the years ended December 31, 1995,
1994 and 1993, statutory (loss) earnings totaled $(352.4) million, $67.5
million and $324.0 million, respectively. No amounts are expected to be
available for dividends from Equitable Life to the Holding Company in
1996.
At December 31, 1995, the Insurance Group, in accordance with various
government and state regulations, had $18.9 million of securities
deposited with such government or state agencies.
F-36
<PAGE>
Accounting practices used to prepare statutory financial statements for
regulatory filings of stock life insurance companies differ in certain
instances from GAAP. The following reconciles the Company's statutory
change in surplus and capital stock and statutory surplus and capital
stock determined in accordance with accounting practices prescribed by
the New York Insurance Department with net earnings and equity on a GAAP
basis.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net change in statutory surplus and capital stock.. $ 78.1 $ 292.4 $ 190.8
Change in asset valuation reserves................. 365.7 (285.2) 639.1
----------------- ---------------- -----------------
Net change in statutory surplus, capital stock
and asset valuation reserves..................... 443.8 7.2 829.9
Adjustments:
Future policy benefits and policyholders'
account balances............................... (67.9) (11.0) (171.0)
Deferred policy acquisition costs................ 70.6 92.8 121.8
Deferred Federal income taxes.................... (150.0) (59.7) (57.5)
Valuation of investments......................... 189.1 45.2 202.3
Valuation of investment subsidiary............... (188.6) 396.6 (464.9)
Limited risk reinsurance......................... 416.9 74.9 85.2
Issuance of surplus notes........................ (538.9) - -
Sale of subsidiary and joint venture............. - - (366.5)
Contribution from the Holding Company............ - (300.0) -
Postretirement benefits.......................... (26.7) 17.1 23.8
Other, net....................................... 115.1 (44.0) 60.3
GAAP adjustments of Closed Block................. (3.1) 4.5 (16.0)
GAAP adjustments of discontinued GIC
Segment........................................ 37.3 42.8 (35.0)
----------------- ---------------- -----------------
Net Earnings....................................... $ 297.6 $ 266.4 $ 212.4
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Statutory surplus and capital stock................ $ 2,202.9 $ 2,124.8 $ 1,832.4
Asset valuation reserves........................... 1,345.9 980.2 1,265.4
----------------- ---------------- -----------------
Statutory surplus, capital stock and asset
valuation reserves............................... 3,548.8 3,105.0 3,097.8
Adjustments:
Future policy benefits and policyholders'
account balances............................... (1,017.4) (949.5) (938.5)
Deferred policy acquisition costs................ 3,083.3 3,221.1 2,858.8
Deferred Federal income taxes.................... (450.8) (26.8) (137.8)
Valuation of investments......................... 417.7 (794.1) (29.8)
Valuation of investment subsidiary............... (665.1) (476.5) (873.1)
Limited risk reinsurance......................... (429.0) (845.9) (920.8)
Issuance of surplus notes........................ (538.9) - -
Postretirement benefits.......................... (343.3) (316.6) (333.7)
Other, net....................................... 4.4 (79.2) (81.9)
GAAP adjustments of Closed Block................. 575.7 578.8 574.2
GAAP adjustments of discontinued GIC
Segment........................................ (184.6) (221.9) (264.6)
----------------- ---------------- -----------------
Total Shareholder's Equity......................... $ 4,000.8 $ 3,194.4 $ 2,950.6
================= ================ =================
</TABLE>
F-37
<PAGE>
18) BUSINESS SEGMENT INFORMATION
The Company has three major business segments: Individual Insurance and
Annuities; Investment Services and Group Pension.
Consolidation/elimination principally includes debt not specific to any
business segment. Attributed Insurance Capital represents net assets and
related revenues and earnings of the Insurance Group not assigned to the
insurance segments. Interest expense related to debt not specific to any
business segment is presented within Corporate interest expense.
Information for all periods is presented on a comparable basis.
The Individual Insurance and Annuities segment offers a variety of
traditional, variable and interest-sensitive life insurance products,
disability income, annuity products and mutual fund and other investment
products to individuals and small groups. This segment includes Separate
Accounts for certain individual insurance and annuity products.
The Investment Services segment provides investment fund management,
primarily to institutional clients. This segment includes Separate
Accounts which provide various investment options for group clients
through pooled or single group accounts.
Intersegment investment advisory and other fees of approximately $124.1
million, $135.3 million and $128.6 million for 1995, 1994 and 1993,
respectively, are included in total revenues of the Investment Services
segment. These fees, excluding amounts related to the discontinued GIC
Segment of $14.7 million, $27.4 million and $17.0 million for 1995, 1994
and 1993, respectively, are eliminated in consolidation.
The Group Pension segment administers traditional participating group
annuity contracts with conversion features, generally for corporate
qualified pension plans, and association plans which provide full
service retirement programs for individuals affiliated with professional
and trade associations.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Individual insurance and annuities................. $ 3,254.6 $ 3,110.7 $ 2,981.5
Group pension...................................... 292.0 359.1 426.6
Attributed insurance capital....................... 61.2 79.4 61.6
----------------- ---------------- -----------------
Insurance operations............................. 3,607.8 3,549.2 3,469.7
Investment services................................ 949.1 935.2 2,792.6
Consolidation/elimination.......................... (34.9) (24.7) (40.5)
----------------- ---------------- -----------------
Total.............................................. $ 4,522.0 $ 4,459.7 $ 6,221.8
================= ================ =================
Earnings (loss) before Federal income taxes
and cumulative effect of accounting change
Individual insurance and annuities................. $ 274.4 $ 245.5 $ 76.2
Group pension...................................... (13.3) 15.8 2.0
Attributed insurance capital....................... 18.7 69.8 49.0
----------------- ---------------- -----------------
Insurance operations............................. 279.8 331.1 127.2
Investment services................................ 161.2 177.5 302.1
Consolidation/elimination.......................... (3.1) .3 .5
----------------- ---------------- -----------------
Subtotal..................................... 437.9 508.9 429.8
Corporate interest expense......................... (27.9) (114.2) (126.1)
----------------- ---------------- -----------------
Total.............................................. $ 410.0 $ 394.7 $ 303.7
================= ================ =================
</TABLE>
F-38
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Individual insurance and annuities..................................... $ 50,328.8 $ 44,063.4
Group pension.......................................................... 4,033.3 4,222.8
Attributed insurance capital........................................... 2,391.6 2,609.8
---------------- -----------------
Insurance operations................................................. 56,753.7 50,896.0
Investment services.................................................... 12,842.9 12,127.9
Consolidation/elimination.............................................. (354.4) (1,614.4)
---------------- -----------------
Total.................................................................. $ 69,242.2 $ 61,409.5
================ =================
</TABLE>
19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations for the years ended December 31,
1995, 1994 and 1993, are summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
------------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------------- ----------------- ------------------ ------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1995
----
Total Revenues................ $ 1,074.7 $ 1,158.4 $ 1,127.1 $ 1,161.8
================= ================= ================== ==================
Net Earnings.................. $ 59.0 $ 94.3 $ 91.2 $ 53.1
================= ================= ================== ==================
1994
----
Total Revenues................ $ 1,107.4 $ 1,075.0 $ 1,153.8 $ 1,123.5
================= ================= ================== ==================
Earnings before Cumulative
Effect of Accounting
Change...................... $ 64.0 $ 68.4 $ 89.1 $ 72.0
================= ================= ================== ==================
Net Earnings.................. $ 36.9 $ 68.4 $ 89.1 $ 72.0
================= ================= ================== ==================
1993
----
Total Revenues................ $ 1,502.2 $ 1,539.7 $ 1,679.4 $ 1,500.5
================= ================= ================== ==================
Net Earnings.................. $ 32.3 $ 47.1 $ 68.8 $ 64.2
================= ================= ================== ==================
</TABLE>
20) INVESTMENT IN DLJ
On December 15, 1993, the Company sold a 61% interest in DLJ to the
Holding Company for $800.0 million in cash and securities. The excess of
the proceeds over the book value in DLJ at the date of sale of $340.2
million has been reflected as a capital contribution. In 1995, DLJ
completed the initial public offering ("IPO") of 10.58 million shares of
its common stock, which included 7.28 million of the Holding Company's
shares in DLJ, priced at $27 per share. Concurrent with the IPO, the
Company contributed equity securities to DLJ having a market value of
$21.2 million. Upon completion of the IPO, the Company's ownership
percentage was reduced to 36.1%. The Company's ownership interest will
be further reduced upon the issuance of common stock after the vesting
of forfeitable restricted stock units acquired by and/or the exercise of
options granted to certain DLJ employees. At December 31, 1995, DLJ had
options
F-39
<PAGE>
outstanding to purchase approximately 9.2 million shares of DLJ common
stock at $27.00 per share. Options are exercisable over a period of up
to ten years. DLJ restricted stock units represents forfeitable rights
to receive approximately 5.2 million shares of DLJ common stock through
February 2000.
The results of operations and cash flows of DLJ through the date of sale
are included in the consolidated statements of earnings and cash flow
for the year ended December 31, 1993. For the period subsequent to the
date of sale, the results of operations of DLJ are accounted for on the
equity basis and are included in commissions, fees and other income in
the consolidated statements of earnings. The Company's carrying value of
DLJ is included in investment in and loans to affiliates in the
consolidated balance sheets.
Summarized balance sheets information for DLJ, reconciled to the
Company's carrying value of DLJ, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets:
Trading account securities, at market value............................ $ 10,911.4 $ 8,970.0
Securities purchased under resale agreements........................... 18,748.2 10,476.4
Broker-dealer related receivables...................................... 13,023.7 11,784.8
Other assets........................................................... 1,893.2 2,030.4
---------------- -----------------
Total Assets........................................................... $ 44,576.5 $ 33,261.6
================ =================
Liabilities:
Securities sold under repurchase agreements............................ $ 26,744.8 $ 18,356.7
Broker-dealer related payables......................................... 12,915.5 10,618.0
Short-term and long-term debt.......................................... 1,717.5 1,956.5
Other liabilities...................................................... 1,775.0 1,285.1
---------------- -----------------
Total liabilities...................................................... 43,152.8 32,216.3
Cumulative exchangeable preferred stock................................ 225.0 225.0
Total shareholders' equity............................................. 1,198.7 820.3
---------------- -----------------
Total Liabilities, Cumulative Exchangeable Preferred Stock and
Shareholders' Equity................................................. $ 44,576.5 $ 33,261.6
================ =================
DLJ's equity as reported............................................... $ 1,198.7 $ 820.3
Unamortized cost in excess of net assets acquired in 1985
and other adjustments................................................ 40.5 50.8
The Holding Company's equity ownership in DLJ.......................... (499.0) (532.1)
Minority interest in DLJ............................................... (324.3) -
---------------- -----------------
The Company's Carrying Value of DLJ.................................... $ 415.9 $ 339.0
================ =================
</TABLE>
F-40
<PAGE>
Summarized statements of earnings information for DLJ reconciled to the
Company's equity in earnings of DLJ is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Commission, fees and other income...................................... $ 1,325.9 $ 953.5
Net investment income.................................................. 904.1 791.9
Dealer, trading and investment gains, net.............................. 528.6 263.3
---------------- -----------------
Total Revenues......................................................... 2,758.6 2,008.7
Total expenses including income taxes.................................. 2,579.5 1,885.7
---------------- -----------------
Net earnings........................................................... 179.1 123.0
Dividends on preferred stock........................................... 19.9 20.9
---------------- -----------------
Earnings Applicable to Common Shares................................... $ 159.2 $ 102.1
================ =================
DLJ's earnings applicable to common shares as reported................. $ 159.2 $ 102.1
Amortization of cost in excess of net assets acquired in 1985.......... (3.9) (3.1)
The Holding Company's equity in DLJ's earnings......................... (90.4) (60.9)
Minority interest in DLJ............................................... (6.5) -
---------------- -----------------
The Company's Equity in DLJ's Earnings................................. $ 58.4 $ 38.1
================ =================
</TABLE>
21) RELATED PARTY TRANSACTIONS
On August 31, 1993, the Company sold $661.0 million of primarily
privately placed below investment grade fixed maturities to EQ Asset
Trust 1993, a limited purpose business trust, wholly owned by the
Holding Company. The Company recognized a $4.1 million gain net of
related deferred policy acquisition costs, deferred Federal income tax
and amounts attributable to participating group annuity contracts. In
conjunction with this transaction, the Company received $200.0 million
of Class B Notes issued by EQ Asset Trust 1993. These notes have
interest rates ranging from 6.85% to 9.45%. The Class B Notes are
reflected in investments in and loans to affiliates on the consolidated
balance sheets.
F-41
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1996 1995
------------- ------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value ............ $ 17,117.5 $ 15,899.9
Mortgage loans on real estate ............................ 3,298.5 3,638.3
Equity real estate ....................................... 3,705.0 3,916.2
Policy loans ............................................. 2,167.3 1,976.4
Investment in and loans to affiliates .................... 686.8 636.6
Other equity investments ................................. 561.4 621.1
Other invested assets .................................... 358.4 706.1
----------- -----------
Total investments .................................... 27,894.9 27,394.6
Cash and cash equivalents .................................. 528.2 774.7
Deferred policy acquisition costs .......................... 3,279.3 3,083.3
Amounts due from discontinued GIC Segment .................. 1,270.1 2,097.1
Other assets ............................................... 2,720.0 2,713.1
Closed Block assets ........................................ 8,345.7 8,612.8
Separate Accounts assets ................................... 28,242.3 24,566.6
----------- -----------
TOTAL ASSETS ............................................... $ 72,280.5 $ 69,242.2
=========== ============
LIABILITIES
Policyholders' account balances ............................ $ 21,795.3 $ 21,911.2
Future policy benefits and other policyholders' liabilities 4,155.9 4,013.2
Short-term and long-term debt .............................. 2,029.9 1,899.3
Other liabilities .......................................... 2,988.2 3,379.5
Closed Block liabilities ................................... 9,193.2 9,507.2
Separate Accounts liabilities .............................. 28,154.7 24,531.0
----------- -----------
Total liabilities .................................... 68,317.2 65,241.4
----------- -----------
Commitments and contingencies (Note 10)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value; 2.0 million shares
authorized issued and outstanding ......................... 2.5 2.5
Capital in excess of par value ............................. 2,913.6 2,913.6
Retained earnings .......................................... 1,019.0 781.6
Net unrealized investment gains ............................ 63.3 338.2
Minimum pension liability .................................. (35.1) (35.1)
----------- -----------
Total shareholder's equity ........................... 3,963.3 4,000.8
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY ................. $ 72,280.5 $ 69,242.2
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-42
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ---------------------
1996 1995 1996 1995
----------- --------- --------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
REVENUES
Universal life and investment-type
product policy fee income ..................... $ 220.7 $ 197.1 $ 651.4 $ 581.4
Premiums ........................................ 145.8 140.2 439.2 452.7
Net investment income ........................... 534.3 517.5 1,605.9 1,551.7
Investment (losses) gains, net .................. (5.5) 8.8 (21.5) 27.7
Commissions, fees and other income .............. 262.5 232.3 786.8 650.5
Contribution from the Closed Block .............. 23.7 28.2 73.8 85.4
---------- --------- --------- --------
Total revenues ............................ 1,181.5 1,124.1 3,535.6 3,349.4
---------- --------- --------- --------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account
balances ...................................... 315.8 314.8 948.8 921.3
Policyholders' benefits ......................... 268.4 245.7 795.6 766.1
Other operating costs and expenses .............. 457.2 421.8 1,379.0 1,282.4
---------- --------- --------- --------
Total benefits and other deductions ....... 1,041.4 982.3 3,123.4 2,969.8
---------- --------- --------- --------
Earnings before Federal income taxes,
minority interest and cumulative effect of
accounting change ............................. 140.1 141.8 412.2 379.6
Federal income taxes ............................ 33.7 33.9 92.2 89.9
Minority interest in net income of consolidated
subsidiaries .................................. 20.6 16.7 59.5 45.2
---------- --------- --------- --------
Earnings before cumulative effect of
accounting change ............................. 85.8 91.2 260.5 244.5
Cumulative effect of accounting change,
net of Federal income taxes ................... - - (23.1) -
---------- --------- --------- --------
Net Earnings .................................... $ 85.8 $ 91.2 $ 237.4 $ 244.5
========== ========== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-43
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(IN MILLIONS)
<S> <C> <C>
Common stock, at par value, beginning of year and end of period .. $ 2.5 $ 2.5
---------- ----------
Capital in excess of par value, beginning of year
and end of period ............................................... 2,913.6 2,913.6
---------- ----------
Retained earnings, beginning of year ............................. 781.6 484.0
Net earnings ..................................................... 237.4 244.5
---------- ----------
Retained earnings, end of period ................................. 1,019.0 728.5
---------- ----------
Net unrealized investment gains (losses), beginning of year ...... 338.2 (203.0)
Change in unrealized investment (losses) gains ................... (274.9) 270.5
---------- ----------
Net unrealized investment gains, end of period ................... 63.3 67.5
---------- ----------
Minimum pension liability, beginning of year and end of period ... (35.1) (2.7)
---------- ----------
TOTAL SHAREHOLDER'S EQUITY, END OF PERIOD ........................ $ 3,963.3 $ 3,709.4
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-44
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- ----------
(IN MILLIONS)
<S> <C> <C>
Net earnings ......................................................... $ 237.4 $ 244.5
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Interest credited to policyholders' account balances ............. 948.8 921.3
General Account policy charges ................................... (651.4) (581.4)
Investment losses (gains) ........................................ 21.5 (27.7)
Change in Federal income taxes payable ........................... (96.2) 110.8
Changes in Closed Block assets and liabilities, net .............. (46.9) (52.6)
Other, net ....................................................... 33.8 102.2
---------- ----------
Net cash provided by operating activities ............................ 447.0 717.1
---------- ----------
Cash flows from investing activities:
Maturities and repayments .......................................... 1,626.0 1,312.6
Sales .............................................................. 6,913.2 5,371.0
Return of capital from joint ventures and limited partnerships ..... 64.3 34.7
Purchases .......................................................... (9,646.9) (7,100.5)
Decrease in loans to discontinued GIC Segment ...................... 827.0 1,155.4
Other, net ......................................................... (97.9) (176.7)
---------- ----------
Net cash (used) provided by investing activities ..................... (314.3) 596.5
---------- ----------
Cash flows from financing activities:
Policyholders' account balances:
Deposits ......................................................... 1,402.2 2,034.3
Withdrawals ...................................................... (1,839.5) (2,078.9)
Net increase in short-term financings .............................. 195.3 272.5
Repayments of long-term debt ....................................... (88.5) (5.3)
Payment of obligation to fund accumulated deficit of discontinued
GIC Segment ...................................................... - (1,215.4)
Other, net ......................................................... (48.7) (33.8)
---------- ----------
Net cash used by financing activities ................................ (379.2) (1,026.6)
---------- ----------
Change in cash and cash equivalents .................................. (246.5) 287.0
Cash and cash equivalents, beginning of year ......................... 774.7 693.6
---------- ----------
Cash and Cash Equivalents, End of Period ............................. $ 528.2 $ 980.6
========== ==========
Supplemental cash flow information
Interest Paid ...................................................... $ 70.6 $ 61.2
========== ==========
Income Taxes (Refunded) Paid ....................................... $ (7.9) $ 4.1
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-45
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1) BASIS OF PRESENTATION
The preparation of the accompanying consolidated financial statements in
conformity with GAAP required management to make estimates and assumptions
(including normal, recurring accruals) that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. These statements should
be read in conjunction with the consolidated financial statements of the
Company for the year ended December 31, 1995. The results of operations
for the nine months ended September 30, 1996 are not necessarily
indicative of the results to be expected for the full year.
Certain reclassifications have been made in the amounts presented for
prior periods to conform those periods with the current presentation.
2) ACCOUNTING CHANGES AND PRONOUNCEMENTS
The Company implemented SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," as of
January 1, 1996. The statement requires long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate the carrying value of such assets may
not be recoverable. Impaired real estate is written down to fair value
with the impairment loss being included in Investment gains, net. Before
implementing SFAS No. 121, valuation allowances on real estate held for
the production of income were computed using the forecasted cash flows of
the respective properties discounted at a rate equal to the Company's cost
of funds. The adoption of the statement resulted in the release of
valuation allowances of $152.4 million and recognition of impairment
losses of $144.0 million on real estate held and used. Real estate which
management has committed to disposing of by sale or abandonment is
classified as real estate to be disposed of. Valuation allowances on real
estate to be disposed of continue to be computed using the lower of
estimated fair value or depreciated cost, net of disposition costs.
Implementation of the SFAS No. 121 impairment requirements relative to
other assets to be disposed of resulted in a charge for the cumulative
effect of an accounting change of $23.1 million, net of a Federal income
tax benefit of $12.4 million, due to the writedown to fair value of
building improvements relating to facilities being vacated beginning in
1996.
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities". SFAS
No. 125 specifies the accounting and reporting requirements for transfers
of financial assets, the recognition and measurement of servicing assets
and liabilities and extinguishments of liabilities. SFAS No. 125 is
effective for transactions occurring after December 31, 1996 and is to be
applied prospectively. Management has not yet determined the effect of
implementing SFAS No. 125.
3) FEDERAL INCOME TAXES
Federal income taxes for interim periods have been computed using an
estimated annual effective tax rate. This rate is revised, if necessary,
at the end of each successive interim period to reflect the current
estimate of the annual effective tax rate.
F-46
<PAGE>
4) INVESTMENTS
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1995
--------- ----------
(IN MILLIONS)
<S> <C> <C>
Balances, beginning of year ............................ $ 325.3 $ 284.9
SFAS No. 121 release ................................... (152.4) -
Additions charged to income ............................ 88.7 67.8
Deductions for writedowns and asset dispositions ....... (105.2) (49.7)
-------- --------
Balances, End of Period ................................ $ 156.4 $ 303.0
======== ========
Balances, end of period:
Mortgage loans on real estate ........................ $ 93.3 $ 66.8
Equity real estate ................................... 63.1 236.2
-------- --------
Total............................................. $ 156.4 $ 303.0
======== ========
</TABLE>
For the three months and nine months ended September 30, 1996 and 1995,
investment income is shown net of investment expenses of $89.9 million,
$272.1 million, $115.2 million and $343.3 million, respectively.
As of September 30, 1996 and December 31, 1995, fixed maturities
classified as available for sale had amortized costs of $17,001.8 million
and $15,284.0 million, respectively. Other equity investments included
equity securities with carrying values of $125.0 million and $128.4
million and costs of $101.3 million and $97.3 million as of September 30,
1996 and December 31, 1995, respectively.
For the nine months ended September 30, 1996 and 1995, proceeds received
on sales of fixed maturities classified as available for sale amounted to
$6,645.1 million and $5,009.6 million, respectively. Gross gains of $94.0
million and $135.1 million and gross losses of $58.4 million and $49.8
million were realized on these sales for the nine months ended September
30, 1996 and 1995, respectively. The decrease in unrealized investment
gains related to fixed maturities classified as available for sale for the
nine months ended September 30, 1996 amounted to $500.1 million.
During the nine months ended September 30, 1995, one security classified
as held to maturity was sold and twelve securities classified as held to
maturity were transferred to the available for sale portfolio. All actions
were taken as a result of significant deterioration in creditworthiness.
The amortized cost of the security sold was $4.2 million. The aggregate
amortized cost of the securities transferred was $116.0 million with gross
unrealized investment losses of $3.2 million transferred to equity for the
nine months ended September 30, 1995.
Impaired mortgage loans along with the related provision for losses
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1996 1995
------------- ----------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with provision for losses ........ $ 428.6 $ 310.1
Impaired mortgage loans with no provision for losses ..... 148.3 160.8
-------- --------
Recorded investment in impaired mortgage loans ........... 576.9 470.9
Provision for losses ..................................... 88.0 62.7
-------- --------
Net Impaired Mortgage Loans .............................. $ 488.9 $ 408.2
======== ========
</TABLE>
F-47
<PAGE>
Impaired mortgage loans with no provision for losses are loans where the
fair value of the collateral or the net present value of the loans equals
or exceeds the recorded investment. Interest income earned on loans where
the collateral value is used to measure impairment is recorded using the
cash basis method. Interest income on loans where the present value method
is used to measure impairment is accrued on the net carrying value amount
of the loan at the interest rate used to discount the cash flows. Changes
in the present value attributable to changes in the amount or timing of
expected cash flows are reported as investment gains or losses.
During the nine months ended September 30, 1996 and 1995, respectively,
the Company's average recorded investment in impaired mortgage loans was
$548.7 million and $295.5 million. Interest income recognized on these
impaired mortgage loans totaled $30.9 million and $20.3 million for the
nine months ended September 30, 1996 and 1995, respectively, including
$13.7 million and $10.8 million recognized on the cash basis method.
5) ALLIANCE - CURSITOR TRANSACTION
On February 29, 1996, Alliance acquired the business of Cursitor-Eaton
Asset Management Company and Cursitor Holdings Limited in exchange for
approximately 1.8 million Alliance Units, $84.9 million in cash, $21.5
million in notes which are payable ratably over the next four years and
substantial additional consideration which will be determined at a later
date. The Company recognized an investment gain of $20.6 million as a
result of the issuance of Units in this transaction. At September 30,
1996, the Company's ownership of Alliance Units was approximately 57.4%.
6) BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ----------------------
1996 1995 1996 1995
----------- ---------- ----------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Revenues
Individual insurance and annuities .. $ 841.7 $ 793.5 $ 2,496.9 $ 2,436.6
Group pension ....................... 60.7 77.1 189.3 209.4
Attributed insurance capital ........ 17.9 17.0 49.2 45.6
---------- ---------- ---------- ----------
Insurance operations .............. 920.3 887.6 2,735.4 2,691.6
Investment services ................. 267.0 243.7 818.3 681.1
Consolidation/elimination ........... (5.8) (7.2) (18.1) (23.3)
---------- ---------- ---------- ----------
Total ............................... $ 1,181.5 $ 1,124.1 $ 3,535.6 $ 3,349.4
========== ========== ========== ==========
EARNINGS (LOSS) BEFORE FEDERAL
INCOME TAXES, MINORITY INTEREST
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE
Individual insurance and annuities .. $ 86.8 $ 80.6 $ 240.3 $ 232.2
Group pension ....................... (8.3) (.9) (28.6) (12.7)
Attributed insurance capital ........ 9.7 9.9 23.5 22.5
---------- ---------- ---------- ----------
Insurance operations .............. 88.2 89.6 235.2 242.0
Investment services ................. 68.8 59.2 226.8 157.2
---------- ---------- ---------- ----------
Subtotal .......................... 157.0 148.8 462.0 399.2
Corporate interest expense .......... (16.9) (7.0) (49.8) (19.6)
---------- ---------- ---------- ----------
Total ............................... $ 140.1 $ 141.8 $ 412.2 $ 379.6
========== ========== ========== ==========
</TABLE>
F-48
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1996 1995
-------------- ------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Individual insurance and annuities ........... $ 53,559.8 $ 50,328.8
Group pension ................................ 3,601.0 4,033.3
Attributed insurance capital ................. 2,055.5 2,391.6
----------- -----------
Insurance operations ....................... 59,216.3 56,753.7
Investment services .......................... 13,434.1 12,842.9
Consolidation/elimination .................... (369.9) (354.4)
----------- -----------
Total ........................................ $ 72,280.5 $ 69,242.2
=========== ===========
</TABLE>
7) DISCONTINUED OPERATIONS
Summarized financial information of the discontinued GIC Segment follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------------- ------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Mortgage loans on real estate .................... $ 1,285.0 $ 1,485.8
Equity real estate ............................... 1,057.1 1,122.1
Cash and other invested assets ................... 361.7 665.2
Other assets ..................................... 191.5 579.3
---------- ----------
Total Assets ..................................... $ 2,895.3 $ 3,852.4
========== ==========
LIABILITIES
Policyholders' liabilities ....................... $ 1,360.3 $ 1,399.8
Allowance for future losses ...................... 118.8 164.2
Amounts due to continuing operations ............. 1,270.1 2,097.1
Other liabilities ................................ 146.1 191.3
---------- ----------
Total Liabilities ................................ $ 2,895.3 $ 3,852.4
========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1996 1995 1996 1995
------- -------- ------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
REVENUES
Investment income (net of investment
expenses of $31.8, $40.5, $96.1
and $117.9) ............................ $ 50.2 $ 52.6 $ 182.4 $ 202.1
Investment (losses) gains, net ........... (6.2) 6.6 (23.8) (12.3)
Policy fees, premiums and other
income, net ............................ .1 .1 .2 .6
--------- -------- -------- --------
Total revenues ........................... 44.1 59.3 158.8 190.4
BENEFITS AND OTHER DEDUCTIONS ............ 56.9 76.6 196.2 253.9
--------- -------- -------- --------
Losses Charged to Allowance
for Future Losses ...................... $ (12.8) $ (17.3) $ (37.4) $ (63.5)
======= ======= ======== ========
</TABLE>
F-49
<PAGE>
Investment valuation allowances amounted to $19.9 million on mortgage
loans and $16.3 million on equity real estate for an aggregate of $36.2
million at September 30, 1996. As of January 1, 1996, the adoption of SFAS
No. 121 resulted in a release of existing valuation allowances of $71.9
million on equity real estate and recognition of impairment losses of
$69.8 million on real estate held and used. At December 31, 1995,
valuation allowances amounted to $19.2 million on mortgage loans and $77.9
million on equity real estate for an aggregate of $97.1 million.
Benefits and other deductions included $23.3 million, $94.8 million, $38.7
million and $116.0 million of interest expense related to amounts borrowed
from continuing operations for the three months and nine months ended
September 30, 1996 and 1995, respectively.
The allowance for future losses is based upon management's best judgment
and there can be no assurance ultimate losses will not differ.
8) CLOSED BLOCK
Summarized financial information of the Closed Block follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Fixed maturities:
Available for sale, at estimated fair value (amortized
cost of $3,730.0 and $3,662.8) ...................... $ 3,736.2 $ 3,896.2
Mortgage loans on real estate ........................... 1,422.2 1,368.8
Policy loans ............................................ 1,778.8 1,797.2
Cash and other invested assets .......................... 321.8 440.9
Deferred policy acquisition costs ....................... 780.8 823.6
Other assets ............................................ 305.9 286.1
---------- ----------
Total Assets ............................................ $ 8,345.7 $ 8,612.8
========== ==========
LIABILITIES
Future policy benefits and other policyholders'
account balances ....................................... $ 9,159.6 $ 9,346.7
Other liabilities ....................................... 33.6 160.5
--------- ----------
Total Liabilities ....................................... $ 9,193.2 $ 9,507.2
========= ==========
</TABLE>
F-50
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ --------------------
1996 1995 1996 1995
-------- -------- -------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
REVENUES
Premiums and other income ......... $ 171.3 $ 178.8 $ 539.1 $ 561.3
Investment income (net of investment
expenses of $6.9, $6.6, $21.0 and
$20.3) .......................... 140.2 133.3 408.4 400.7
Investment losses, net ............ (4.6) (.6) (13.2) (7.5)
-------- -------- -------- --------
Total revenues .................... 306.9 311.5 934.3 954.5
-------- -------- -------- --------
BENEFITS AND OTHER DEDUCTIONS
Policyholders' benefits and dividends 266.9 270.8 810.2 824.1
Other operating costs and expenses . 16.3 12.5 50.3 45.0
-------- -------- -------- --------
Total benefits and other deductions 283.2 283.3 860.5 869.1
-------- -------- -------- --------
Contribution from the Closed Block $ 23.7 $ 28.2 $ 73.8 $ 85.4
======== ======== ======== ========
</TABLE>
Investment valuation allowances amounted to $33.4 million and $18.4
million on mortgage loans and $2.5 million and $4.3 million on equity real
estate for an aggregate of $35.9 million and $22.7 million at September
30, 1996 and December 31, 1995, respectively. As of January 1, 1996, the
adoption of SFAS No. 121 resulted in the recognition of impairment losses
of $5.6 million on real estate held and used.
9) RESTRUCTURE COSTS
At September 30, 1996, liabilities associated with 1994 and 1995 cost
reduction programs totaled $27.3 million. During the nine months ended
September 30, 1996 and 1995, the Company restructured certain operations
in connection with cost reduction programs and incurred costs of $2.6
million and $8.6 million, respectively, primarily associated with
severance related benefits. Amounts paid during the nine months ended
September 30, 1996 and charged against the liabilities for the 1994 and
1995 cost reduction programs totaled $13.1 million.
10) LITIGATION
There have been no new material legal proceedings and no material
developments in matters which were previously reported in the Company's
Notes to Consolidated Financial Statements for the year ended December 31,
1995, except as follows:
On May 29, 1996, the New York County Supreme Court entered a judgment
dismissing the complaint with prejudice in the previously reported action
Golomb, et al. v. The Equitable Life Assurance Society of the United
States. Plaintiffs have filed a notice of appeal of that judgment. On
February 9, 1996, Equitable Life removed the Pennsylvania action, Malvin
v. The Equitable Life Assurance Society of the United States, to the
United States District Court for the Middle District of Pennsylvania.
Following the decision granting Equitable Life's motion to dismiss the New
York action (Golomb), on the consent of the parties, the District Court
ordered an indefinite stay of all proceedings in the Pennsylvania action,
pending either party's right to reinstate the proceeding, and ordered that
for administrative purposes the case be deemed administratively closed. On
February 2, 1996, Equitable Life removed the Texas action, Bowler, et al.
v. The Equitable Life Assurance Society of the United States, to the
United States District Court for the Northern District of Texas. On July
1, 1996, Equitable Life filed a motion for summary judgment dismissing the
complaint in its entirety. The Company's management has been advised that
plaintiffs plan to oppose the motion for summary judgment. In August,
1996, the court granted plaintiffs leave to file a supplemental complaint
on behalf of a proposed class of Texas policyholders claiming unfair
discrimination, breach of contract and other claims arising out of alleged
differences between premiums charged to Texas policyholders and premiums
charged to
F-51
<PAGE>
similarly situated policyholders in New York and certain other states.
Plaintiffs seek refunds of alleged overcharges, exemplary or additional
damages citing Texas statutory provisions which among other things, permit
two times the amount of actual damage plus additional penalties if the
acts complained of are found to be knowingly committed, and injunctive
relief. Equitable Life has also filed a motion for summary judgment
dismissing the supplemental complaint in its entirety. Equitable Life's
management has been advised that plaintiffs plan to oppose that motion.
On May 22, 1996, a separate action entitled Bachman v. The Equitable Life
Assurance Society of the United States, was filed in Florida state court
making claims similar to those in the previously reported Golomb action.
The Florida action is asserted on behalf of a proposed class of Florida
issued or renewed policyholders, insured after 1983 under Lifetime
Guaranteed Renewable Major Medical Insurance Policies issued by Equitable
Life. The Florida action seeks compensatory and punitive damages and
injunctive relief restricting the methods by which Equitable Life
increases premiums in the future, based on various common law claims. On
June 20, 1996, Equitable Life removed the Florida action to Federal court.
Equitable Life has answered the complaint, denying the material
allegations and asserting certain affirmative defenses. Although the
outcome of any litigation cannot be predicted with certainty, particularly
in the early stages of an action, The Equitable's management believes that
the ultimate resolution of this litigation should not have a material
adverse effect on the financial position of the Company. Due to the early
stage of such litigation, the Company's management cannot make an estimate
of loss, if any, or predict whether or not such litigation will have a
material adverse effect on the Company's results of operations in any
particular period.
On November 6, 1996, a proposed class action entitled Fletcher, et al. v.
The Equitable Life Assurance Society of the United States, was filed in
California Superior Court for Fresno County, making substantially the same
allegations concerning premium rates and premium rate increases on
guaranteed renewable policies made in the Bowler action. The complaint
alleges, among other things, that differentials between rates charged
California policyholders and policyholders in New York and certain other
states, and the methods used by Equitable Life to calculate premium
increases, breached the terms of its policies and that Equitable Life
misrepresented and concealed the facts pertaining to such differentials
and methods in violation of California law. Plaintiffs seek compensatory
damages in an unspecified amount, rescission, injunctive relief and
attorneys fees. Although the outcome of any litigation cannot be predicted
with certainty, particularly in the early stages of an action, Equitable
Life's management believes that the ultimate resolution of this litigation
should not have a material adverse effect on the financial position of
Equitable Life. Due to the early stage of such litigation, Equitable
Life's management cannot make an estimate of loss, if any, or predict
whether or not such litigation will have a material adverse effect on
Equitable Life's results of operations in any particular period.
In connection with the previously reported action entitled Sidney C. Cole
et al. v. The Equitable Life Assurance Society of the United States and
The Equitable of Colorado, Inc., on June 28, 1996, the court issued a
decision and order dismissing with prejudice plaintiff's causes of action
for fraud, constructive fraud, breach of fiduciary duty, negligence, and
unjust enrichment, and dismissing without prejudice plaintiff's cause of
action under the New York State consumer protection statute. The only
remaining causes of action are for breach of contract and negligent
misrepresentation. Plaintiffs have made a motion for reargument with
respect to this order, which was submitted to the court in October 1996.
On May 21, 1996, an action entitled Elton F. Duncan, III v. The Equitable
Life Assurance Society of the United States, was commenced against
Equitable Life in the Civil District Court for the Parish of Orleans,
State of Louisiana. The action is brought by an individual who purchased a
whole life policy. Plaintiff alleges misrepresentations concerning the
extent to which the policy was a proper replacement policy and the number
of years that the annual premium would need to be paid. Plaintiff purports
to represent a class consisting of all persons who purchased whole life or
universal life insurance policies from Equitable Life from January 1, 1982
to the present. Plaintiff seeks damages, including punitive damages, in an
unspecified amount. On June 21, 1996, Equitable Life removed the action to
the United States District Court for the Eastern District of Louisiana.
Plaintiff has made a motion to remand to the Louisiana Civil District
Court, and Equitable Life will
F-52
<PAGE>
oppose such motion. On July 26, 1996, an action entitled Michael Bradley
v. Equitable Variable Life Insurance Company, was commenced in New York
state court. The action is brought by the holder of a variable life
insurance policy issued by EVLICO. The plaintiff purports to represent a
class consisting of all persons or entities who purchased one or more life
insurance policies issued by EVLICO from January 1, 1980. The complaint
puts at issue various alleged sales practices and alleges
misrepresentations concerning the extent to which the policy was a proper
replacement policy and the number of years that the annual premium would
need to be paid. Plaintiff seeks damages, including punitive damages, in
an unspecified amount and also seeks injunctive relief prohibiting EVLICO
from canceling policies for failure to make premium payments beyond the
alleged stated number of years that the annual premium would need to be
paid. Equitable Life and EVLICO have made a motion to consolidate or
jointly try this proceeding with the Cole action, which will not be heard
until November 1996. Although the outcome of any litigation cannot be
predicted with certainty, particularly in the early stages of an action,
the Company's management believes that the ultimate resolution of the
litigations discussed in this paragraph should not have a material adverse
effect on the financial position of the Company. Due to the early stages
of such litigation, the Company's management cannot make an estimate of
loss, if any, or predict whether or not such litigation will have a
material adverse effect on the Company's results of operations in any
particular period.
Equitable Life recently received a subpoena from the U.S. Department of
Labor ("DOL") requesting copies of any third-party appraisals in Equitable
Life's possession relating to the ten largest properties (by value) in the
Prime Property Fund ("PPF"). PPF is an open-end, commingled real estate
separate account of Equitable Life's for pension clients. Equitable Life
serves as investment manager in PPF and has retained Equitable Real Estate
Investment Management, Inc. ("Equitable Real Estate") as adviser. In early
1995, the DOL commenced a national investigation of commingled real estate
funds with pension investors, including PPF. The investigation now appears
to be focused principally on appraisal and valuation procedures in respect
of fund properties. The most recent request from the DOL seems to reflect,
at least in part, an interest in the relationship between the valuations
for those properties reflected in appraisals prepared for local property
tax proceedings and the valuations used by PPF for other purposes. At no
time has the DOL made any specific allegation that Equitable Life or
Equitable Real Estate has acted improperly and Equitable Life and
Equitable Real Estate believe that any such allegation would be without
foundation. While the outcome of this investigation cannot be predicted
with certainty, in the opinion of management, the ultimate resolution of
this matter should not have a material adverse effect on the Company's
consolidated financial position or results of operations.
In connection with the previously reported arbitration involving Equitable
Casualty Insurance Company ("Casualty"), the arbitration panel issued a
final award in favor of Casualty and GEICO General Insurance Company
("GEICO General") on June 17, 1996. The result of the arbitration is
expected to resolve in favor of Casualty and GEICO General two litigations
that were commenced by Houston General Insurance Company ("Houston
General") and that have been stayed by the presiding courts pending the
completion of the arbitration. Houston General has informed Casualty,
through counsel, that it is considering whether to consent to entry of a
judgment enforcing the arbitration award or whether to contest the award.
The Company's management believes that Houston General has no valid basis
for contesting the arbitration award and therefore the ultimate resolution
of this matter should not have a material adverse effect on the Company's
financial position or results of operations.
With respect to the previously reported National Gypsum litigation, the
Bankruptcy Court has remanded the Texas state court action to state court.
With respect to the previously reported Spectravision litigation,
plaintiffs have filed an amended complaint in which DLJSC is no longer
named as a defendant.
F-53
<PAGE>
On September 26, 1996, the United States District Court for the Southern
District of New York granted the defendants' motion to dismiss all counts
of the complaint in the previously reported litigation involving Alliance
and the Alliance North American Government Income Fund, Inc. The
plaintiffs have filed motions requesting that the court reconsider its
decision and for permission to file an amended complaint. While the
ultimate outcome cannot be determined at this time, Alliance's management
does not expect that it will have a material adverse effect on Alliance's
consolidated financial position or results of operations.
In addition to the matters previously reported and the matters described
above, Equitable Life and its subsidiaries and DLJ and its subsidiaries
are involved in various legal actions and proceedings in connection with
their businesses. Some of the actions and proceedings have been brought on
behalf of various alleged classes of claimants and certain of these
claimants seek damages of unspecified amounts. While the ultimate outcome
of such matters cannot be predicted with certainty, in the opinion of
management no such matter is likely to have a material adverse effect on
the Company's consolidated financial position or results of operations.
F-54
<PAGE>
APPENDIX A
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 over 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 IL COLI II 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, 1995 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>
FOR THE
FOLLOWING LONG-TERM LONG-TERM INTERMEDIATE- U.S. CONSUMER
PERIODS ENDING COMMON GOVERNMENT CORPORATE TERM GOV'T TREASURY PRICE
12/31/95: STOCKS BONDS BONDS BONDS BILLS INDEX
- -------- ------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
1 year.................. 37.43 31.67 26.39 16.80 5.60 2.74
3 years................. 15.26 12.82 10.47 7.22 4.13 2.72
5 years................. 16.57 13.10 12.07 8.81 4.29 2.83
10 years................. 14.84 11.92 11.25 9.08 5.55 3.48
20 years................. 14.59 10.45 10.54 9.69 7.28 5.23
30 years................. 10.68 7.92 8.17 8.36 6.72 5.39
40 years................. 10.78 6.38 6.75 7.02 5.73 4.46
50 years................. 11.94 5.35 5.75 5.87 4.80 4.36
60 years................. 11.34 5.20 5.46 5.34 4.01 4.10
Since 1926............... 10.54 5.17 5.69 5.25 3.72 3.12
Inflation Adjusted
Since 1926............... 7.20 1.99 2.49 2.07 0.58 0.00
- ----------------------------
</TABLE>
*Source: Ibbotson, Roger G. and Rex A. Sinquefield, STOCKS, BONDS, BILLS, AND
INFLATION (SBBI), 1982, updated in STOCKS, BONDS, BILLS, AND INFLATION 1996
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 1969-1995, 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
1969-1995; 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.
A-2
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
IL COLI II (TM)
- --------------------------------------------------------------------------------
JULY 24, 1996
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
<PAGE>
IL
COLI II
Prospectus Dated July 24, 1996
IL COLI II is an individual 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 is designed to be offered to eligible purchasers
and to be used for a variety of business purposes.
The policy offers flexible premium payments, a choice of two death benefit
options, 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>
<S> <C> <C>
Fixed Income Series: Equity Series: Asset Allocation Series:
o Money Market o Growth & Income o Conservative Investors
o Intermediate Government Securities o Equity Index o Balanced
o Quality Bond o Common Stock o Growth Investors
o High Yield o Global
o International
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)
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).
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.
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 IL COLI II 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 IL COLI
II. 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 1996 Equitable Variable Life Insurance Company. All rights reserved.
VM 514 Cat. No. 126945
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF IL COLI II FEATURES.................................................1
PART 1 -- DETAILED INFORMATION ABOUT EQUITABLE VARIABLE AND
IL COLI II INVESTMENT CHOICES................................................6
THE COMPANY THAT ISSUES IL COLI II...................................6
Equitable Variable.................................................6
Our Parent, Equitable..............................................6
THE SEPARATE ACCOUNT AND THE TRUST...................................6
The Separate Account...............................................6
The Trust..........................................................6
The Trust's Investment Adviser.....................................6
Investment Policies Of The Trust's Portfolios......................7
THE GUARANTEED INTEREST ACCOUNT......................................8
Adding Interest In The Unloaned Guaranteed
Interest Account.................................................8
Transfers Out Of The Guaranteed Interest Account...................8
PART 2 -- DETAILED INFORMATION ABOUT IL COLI II................................9
FLEXIBLE PREMIUMS....................................................9
Planned Periodic And Death Benefit Guarantee
Premiums.........................................................9
Premium And Monthly Charge Allocations.............................9
DEATH BENEFITS.......................................................9
Guaranteeing The Death Benefit....................................10
CHANGES IN INSURANCE PROTECTION.....................................10
Decreasing The Face Amount........................................10
Changing The Death Benefit Option.................................10
Substitution Of Insured Person....................................11
When Policy Changes Go Into Effect................................11
MATURITY BENEFIT....................................................11
LIVING BENEFIT OPTION...............................................11
SUPPLEMENTAL INSURANCE ON THE INSURED PERSON........................11
YOUR POLICY ACCOUNT VALUE...........................................12
Amounts In The Separate Account...................................12
How We Determine The Unit Value...................................12
Transfers Of Policy Account Value.................................12
Telephone Transfers...............................................12
Charge For Transfers..............................................12
BORROWING FROM YOUR POLICY ACCOUNT..................................12
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......................................13
PARTIAL WITHDRAWALS AND SURRENDER...................................13
Partial Withdrawals...............................................13
Surrender For Net Cash Surrender Value............................14
DEDUCTIONS AND CHARGES..............................................14
Deductions From Premiums..........................................14
Deductions From Your Policy Account...............................14
Trust Charges.....................................................15
ADDITIONAL INFORMATION ABOUT IL COLI II.............................16
Your Policy Can Terminate.........................................16
You May Restore A Policy After It Terminates......................16
Policy Periods, Anniversaries, Dates And Ages.....................16
TAX EFFECTS.........................................................17
Policy Proceeds...................................................17
Policy Terminations...............................................18
Diversification...................................................18
Policy Changes....................................................18
Tax Changes.......................................................18
Estate And Generation Skipping Taxes..............................18
Pension And Profit-Sharing Plans..................................19
Other Employee Benefit Programs...................................19
Our Taxes.........................................................19
When We Withhold Income Taxes.....................................19
PART 3 -- ADDITIONAL INFORMATION..............................................19
YOUR VOTING PRIVILEGES..............................................19
Trust Voting Privileges...........................................19
How We Determine Your Voting Shares...............................20
Separate Account Voting Rights....................................20
OUR RIGHT TO CHANGE HOW WE OPERATE..................................20
OUR REPORTS TO POLICYOWNERS.........................................20
LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY.........................20
YOUR PAYMENT OPTIONS................................................20
YOUR BENEFICIARY....................................................21
ASSIGNING YOUR POLICY...............................................21
WHEN WE PAY POLICY PROCEEDS.........................................21
DIVIDENDS...........................................................21
REGULATION..........................................................21
SPECIAL CIRCUMSTANCES...............................................21
DISTRIBUTION........................................................22
LEGAL PROCEEDINGS...................................................22
ACCOUNTING AND ACTUARIAL EXPERTS....................................22
ADDITIONAL INFORMATION..............................................22
MANAGEMENT..........................................................23
PART 4 -- ILLUSTRATIONS OF POLICY BENEFITS....................................25
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) 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 IL COLI II 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).
ELIGIBILITY TO PURCHASE
IL COLI II has been designed to be used as a potential source of funds to pay
benefits under non-qualified executive deferred compensation plans, salary
continuation plans or for other business purposes. In order to qualify to
purchase IL COLI II, the following conditions must be satisfied:
o a minimum of five policies must be issued, each on the life of a different
eligible insured person;
o the minimum initial premium under each of the policies must be remitted to
Equitable Variable by the policyowner;
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, are submitted to Equitable Variable.
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 9.
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 6.
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. 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, before deductions). See THE GUARANTEED INTEREST ACCOUNT on page
8.
TAKING MONEY OUT OF THE POLICY
o Loans may be taken against 90% of a policy's Cash Surrender Value (Policy
Account value) 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 12.
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 13.
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 The total minimum Face Amount (including any death benefit coverage under any
policy rider) is $100,000.
1
<PAGE>
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 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. See CHANGES IN INSURANCE PROTECTION on page 10.
o After the second policy year, you may be able to substitute the insured
person. See SUBSTITUTION OF INSURED PERSON on page 11.
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 charges. The death benefit guarantee
provision is not available if you have elected any death benefit coverage
under the supplemental term insurance rider. The death benefit guarantee
provision may be limited or not available in some states. See GUARANTEEING THE
DEATH BENEFIT on page 10 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.
LIVING BENEFIT
o The Living Benefit rider enables the policyowner to receive a portion of the
policy's death benefit (excluding any death benefit payable under the
supplemental term insurance rider) 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.
SUPPLEMENTAL INSURANCE ON THE INSURED PERSON
o You may purchase at issue death benefit coverage on the insured person through
a supplemental term insurance rider. Choosing coverage under the supplemental
term insurance rider in lieu of coverage under the base policy will reduce
total charges and increase Policy Account values on a current charge basis.
The more supplemental term insurance coverage you elect, the greater will be
the amount of the reduction in charges and increase in Policy Account values
on a current charge basis. However, the supplemental term insurance rider has
higher guaranteed maximum cost of insurance charges than the base policy. On a
guaranteed charge basis, the use of the rider will increase charges and
decrease Policy Account values. In addition, if you elect any coverage under
this rider, the death benefit guarantee provision will not be available and
the Living Benefit rider will not apply to the supplemental term insurance.
See SUPPLEMENTAL INSURANCE ON THE INSURED PERSON on page 11.
DEDUCTIONS AND CHARGES
FROM PREMIUMS (See DEDUCTIONS FROM PREMIUMS on page 14.)
o Charge for taxes imposed by states and other jurisdictions. Such charges
currently range from .75% to 5% (Virgin Islands).
o Premium Sales Charge equal to 9.0% of premiums paid through the tenth policy
year and 3.0% of premiums paid thereafter. Equitable Variable currently
intends to reduce the 9% charge once premiums paid equal a specified amount.
FROM THE POLICY ACCOUNT (See DEDUCTIONS FROM YOUR POLICY ACCOUNT on page 14.)
o Maximum administrative charge of $18.50 per month for the first three policy
years and $6.00 thereafter, plus a charge per thousand of Face Amount at issue
(excluding any death benefit coverage under the supplemental term insurance
rider) ranging from $0.15 to $0.26 per month for the first ten policy years
(depending upon the issue age of the insured person) and equal to $0.06 per
month thereafter. Equitable Variable intends to reduce these charges on a
current basis. See DEDUCTIONS FROM YOUR POLICY ACCOUNT on page 14.
o Current monthly cost of insurance rates for the base policy range from less
than one cent per thousand of net amount at risk at the youngest age to $50.00
per thousand of net amount at risk at the oldest age (99). The net amount at
risk is the difference between the Policy Account value and the current death
benefit. Guranteed cost of insurance rates for the base policy range from
$0.08 (youngest age) to $83.33 (age 99). These same ranges in cost of
insurance rates apply to the supplemental term insurance rider, except that
the rates are based upon per thousand of rider benefit.
o Current monthly charge for certain mortality and expense risks at an annual
rate of .20% of the unloaned Policy Account value (guaranteed not to exceed
.40% per annum).
o Certain policy transactions will result in the following charges:
o Transfers - Currently, we charge $25 per transfer after the twelfth
transfer in a policy year. We reserve the right to charge $25 per transfer.
o Partial Withdrawals - An expense charge of $25 or 2% of the amount
requested, whichever is less, is made for each partial withdrawal.
o Substitution of Insured Person - A $100 expense charge will be deducted for
each substitution of insured person.
FROM THE TRUST
o The Separate Account Funds purchase shares of the Trust at net asset value.
That price reflects investment management fees, indirect expenses, such as
brokerage commissions, and certain direct operating expenses.
2
<PAGE>
The table below shows (i) the maximum annual rates payable by the Trust for
investment management fees and (ii) direct expenses deducted from Trust assets
in 1995. Investment management fees may decrease as portfolio net assets reach
certain levels. These fee reductions are described under THE TRUST'S
INVESTMENT ADVISER on page 6, and the actual fees paid by the Trust in 1995
are disclosed in the attached Trust prospectus. Direct Trust expenses are
likely to fluctuate from year to year. Both investment management fees and
direct Trust expenses are expressed in the table below as a percentage of each
portfolio's daily average net assets:
PORTFOLIO MAXIMUM MANAGEMENT FEE 1995 DIRECT EXPENSES
------------------------------------------------------------------------------
Money Market 0.40% 0.04%
Intermediate Govt. Securities 0.50% 0.07%
Quality Bond 0.55% 0.04%
High Yield 0.55% 0.05%
Growth & Income 0.55% 0.05%
Equity Index 0.35% 0.13%
Common Stock 0.40% 0.03%
Global 0.55% 0.08%
International 0.90% 0.13%*
Aggressive Stock 0.50% 0.03%
Conservative Investors 0.55% 0.04%
Balanced 0.40% 0.03%
Growth Investors 0.55% 0.04%
-----------------------------
*Annualized
VARIATIONS
o Equitable Variable is subject to the insurance laws and regulations in every
jurisdiction in which IL COLI II 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 IL COLI II may also vary where special circumstances result in a
reduction in our costs.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
o You have a right to examine the policy. You may cancel the policy by sending
it to our Administrative Office with a written request to cancel. Your request
to cancel the policy must be postmarked no later than 10 days after you
receive the policy. Insurance coverage ends when you send your request.
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.
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
provision is 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 16 and YOU MAY RESTORE A POLICY AFTER IT TERMINATES on page
16.
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. Death benefits and Policy
Account earnings may, however, have corporate alternative minimum tax
consequences. 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 17.
3
<PAGE>
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,
1996. The historical performance of the Common Stock and Money Market Portfolios
for periods prior to March 22, 1985, when these funds were managed separate
accounts and subject to a different fee structure, 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 CHARGE, TAX CHARGE AND THE
MORTALITY AND EXPENSE RISK CHARGE APPLICABLE UNDER AN IL COLI II POLICY. SUCH
CHARGES WOULD REDUCE THE RETURNS AND YIELDS SHOWN. SEE ILLUSTRATIONS OF IL COLI
II CASH SURRENDER VALUES BASED ON HISTORICAL INVESTMENT RESULTS BELOW.
<TABLE>
<CAPTION>
RATES OF RETURN FOR PERIODS ENDING JUNE 30, 1996
------------------------------------------------------------------------------------
SEC
PORTFOLIO YIELDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 15 YEARS SINCE INCEPTION(A)
--------- ------ ------ ------- ------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Fixed Income Series:
Money Market.......................... 5.08% 5.36% 4.60% 4.35% 5.92% -- 7.34%
Intermediate Government Securities.... 5.69 4.66 3.85 6.98 -- -- 6.86
Quality Bond.......................... 6.14 5.17 -- -- -- -- 3.36
High Yield............................ 10.93 20.99 12.37 14.90 -- -- 10.95
The Equity Series:
Growth & Income....................... 18.90 -- -- -- -- 10.55
Equity Index.......................... 25.24 -- -- -- -- 19.44
Common Stock.......................... 21.42 16.84 15.87 13.21 14.81% 14.86
Global................................ 19.86 14.71 14.87 -- -- 11.67
International(b)...................... 19.22 -- -- -- -- 16.45
Aggressive Stock...................... 35.18 18.74 18.29 17.29 -- 20.80
The Asset Allocation Series:
Conservative Investors................ 6.35 5.49 8.92 -- -- 8.73
Balanced.............................. 13.48 7.44 10.07 8.88 -- 11.91
Growth Investors...................... 16.06 10.60 14.73 -- -- 15.58
<FN>
-----------------
(a) The International Portfolio received its initial funding on April 3, 1995;
the Equity Index Portfolio 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 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
Cash Surrender Value of hypothetical IL COLI II policies held for specified
periods of time. The table illustrates premiums and Cash Surrender Values of
twelve hypothetical IL COLI II policies, each with a 100% premium allocation to
a different Fund. The illustration also assumes that, in each case, the insured
is a 45-year-old male, preferred non-tobacco user and that each policy has an
increasing death benefit, a $200,000 initial Face Amount (not including any
supplemental term insurance rider) and a $10,392 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 of inception. 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.
The table then illustrates what the Cash Surrender Value would have been after
one policy year, after five policy years, after 10 policy years and as of
June 30, 1996.
4
<PAGE>
ILLUSTRATIONS OF IL COLI II CASH SURRENDER VALUES
BASED ON HISTORICAL INVESTMENT RESULTS $200,000 OF INITIAL INSURANCE PROTECTION
AND CURRENT CHARGES(1)
Male Age 45
Preferred Risk Non-Tobacco User
<TABLE>
<CAPTION>
ASSUMED POLICY
PURCHASE DATE (2) AT END OF FIRST POLICY YEAR AT END OF FIFTH POLICY YEAR
----------------- --------------------------- ---------------------------
TOTAL CASH TOTAL CASH
BEGINNING PREMIUM SURRENDER PREMIUM SURRENDER
OF YEAR: PAID VALUE PAID VALUE
-------- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
THE FIXED INCOME SERIES:
- ------------------------
Money Market ............... 1982 $10,392 $9,638 $51,960 $54,346
Int. Gov't Securities ...... 1991 10,392 9,558 51,960 51,181
Quality Bond................ 1994 10,392 8,039
High Yield.................. 1987 10,392 8,904 51,960 56,081
THE EQUITY SERIES:
- ------------------
Growth & Income............. 1994 10,392 8,436
Equity Index................ 1994 10,392 8,586
Common Stock................ 1976 10,392 9,302 51,960 80,478
Global...................... 1988 10,392 9,452 51,960 56,967
International............... 1995 10,392 9,487
Aggressive Stock............ 1986 10,392 11,665 51,960 68,973
THE ASSET ALLOCATION SERIES:
- ----------------------------
Conservative Investors...... 1990 10,392 9,045 51,960 49,698
Balanced.................... 1986 10,392 11,063 51,960 58,419
Growth Investors............ 1990 10,392 9,434 51,960 58,358
</TABLE>
<TABLE>
<CAPTION>
FROM POLICY PURCHASE
THROUGH
AT END OF TENTH POLICY YEAR JUNE 30, 1996
--------------------------- ------------------------
TOTAL CASH TOTAL CASH
PREMIUM SURRENDER PREMIUM SURRENDER
PAID VALUE PAID VALUE
------- --------- ------- ---------
<S> <C> <C> <C> <C>
THE FIXED INCOME SERIES:
- ------------------------
Money Market ............... $103,920 $130,665 $155,880 $204,434
Int. Gov't Securities ...... 62,352 59,869
Quality Bond................ 31,176 27,824
High Yield.................. 103,920 162,387
THE EQUITY SERIES:
- ------------------
Growth & Income............. 31,176 31,923
Equity Index................ 31,176 35,263
Common Stock................ 103,920 214,490 218,232 1,162,142
Global...................... 93,528 149,435
International............... 20,784 19,911
Aggressive Stock............ 103,920 255,558 114,312 310,298
THE ASSET ALLOCATION SERIES:
- ----------------------------
Conservative Investors...... 72,744 77,819
Balanced.................... 103,920 154,151 114,312 170,255
Growth Investors............ 72,744 97,770
</TABLE>
THE DEATH BENEFIT GUARANTEE PREMIUM FOR THIS POLICY IS $3,568.04. SEE
GUARANTEEING THE DEATH BENEFIT ON PAGE 10.
THESE VALUES ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
(1) POLICY VALUES REFLECT ALL CHARGES ASSESSED UNDER THE POLICY AND BY THE TRUST
INCLUDING AN ASSUMED CHARGE FOR TAXES OF 2%. CURRENT COST OF INSURANCE,
ADMINISTRATIVE, MORTALITY AND EXPENSE RISK AND PREMIUM SALES CHARGES HAVE
BEEN USED TO DETERMINE POLICY VALUES; IF GUARANTEED COST OF INSURANCE,
ADMINISTRATIVE, MORTALITY AND EXPENSE RISK AND PREMIUM SALES CHARGES WERE
USED, THE RESULTS WOULD BE LOWER.
(2) ASSUMED POLICY PURCHASE DATE IS BASED UPON INCEPTION OF TRUST PORTFOLIO.
PLEASE REFER TO EXPLANATION OF TABLE ON PAGE 4.
5
<PAGE>
PART 1: DETAILED INFORMATION ABOUT EQUITABLE VARIABLE AND
IL COLI II INVESTMENT CHOICES
THE COMPANY THAT ISSUES IL COLI II
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, 1995, we had approximately $132.8 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 S.A. (AXA), a French insurance holding company.
AXA beneficially owns 60.6% 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 and its subsidiaries, including Equitable and Equitable Variable. 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 $195.3 billion as of December 31, 1995.
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, 1995, Alliance was managing
approximately $146.5 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>
6
<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>
FIXED INCOME SERIES:
MONEY MARKET............ Primarily high quality short-term money market High level of current income while preserving
instruments. assets and maintaining liquidity.
INTERMEDIATE............ Primarily debt securities issued or guaranteed by High current income consistent with relative
GOVERNMENT the U.S. Government, its agencies and 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 preserva-
tion of capital.
HIGH YIELD.............. Primarily a diversified mix of high yield,fixed- High return by maximizing current income and,
income securities involving greater volatility of to the extent consistent with that objective,
price and risk of principal and income than capital appreciation.
high quality fixed-income securities. The medium
and lower quality debt securities in which the
Portfolio may invest are known as "junk bonds."
EQUITY SERIES:
GROWTH & INCOME......... Primarily income producing common stocks and High total return through a combination of
securities convertible into common stocks. 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 investment
aggregate, approximate the performance results of performance of the Index (including reinvest-
the Index. ment 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 increasing
instruments. 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.
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</TABLE>
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<TABLE>
<CAPTION>
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PORTFOLIO INVESTMENT POLICY OBJECTIVE
---------- ----------------- ----------
<S> <C> <C>
ASSET ALLOCATION SERIES:
CONSERVATIVE............ Diversified mix of publicly-traded, fixed-income High total return without, in the adviser's
INVESTORS and equity securities; asset mix and security opinion, undue risk to principal.
selection are primarily based upon factors
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 current
securities and high quality money market 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.
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</TABLE>
Because Policy Account values may be invested in mutual fund options, IL COLI II
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 one 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 UNLOANED 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 unloaned 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%, before policy deductions.
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 credited and compounds daily at an effective annual rate
that equals the declared rate for each policy year.
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. Amounts securing a Living
Benefit payment may not be transferred from the Guaranteed Interest Account.
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PART 2: DETAILED INFORMATION ABOUT IL COLI II
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 and tobacco user status of the insured person, the
initial Face Amount of the policy and any additional term insurance benefit
selected. In certain situations, however, no distinction is made based on the
sex of the insured person. See COST OF INSURANCE CHARGES on page 15. You may
choose to pay a higher initial premium.
The full minimum initial premium 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 minimum 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 minimum 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 based upon our interpretation of
current tax rules that such premiums 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 17 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 AND DEATH BENEFIT GUARANTEE PREMIUMS. Although premiums are
flexible, the Policy Information Page will show a "planned" periodic premium and
a "death benefit guarantee premium" (if the death benefit guarantee provision is
available under your policy). We measure actual premiums against accumulated
death benefit guarantee premiums to determine whether the death benefit
guarantee provision will prevent the policy from going into default.
The death benefit guarantee premium is actuarially determined at issue based on
the age, sex, tobacco user status and underwriting class of the insured person
and the Face Amount. The death benefit guarantee premium may change if you make
policy changes that decrease the Face Amount of the policy or if there is a
change in the insured person's underwriting or tobacco user classification. We
reserve the right to limit the amount of any premium payments which are in
excess of the greater of the planned periodic premium or the death benefit
guarantee premium.
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 death benefit guarantee premium. Neither the planned premium nor the death
benefit guarantee premium are required premiums. Failure to pay premiums could
cause the policy to terminate. See YOUR POLICY CAN TERMINATE on page 16.
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.
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 term insurance benefit included in your policy, 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.
9
<PAGE>
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>
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TABLE OF DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF POLICY ACCOUNT VALUES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INSURED 40 or 45 50 55 60 65 70 75 to 100
PERSON'S AGE under 95
250% 215% 185% 150% 130% 120% 115% 105% 100%
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</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 provision is not available if you have
elected any death benefit coverage under the supplemental term insurance rider.
See SUPPLEMENTAL INSURANCE ON THE INSURED PERSON on page 11. The death benefit
guarantee provision is also not available in some states.
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. Some states may also limit the length of time the death benefit
guarantee provision will last to 5 years or less. You should ask your agent for
further information.
If your policy's Net Cash Surrender Value is sufficient to pay the monthly
deductions, the death benefit guarantee provision can keep your policy from
terminating if two conditions are satisfied. First, any outstanding policy loan
plus accrued loan interest cannot exceed the policy's Cash Surrender Value.
Second, the amount of your actual premium payments minus any withdrawals (each
accumulated at 4% interest) must equal or exceed a benchmark premium amount. To
determine this benchmark premium amount we accumulate the death benefit
guarantee premium (shown on the Policy Information Pages) at 4% interest.
CHANGES IN INSURANCE PROTECTION
DECREASING THE FACE AMOUNT. After the second policy year, you may request a
decrease in your policy's Face Amount. You must send your signed written request
to our Administrative Office. See TAX EFFECTS on page 17 for the tax
consequences of changing the Face Amount. Any change will be subject to our
approval and the following conditions.
You may not reduce the Face Amount below the minimum we require to issue this
policy at the time of the reduction. Any reduction must be at least $10,000. The
reduction will be allocated between the base policy and any supplemental term
insurance rider in proportion to their respective Face Amounts at issue, subject
to maintaining the minimum base policy Face Amount that we require. The death
benefit guarantee premium as well as monthly deductions from your Policy Account
for the cost of insurance will generally decrease, beginning on the date the
decrease in Face Amount takes effect.
CHANGING THE DEATH BENEFIT OPTION. After the second policy year, you may change
the death benefit option by sending a signed written request to our
Administrative Office. See TAX EFFECTS on page 17 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 10. 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 for the base policy are based (see
COST OF INSURANCE CHARGES 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.
10
<PAGE>
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. Substituting
the insured person is a taxable event and may, depending upon individual
circumstances, have other adverse tax consequences, including classification of
the policy as a modified endowment contract or disqualification of the policy as
life insurance for Federal income tax purposes unless funds are distributed out
of the policy. See TAX EFFECTS on page 17. 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 potential tax
consequences of making this change. A $100 charge will be deducted from the
Policy Account for each substitution of insured person.
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 on 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
based on our understanding of current rules, the change 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 17.
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 17 and YOUR PAYMENT
OPTIONS on page 20.
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 any death benefit payable under the supplemental term insurance
rider) 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 a 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 Living Benefit 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 in which your policy
is delivered. See BORROWING FROM YOUR POLICY ACCOUNT -- POLICY LOAN INTEREST on
pages 12 and 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
8. 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 17 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.
SUPPLEMENTAL INSURANCE ON THE INSURED PERSON
You may purchase at issue death benefit coverage on the insured person through a
supplemental term insurance rider. Choosing coverage under the supplemental term
insurance rider in lieu of coverage under the base policy will reduce total
charges and increase Policy Account values on a current charge basis. The more
supplemental term insurance coverage you elect, the greater will be the amount
of the reduction in charges and increase in Policy Account value on a current
charge basis. However, the supplemental term insurance rider has higher
guaranteed maximum cost of insurance charges than the base policy. On a
guaranteed charge basis, the use of the rider will increase charges and decrease
the Policy Account value. In addition, if you elect any coverage under this
rider, the death benefit guarantee provision will not be available and the
Living Benefit rider will not apply to the supplemental term insurance.
The minimum Face Amount that we will issue under the rider is $10,000. The
minimum total Face Amount (Face Amount under the rider plus base policy Face
Amount) that must be maintained at all times is $100,000, of which at least
$50,000 must be coverage under the base policy. Premiums are allocated between
the base policy and the rider in proportion to their respective Face Amounts at
issue, and a charge equal to 2% will be deducted from premiums allocated to the
rider to cover sales expenses. Premiums allocated to the base policy are subject
to a different sales charge. See PREMIUM SALES CHARGE on page 14. Coverage under
the supplemental term insurance rider is not included when we calculate the
amount of the administrative charge.
If the base policy becomes subject to a higher death benefit in order to
maintain its qualification as life insurance, the amount of coverage provided by
the supplemental term insurance rider will automatically decrease to offset the
increase in the base policy death benefit. Your agent can provide further
information and policy illustrations showing how the supplemental term insurance
rider can affect your policy values under different assumptions.
11
<PAGE>
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.
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 on those days other than
a policy anniversary report 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. Finally, we reserve the
right to subtract any daily charge for taxes or amounts set aside as a reserve
for taxes.
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.
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.
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 Funds' unit value as of the close of business on
the day you call. We do not accept telephone transfer requests after 4:00 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 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. 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. 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.
12
<PAGE>
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
based on the proportions of your unloaned amount in the Guaranteed Interest
Account and your values in the Funds bear to the total 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 calendar 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 IL COLI II was offered for the first time in 1996,
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%.
Interest accrues daily on any loaned amount in the Guaranteed Interest Account.
On each policy anniversary and any time you repay a policy loan in full, accrued
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.
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. This
means an additional loan is made to pay the interest. An amount equal to the
difference between the loan interest due and the loan interest credited on the
loaned portion of the Guaranteed Interest Account will be transferred from the
Funds and the Guaranteed Interest Account to make the loan, and allocated based
on the proportion that your unloaned value in the Guaranteed Interest Account
and your values in the Funds bear to the total unloaned value in your Policy
Account.
REPAYING THE LOAN. You may repay all or part of a policy loan at any time. We
assume that any money you send us is a premium payment unless you specifically
indicate in writing that it is to be applied as a loan repayment. Loan
repayments are not subject to a charge for 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 repayments. If you do not provide specific instructions,
repayments will be allocated based on the proportion that your unloaned value in
the Guaranteed Interest Account and your values in the Funds bear to the total
unloaned value in your Policy Account.
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 17 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 16.
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 sending a signed written request to our Administrative
Office. When you make a partial withdrawal, an expense charge of $25 or 2% of
the amount requested, whichever is less, will also 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:
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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. If you
do not specifically indicate, we will make the withdrawal and deduct the related
expense charge based on the proportions that your unloaned amounts in the
Guaranteed Interest Account and the Funds bear 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 on a dollar-for-dollar basis. Normally, it also reduces the
total death benefit on a dollar-for-dollar basis. However, if the total death
benefit is based on the Policy Account percentage multiple, the reduction in
death benefit would be greater. 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 17 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. 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 17 for the tax
consequences of a surrender. We will deduct from the Net Cash 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 certain taxes are deducted from all
premiums. In addition, 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.
Charge for Taxes. We deduct a charge designed to approximate certain taxes and
additional charges imposed upon us by states and certain jurisdictions. Such
charges currently range from .75% to 5% (Virgin Islands).
This charge may be increased or decreased to reflect any changes in our taxes.
In addition, if an insured person changes his or her place of residence, you
should notify us to change our records so that the charge will reflect the new
jurisdiction.
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 IL COLI II, 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 and
any profit we may earn on the charges deducted under the policy, such as the
mortality and expense risk charge. The maximum Premium Sales Charge for premiums
allocated to the base policy is equal to 9.0% of such premiums paid through the
tenth policy year and 3.0% of such premiums paid thereafter. Premiums allocated
to the supplemental term insurance rider have a lower sales charge. See
SUPPLEMENTAL INSURANCE ON THE INSURED PERSON on page 11.
Currently, we deduct the 9.0% Premium Sales Charge from each base policy premium
payment until the cumulative premiums paid during the first 10 policy years
equals seven times the "target premium" and 3.0% thereafter. The target premium
varies by issue age, sex and tobacco user status of the insured person and the
base policy's Face Amount, and is generally less than or equal to one seven-pay
premium for the base policy. The seven-pay premium is defined by the Internal
Revenue Code and 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 and administrative charges), would be
fully paid for after seven level annual payments. We reserve the right, however,
to deduct the maximum Premium Sales Charge as described in the preceding
paragraph from each base policy premium payment at any time.
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 current administrative charge is equal to $16.50 per month in the first
three policy years (guaranteed not to exceed $18.50 per month) and $4 thereafter
(guaranteed not to exceed $6), plus a monthly charge per $1,000 of base policy
Face Amount at issue for the first ten policy years as follows:
ISSUE AGE CURRENT CHARGE GUARANTEED MAXIMUM CHARGE
--------- -------------- -------------------------
18-39 $.11 $.15
40-49 $.14 $.18
50-59 $.18 $.22
60-80 $.22 $.26
The current monthly charge per $1,000 of base policy Face Amount at issue is
equal to $.02 during the 11th policy year and later (guaranteed not to exceed
$.06).
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Cost Of Insurance Charges. The base policy cost of insurance charge is
calculated by multiplying the net amount at risk at the beginning of the policy
month by the monthly base policy cost of insurance rate applicable to the
insured person at that time. The net amount at risk is the difference between
the base policy current death benefit and the amount in your Policy Account.
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 cost of any supplemental term insurance rider you purchase will also be
deducted monthly. Your monthly cost of insurance for this rider will equal the
cost of insurance rate for this rider times the amount of coverage (per
thousand) under the rider at the beginning of the policy month.
The monthly cost of insurance rates 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,
which are based on the Commissioner's 1980 Standard Ordinary Male and Female
Smoker and Non-Smoker Mortality Tables. The supplemental term insurance rider
has higher guaranteed maximum cost of insurance charges than the base policy.
The current and guaranteed monthly cost of insurance rates are determined based
on the sex, age, underwriting 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). Lower
current cost of insurance rates generally apply for insured persons who qualify
as non-tobacco users. To qualify, an insured person must meet additional
requirements that relate to tobacco use.
There will be no distinctions based on sex in the cost of insurance rates for IL
COLI II policies sold in Montana. The guaranteed cost of insurance rates for IL
COLI II 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 IL COLI II 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.
Mortality And Expense Risk Charge. A monthly charge for assuming MORTALITY AND
EXPENSE RISKS will be made. The annual current rate is .20% of the unloaned
Policy Account value on the date this charge is assessed. The annual guaranteed
maximum rate is .40%. 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.
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 13, SUBSTITUTION OF INSURED PERSON on page 11,
LIVING BENEFIT OPTION on page 11 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 25.
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 9. 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, 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 17.
TRUST CHARGES. The Funds purchase shares of the Trust at net asset value. That
price reflects investment management fees, indirect expenses, such as brokerage
commissions, and certain direct operating expenses. The Trust does not impose a
sales charge. See DEDUCTIONS AND CHARGES in the SUMMARY on page 2 and THE
TRUST'S INVESTMENT ADVISER on page 6.
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ADDITIONAL INFORMATION ABOUT IL COLI II
YOUR POLICY CAN TERMINATE. Your insurance coverage under IL COLI II 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 the death benefit guarantee provision prevents this. See
GUARANTEEING THE DEATH BENEFIT on page 10. 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 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 17 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
is still insurable, and you make the premium payment that we require to restore
the policy. The required premium will not be more than an amount sufficient to
cover (i) total monthly deductions for 3 months, calculated from the effective
date of restoration; (ii) the monthly administrative charges from the beginning
of the grace period to the effective date of restoration; and (iii) the charge
for taxes and the Premium Sales Charge associated with this payment. We will
determine the amount of this required premium as if no interest or investment
performance were credited to, or charged against, your Policy Account. The
policy will be restored as of the beginning of the policy month which coincides
with or follows the date we approve your application. Your restored policy will
not have any loan balance even if there was a loan outstanding under the
terminated policy.
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. 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. Your
restored policy will be treated as a continuation of the terminated policy for
purposes of determining the level of Premium Sales Charge and monthly
administrative charge still due. See TAX EFFECTS on page 17 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 IL
COLI II 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 9.
Generally, we determine the Register Date based upon when we receive your full
minimum initial premium. In most cases:
o If you submit the full minimum 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 minimum 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
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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 9.
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 general understanding of the effect of the
current Federal income tax laws as currently interpreted on IL COLI II policies.
The tax effects on corporate taxpayers, other non-natural owners such as trusts,
non-U.S. residents or non-U.S. citizens, may be different. For example,
corporations may be required to include certain life insurance policy amounts
for purposes of determining Federal alternative minimum taxable income. Further,
the tax treatment of individuals receiving benefits under an employer-sponsored
plan or arrangement attributable to life insurance may be determined under the
Federal tax rules governing such plan or arrangement. 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 IL COLI II 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 IL COLI
II will meet these requirements, and that under Federal income tax law:
o the death benefit received by the beneficiary under your IL COLI II 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 and administrative 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 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 including distribution of amounts that may be includable in income.
See POLICY CHANGES on page 18.
IF YOUR IL COLI II 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
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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.
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 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. The exceptions
generally do not apply to policies owned by corporations or other entities. 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.
POLICY TERMINATIONS. A policy which has terminated without value may have the
tax consequences described above even though you may be able to reinstate your
policy. For tax purposes, some reinstatements may be treated as the purchase of
a new insurance contract.
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 by us 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. 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 the Face Amount, 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 IL COLI II 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
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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.
The particular situation of each policyowner, insured 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 IL COLI II 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.
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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.
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 IL COLI II
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 a substitution of insured person) after the change has been in effect
for two years during the insured person's lifetime.
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. 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.
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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). The Equitable Access Account is not available to
corporate or other non-natural beneficiaries. 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 IL COLI II policy (Plan No. 96-300) has been filed with and approved by
insurance officials in 37 jurisdictions. 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 IL COLI II where
special circumstances result in sales or administrative expenses or mortality
risks that are different than those normally associated with IL COLI II
policies. These variations will be made only in accordance with uniform rules
that we establish.
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DISTRIBUTION
EQ Financial Consultants, Inc., a wholly-owned subsidiary of Equitable, is the
principal underwriter of the Trust under a Distribution Agreement. EQ Financial
Consultants is also the distributor of our variable life insurance policies and
Equitable's variable annuity contracts under a Distribution and Servicing
Agreement. EQ Financial Consultants' principal business address is 1755
Broadway, New York, NY 10019. EQ Financial Consultants 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. EQ
Financial Consultants is paid a fee for its services as distributor of our
policies. For 1994 and 1995, Equitable and Equitable Variable paid EQ Financial
Consultants fees of $216,920 and $325,380, respectively, 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 EQ Financial Consultants. 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.
Generally, the agent will receive an amount equal to a maximum of 15% of the
premiums paid up to one target premium, 7 1/2% of premiums paid up to the next
six target premiums and 3% of the premiums paid in excess of that amount. Use of
a term insurance rider on the insured person in place of an equal amount of
coverage under the base policy reduces commissions. Commissions paid to agents
based upon refunded premiums or policies that are terminated or surrendered in
the early policy years may be recovered. 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 EQ Financial Consultants 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 $377.2 million in 1995, $380.5 million in 1994 and $355.7 million
in 1993.
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, 1995, 1994
and 1993 by Price Waterhouse LLP, as stated in their report. The financial
statements of Separate Account FP and Equitable Variable for the years ended
December 31, 1995, 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 for the period ended
March 31, 1996 are unaudited.
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 IL COLI II policies. They should not be
considered as bearing upon the investment experience of the funds of the
Separate Account. The most current financial statements of Equitable Variable
are those as of the end of the most recent fiscal year. Equitable Variable does
not prepare financial statements for publication more often than annually and
believes that any incremental benefit to investors that may result from
preparing and delivering more current financial statements, though unaudited,
would not justify the additional cost that would be incurred. In addition,
Equitable Variable represents that there have been no material adverse changes
in its financial condition or operations between the end of the most recent
fiscal year and the date of this prospectus.
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.
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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; Vice President, Financial Reporting,
Equitable, since March 1996; prior thereto, Director from November 1994 to March 1996; prior
thereto, International Controller, AXA, January 1990 to October 1994; Director, Equitable of
Colorado, since March 1995.
William T. McCaffrey................. Director of Equitable Variable since February 1987; Senior Executive Vice President and
Chief Operating Officer, Equitable Life, since February 1996; prior thereto, Executive Vice
President, since February 1986 and Chief Administrative Officer since February 1988;
Director, Equitable Life, since February 1996 and Equitable Foundation since September 1986.
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 and Chief Executive Officer, Equitable Variable since March 1996; prior thereto,
President from December 1993 to March 1996; Vice Chairman of the Board, Equitable Variable,
July 1993 to December 1993. President & Chief Executive Officer, Equitable Life, since
February 1996; 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; National Mutual Association of Australasia, September 1995 to present and
AXA Re Life Insurance Co., January 1995 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, and Chairman of the Board Frontier Trust since September
1995 and Director of Equitable Distributors, Inc. since February 1995.
Jerry de St. Paer.................... Senior Investment Officer, Equitable Variable, since April 1995; Director of Equitable
Variable since April 1992. Senior Executive Vice President and Chief Financial Officer, The
Equitable Companies Incorporated, since May 1996; prior thereto Executive Vice President and
Chief Financial Officer since May 1992. Executive Vice President and Chief Financial
Officer, Equitable Life, April 1992 to May 1996; Executive Vice President, December 1990 to
April 1992. Director, Economic Services Corporation and various Equitable subsidiaries.
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.
Denis Duverne........................ Director of Equitable Variable since March 1996. Senior Vice President -- International Life,
AXA, since 1995. Prior thereto, Executive Committee of Operations of Banque Colbert from
1992 to 1995 and Secretary General of Compagnie Financiere IBI from 1991 to 1995. Director
of Alliance Capital and Equitable Real Estate since 1995.
</TABLE>
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<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, Equitable Variable since March 1996; Chairman of the Board and Chief
Executive Officer, Equitable Variable, November 1990 to March 1996; Chairman of the Board,
Equitable Life, since February 1996; prior thereto, Chairman of the Board and Chief
Executive Officer, Equitable, February 1994 to February 1996; President and Chief Executive
Officer, September 1992 to February 1994; President and Chief Operating Officer from
November 1990 to September 1992. President & Chief Executive Officer of The Equitable
Companies Incorporated since February 1996; prior thereto, President and Chief Operating
Officer 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.
Peter D. Noris....................... Executive Vice President and Chief Investment Officer, Equitable Variable, since September
1995. 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. Director, various 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. Director,
Equitable Distributors, Inc. since February 1995.
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.
Alvin H. Fenichel.................... Vice President and Controller, Equitable Variable, since July 1996; prior thereto, Vice
President since February 1988; Senior Vice President and Controller, Equitable.
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. Director, Equitable of Colorado since December 1985.
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>
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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 and Cash Surrender
Values ("policy benefits") under a hypothetical IL COLI II 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 45-year-old preferred risk male non-tobacco user. Planned premium payments
of $10,392 for an initial Face Amount of $200,000 are assumed to be paid at the
beginning of each policy year. The illustration assumes no policy loan has been
taken and that there is no coverage under a supplemental term insurance rider.
The tables illustrate both current and guaranteed charges. The tables assume
.51% per annum for investment management (the average of the effective annual
advisory fees applicable to each Trust portfolio during 1995) and .04% per annum
for direct Trust expenses. The assumption for direct Trust expenses equals the
weighted average of actual Trust expenses incurred by the portfolios of the
Trust for the year ended December 31, 1995 as disclosed in the Trust's
prospectus. The effect of these adjustments is that on a 0% gross rate of return
the net rate of return would be -0.55%, on 6% it would be 5.42%, and on 12% it
would be 11.39%. Remember, however, that investment management fees and direct
Trust expenses vary by portfolio. See THE TRUST'S INVESTMENT ADVISER on page 6.
The tables also assume a charge for taxes of 2% of premiums. The tables
illustrate 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.
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 Cash
Surrender Value. If you request illustrations more than once in any policy year,
we may charge for the illustration.
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<PAGE>
IL COLI II
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $10,392 TOTAL INITIAL FACE AMOUNT $200,000
DEATH BENEFIT OPTION B
MALE AGE 45
PREFERRED RISK NON-TOBACCO USER
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
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 $ 10,912 $208,441 $208,968 $209,495 $ 8,441 $ 8,968 $ 9,495
2 22,369 216,734 218,316 219,961 16,734 18,316 19,961
3 34,399 224,902 228,085 231,527 24,902 28,085 31,527
4 47,030 233,095 238,451 244,475 33,095 38,451 44,475
5 60,293 241,156 249,285 258,795 41,156 49,285 58,795
6 74,220 249,139 260,664 274,694 49,139 60,664 74,694
7 88,842 257,030 272,604 292,334 57,030 72,604 92,334
8 104,196 265,382 285,718 312,529 65,382 85,718 112,529
9 120,317 273,579 299,420 334,882 73,579 99,420 134,882
10 137,245 281,635 313,753 359,645 81,635 113,753 159,645
15 235,457 320,376 396,801 531,050 120,376 196,801 331,050
20 (age 65) 360,802 351,525 496,693 813,719 151,525 296,693 613,719
<FN>
(1) Assumes net interest of 5% compounded annually.
</FN>
</TABLE>
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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.
THE DEATH BENEFIT GUARANTEE PREMIUM FOR THIS POLICY IS $3,568.04.
26
<PAGE>
IL COLI II
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $10,392 TOTAL INITIAL FACE AMOUNT $200,000
DEATH BENEFIT OPTION B
MALE AGE 45
PREFERRED RISK NON-TOBACCO USER
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT CASH SURRENDER VALUE
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 $ 10,912 $207,849 $208,356 $208,864 $ 7,849 $ 8,356 $ 8,864
2 22,369 215,569 217,074 218,641 15,569 17,074 18,641
3 34,399 223,159 226,168 229,426 23,159 26,168 29,426
4 47,030 230,764 235,807 241,484 30,764 35,807 41,484
5 60,293 238,228 245,856 254,787 38,228 45,856 54,787
6 74,220 245,547 256,330 269,467 45,547 56,330 69,467
7 88,842 252,708 267,236 285,659 52,708 67,236 85,659
8 104,196 259,700 278,583 303,514 59,700 78,583 103,514
9 120,317 266,512 290,379 323,201 66,512 90,379 123,201
10 137,245 273,127 302,628 344,902 73,127 102,628 144,902
15 235,457 307,258 376,211 497,821 107,258 176,211 297,821
20 (age 65) 360,802 333,804 463,228 746,929 133,804 263,228 546,929
<FN>
(1) Assumes net interest of 5% compounded annually.
</FN>
</TABLE>
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
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.
THE DEATH BENEFIT GUARANTEE PREMIUM FOR THIS POLICY IS $3,568.04.
27
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE
MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY COMMON
MARKET SECURITIES BOND YIELD INCOME INDEX STOCK
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------ ----------- ------------ ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of
The Hudson River Trust
-- at market value
(Notes 2 and 6)
Cost: $ 166,588,965...... $166,879,767
40,337,369...... $39,735,905
148,336,529...... $142,261,151
72,274,123...... $78,177,398
20,404,945...... $22,826,370
72,375,677...... $88,382,333
1,065,417,925...... $1,297,488,312
Receivable for shares of
The Hudson River
Trust .................. -- 23,851 11,333 20,875 -- -- 171,871
Receivable for policy-
related transactions ... 4,962,969 -- -- -- 15,383 73,297 --
------------ ----------- ------------ ----------- ----------- ----------- --------------
Total Assets ............. 171,842,736 39,759,756 142,272,484 78,198,273 22,841,753 88,455,630 1,297,660,183
------------ ----------- ------------ ----------- ----------- ----------- --------------
LIABILITIES
Payable for purchases of
shares of The Hudson
River Trust ............ 5,095,532 -- -- -- 17,533 85,428 --
Payable for policy-
related transactions ... -- 30,598 265,432 105,172 -- -- 830,332
Amount retained by
Equitable Variable
in Separate Account
FP (Note 4) ............ 526,006 513,297 611,505 554,594 538,648 286,206 1,080,259
------------ ----------- ------------ ----------- ----------- ----------- --------------
Total Liabilities ........ 5,621,538 543,895 876,937 659,766 556,181 371,634 1,910,591
------------ ----------- ------------ ----------- ----------- ----------- --------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS ........ $166,221,198 $39,215,861 $141,395,547 $77,538,507 $22,285,572 $88,083,996 $1,295,749,592
============ =========== ============ =========== =========== =========== ==============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
--------------------------------------------
AGGRESSIVE CONSERVATIVE GROWTH
GLOBAL INTERNATIONAL STOCK INVESTORS BALANCED 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 6)
Cost: $ 314,360,927...... $361,125,113
20,538,013...... $21,717,782
503,113,872...... $642,645,509
166,308,709...... $171,114,930
353,997,311...... $404,505,133
504,520,396...... $590,681,286
Receivable for shares of
The Hudson River
Trust .................. 55,527 -- 2,397,045 112,117 631,785 38,328
Receivable for policy-
related transactions ... 46,894 128,469 -- -- -- --
------------ ----------- ------------ ------------ ------------ ------------
Total Assets ............. 361,227,534 21,846,251 645,042,554 171,227,047 405,136,918 590,719,614
------------ ----------- ------------ ------------ ------------ ------------
LIABILITIES
Payable for purchases of
shares of The Hudson
River Trust ............ -- 133,814 -- -- -- --
Payable for policy-
related transactions ... -- -- 2,717,427 140,643 889,322 189,659
Amount retained by
Equitable Variable
in Separate Account
FP (Note 4) ............ 530,446 227,263 587,828 562,173 607,638 621,024
------------ ----------- ------------ ------------ ------------ ------------
Total Liabilities ........ 530,446 361,077 3,305,255 702,816 1,496,960 810,683
------------ ----------- ------------ ------------ ------------ ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS ........ $360,697,088 $21,485,174 $641,737,299 $170,524,231 $403,639,958 $589,908,931
============ =========== ============ ============ ============ ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-1
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET DIVISION SECURITIES DIVISION
---------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ...... $ 2,156,008 $ 2,169,463 $ 557,760 $ 456,640
Expenses (Note 3):
Mortality and expense risk charges ......... 245,824 212,520 56,926 43,667
----------- ----------- --------- -----------
NET INVESTMENT INCOME .......................... 1,910,184 1,956,943 500,834 412,973
----------- ----------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments ......... (199,321) (131,239) (133,468) (84,564)
Realized gain distribution from
The Hudson River Trust .................... -- -- -- --
----------- ----------- --------- -----------
NET REALIZED GAIN (LOSS) ....................... (199,321) (131,239) (133,468) (84,564)
----------- ----------- --------- -----------
Unrealized appreciation/depreciation
on investments:
Beginning of period ........................ 89,976 32,760 145,522 (2,736,863)
End of period .............................. 290,802 2,193 (601,464) (2,044,558)
----------- ----------- --------- -----------
Change in unrealized appreciation/depreciation
during the period .......................... 200,826 (30,567) (746,986) 692,305
----------- ----------- --------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ............................... 1,505 (161,806) (880,454) 607,741
----------- ----------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................... $ 1,911,689 $ 1,795,137 ($379,620) $ 1,020,714
=========== =========== ========= ===========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
QUALITY BOND DIVISION HIGH YIELD DIVISION
----------------------------- --------------------------
1996 1995 1996 1995
----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ...... $ 1,952,740 $ 2,014,037 $1,761,269 $ 1,303,126
Expenses (Note 3):
Mortality and expense risk charges ......... 207,006 178,279 112,647 78,970
----------- ------------ ---------- -----------
NET INVESTMENT INCOME .......................... 1,745,734 1,835,758 1,648,622 1,224,156
----------- ------------ ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments ......... (41,970) (108,865) 234,013 (256,670)
Realized gain distribution from
The Hudson River Trust .................... -- -- -- --
----------- ------------ ---------- -----------
NET REALIZED GAIN (LOSS) ....................... (41,970) (108,865) 234,013 (256,670)
----------- ------------ ---------- -----------
Unrealized appreciation/depreciation
on investments:
Beginning of period ........................ (2,105,676) (15,521,200) 3,823,981 (873,103)
End of period .............................. (6,075,378) (12,738,007) 5,903,275 400,373
----------- ------------ ---------- -----------
Change in unrealized appreciation/depreciation
during the period .......................... (3,969,702) 2,783,193 2,079,294 1,273,476
----------- ------------ ---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ............................... (4,011,672) 2,674,328 2,313,307 1,016,806
----------- ------------ ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................... ($2,265,938) $ 4,510,086 $3,961,929 $ 2,240,962
=========== ============ ========== ===========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-2
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH & INCOME EQUITY INDEX
DIVISION DIVISION
------------------------ -----------------------------
1996 1995 1996 1995*
---------- --------- ------------ -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ...... $ 139,390 $ 65,069 $ 368,964 $ 164,200
Expenses (Note 3):
Mortality and expense risk charges ......... 30,078 10,759 115,753 49,793
---------- --------- ------------ -----------
NET INVESTMENT INCOME .......................... 109,312 54,310 253,211 114,407
---------- --------- ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments ........ 2,445 (1,035) (3,003) (517)
Realized gain distribution from
The Hudson River Trust ................... -- -- -- --
---------- --------- ------------ -----------
NET REALIZED GAIN (LOSS) ....................... 2,445 (1,035) (3,003) (517)
---------- --------- ------------ -----------
Unrealized appreciation/depreciation
on investments:
Beginning of period ........................ 2,123,346 (141,585) 12,451,765 (399,286)
End of period .............................. 2,421,425 214,272 16,006,656 2,485,486
---------- --------- ------------ -----------
Change in unrealized appreciation/depreciation
during the period .......................... 298,079 355,857 3,554,891 2,884,772
---------- --------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ............................... 300,524 354,822 3,551,888 2,884,255
---------- --------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................... $ 409,836 $ 409,132 $ 3,805,099 $ 2,998,662
========== ========= ============ ===========
<FN>
See Notes to Financial Statements.
*Commencement of operations on April 1.
**Commencement of operations on April 3.
</FN>
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK GLOBAL STOCK INTERNATIONAL
DIVISION DIVISION DIVISION
----------------------------- --------------------------- -----------
1996 1995 1996 1995 1996**
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ...... $ 2,673,963 $ 2,731,392 $ 1,039,030 $ 1,150,868 $ 45,410
Expenses (Note 3):
Mortality and expense risk charges ......... 1,853,832 1,281,520 521,835 337,105 24,067
------------ ------------ ----------- ----------- -----------
NET INVESTMENT INCOME .......................... 820,131 1,449,872 517,195 773,763 21,343
------------ ------------ ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments ........ 884,436 16,345 1,504,152 1,050,804 (610)
Realized gain distribution from
The Hudson River Trust ................... -- -- -- -- --
------------ ------------ ----------- ----------- -----------
NET REALIZED GAIN (LOSS) ....................... 884,436 16,345 1,504,152 1,050,804 (610)
------------ ------------ ----------- ----------- -----------
Unrealized appreciation/depreciation
on investments:
Beginning of period ........................ 181,824,279 (2,048,649) 9,214,950 3,049,444 667,906
End of period .............................. 232,070,386 47,997,192 19,453,540 1,620,943 1,179,769
------------ ------------ ----------- ----------- -----------
Change in unrealized appreciation/depreciation
during the period .......................... 50,246,107 50,045,841 10,238,590 (1,428,501) 511,863
------------ ------------ ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ............................... 51,130,543 50,062,186 11,742,742 (377,697) 511,253
------------ ------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................... $ 51,950,674 $ 51,512,058 $12,259,937 $ 396,066 $ 532,596
============ ============ =========== =========== ===========
<FN>
See Notes to Financial Statements.
*Commencement of operations on April 1.
**Commencement of operations on April 3.
</FN>
</TABLE>
FSA-3
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONCLUDED)
FOR THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-----------------------------
CONSERVATIVE INVESTORS
AGGRESSIVE STOCK DIVISION DIVISION
------------------------------- -----------------------------
1996 1995 1996 1995
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ...... $ 227,840 $ 99,223 $ 2,093,452 $ 1,902,411
Expenses (Note 3):
Mortality and expense risk charges ......... 875,036 560,886 258,951 203,549
------------- ------------ ------------ -----------
NET INVESTMENT INCOME .......................... (647,196) (461,663) 1,834,501 1,698,862
------------- ------------ ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments ........ 6,970,296 1,019,300 (15,544) (94,217)
Realized gain distribution from
The Hudson River Trust ................... -- -- -- --
------------- ------------ ------------ -----------
NET REALIZED GAIN (LOSS) ....................... 6,970,296 1,019,300 (15,554) (94,217)
------------- ------------ ------------ -----------
Unrealized appreciation/depreciation
on investments:
Beginning of period ........................ 61,903,470 11,560,966 10,362,120 (8,767,697)
End of period .............................. 121,163,990 33,036,019 4,806,220 (4,835,295)
------------- ------------ ------------ -----------
Change in unrealized appreciation/
depreciation during the period ............. 59,260,520 21,475,053 (5,555,900) 3,932,402
------------- ------------ ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ............................... 66,230,816 22,494,353 (5,571,444) 3,838,185
------------- ------------ ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................... $ 65,583,620 $ 22,032,690 ($ 3,736,943) $ 5,537,047
============= ============ ============ ===========
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
----------------------------------------------------------------
BALANCED DIVISION GROWTH INVESTORS DIVISION
------------------------------ ----------------------------
1996 1995 1996 1995
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust ...... $ 2,918,051 $ 2,921,363 $ 4,376,045 $ 3,434,266
Expenses (Note 3):
Mortality and expense risk charges ......... 605,847 517,556 855,420 580,872
------------ ------------ ----------- ------------
NET INVESTMENT INCOME .......................... 2,312,204 2,403,807 3,520,625 2,853,354
------------ ------------ ----------- ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments ........ (374,262) (303,465) 596,618 (30,077)
Realized gain distribution from
The Hudson River Trust ................... -- -- -- --
------------ ------------ ----------- ------------
NET REALIZED GAIN (LOSS) ....................... (374,262) (303,465) 596,618 (30,077)
------------ ------------ ----------- ------------
Unrealized appreciation/depreciation
on investments:
Beginning of period ........................ 43,097,187 (2,878,875) 81,785,873 (770,693)
End of period .............................. 50,507,822 7,317,908 86,160,892 14,841,705
------------ ------------ ----------- ------------
Change in unrealized appreciation/
depreciation during the period ............. 7,410,635 10,196,783 4,375,019 15,612,398
------------ ------------ ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ............................... 7,036,373 9,893,318 4,971,637 15,582,321
------------ ------------ ----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................... $ 9,348,577 $ 12,297,125 $ 8,492,262 $ 18,435,675
============ ============ =========== ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-4
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS
FOR THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET DIVISION SECURITIES DIVISION
-------------------------------- ------------------------------
1996 1995 1996 1995
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............ $ 1,910,184 $ 1,956,943 $ 500,834 $ 412,973
Net realized gain (loss) ......... (199,321) (131,239) (133,468) (84,564)
Change in unrealized appreciation/
depreciation on investments .... 200,826 (30,567) (746,986) 692,305
------------- ------------- ------------ ------------
Net increase (decrease)
from operations ................ 1,911,689 1,795,137 (379,620) 1,020,714
------------- ------------- ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 29,687,450 26,087,869 3,368,052 2,780,423
Benefits and other policy-related
transactions (Note 3) .......... (9,130,450) (9,368,671) (1,363,911) (1,273,719)
Net transfers among divisions .... (63,369,256) (8,440,760) 438,972 (82,704)
------------- ------------- ------------ ------------
Net increase (decrease) from
policy-related transactions .... (42,812,256) 8,278,438 2,443,113 1,424,000
------------- ------------- ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... (11,766) (12,324) 3,324 (19,098)
------------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS .. (40,912,333) 10,061,251 2,066,817 2,425,616
NET ASSETS, BEGINNING OF PERIOD .... 207,133,531 137,496,085 37,149,044 27,654,075
------------- ------------- ------------ ------------
NET ASSETS, END OF PERIOD .......... $ 166,221,198 $ 147,557,336 $ 39,215,861 $ 30,079,691
============= ============= ============ ============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
QUALITY BOND DIVISION HIGH YIELD DIVISION
-------------------------------- ------------------------------
1996 1995 1996 1995
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............ $ 1,745,734 $ 1,835,758 $ 1,648,622 $ 1,224,156
Net realized gain (loss) ......... (41,970) (108,865) 234,013 (256,670)
Change in unrealized appreciation/
depreciation on investments .... (3,969,702) 2,783,193 2,079,294 1,273,476
------------- ------------- ------------ ------------
Net increase (decrease)
from operations ................ (2,265,938) 4,510,086 3,961,929 2,240,962
------------- ------------- ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 1,481,419 736,177 4,880,108 3,997,324
Benefits and other policy-related
transactions (Note 3) .......... (891,984) (710,681) (2,407,891) (1,848,856)
Net transfers among divisions .... 4,777,208 276,391 (796,310) 1,367,858
------------- ------------- ------------ ------------
Net increase (decrease) from
policy-related transactions .... 5,366,643 301,887 1,675,907 3,516,326
------------- ------------- ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... 7,396 (182,625) (30,291) (23,923)
------------- ------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS .. 3,108,101 4,629,348 5,607,545 5,733,365
NET ASSETS, BEGINNING OF PERIOD .... 138,287,446 117,236,472 71,930,962 49,454,901
------------- ------------- ------------ ------------
NET ASSETS, END OF PERIOD .......... $ 141,395,547 $ 121,865,820 $ 77,538,507 $ 55,188,266
============= ============= ============ ============
<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 (CONTINUED)
FOR THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION
----------------------------- ------------------------------
1996 1995 1996 1995*
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............ $ 109,312 $ 54,310 $ 253,211 $ 114,407
Net realized gain (loss) ......... 2,445 (1,035) (3,003) (517)
Change in unrealized appreciation/
depreciation on investments .... 298,079 355,857 3,554,891 2,884,772
------------ ----------- ------------ ------------
Net increase (decrease)
from operations ................ 409,836 409,132 3,805,099 2,998,662
------------ ----------- ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 2,832,227 1,357,752 7,371,417 682,124
Benefits and other policy-related
transactions (Note 3) .......... (658,593) (251,109) (1,290,973) (197,582)
Net transfers among divisions .... 1,095,805 667,638 6,589,617 1,164,646
------------ ----------- ------------ ------------
Net increase (decrease) from
policy-related transactions .... 3,269,439 1,774,281 12,670,061 1,649,188
------------ ----------- ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... (12,016) (52,290) (14,779) (19,586)
------------ ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS .. 3,667,259 2,131,123 16,460,381 4,628,264
NET ASSETS, BEGINNING OF PERIOD .... 18,618,313 5,908,383 71,623,615 31,125,403
------------ ----------- ------------ ------------
NET ASSETS, END OF PERIOD .......... $ 22,285,572 $ 8,039,506 $ 88,083,996 $ 35,753,667
============ =========== ============ ============
<FN>
See Notes to Financial Statements.
*Commencement of operations on April 1.
**Commencement of operations on April 3.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL
COMMON STOCK DIVISION GLOBAL STOCK DIVISION DIVISION
---------------------------------- -------------------------------- ------------
1996 1995 1996 1995 1996**
--------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............ $ 820,131 $ 1,449,872 $ 517,195 $ 773,763 $ 21,343
Net realized gain (loss) ......... 884,436 16,345 1,504,152 1,050,804 (610)
Change in unrealized appreciation/
depreciation on investments .... 50,246,107 50,045,841 10,238,590 (1,428,501) 511,863
--------------- ------------- ------------- ------------- ------------
Net increase (decrease)
from operations ................ 51,950,674 51,512,058 12,259,937 396,066 532,596
--------------- ------------- ------------- ------------- ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 71,969,890 56,824,018 29,222,599 29,808,489 2,475,393
Benefits and other policy-related
transactions (Note 3) .......... (35,741,600) (27,879,606) (10,833,474) (8,629,200) (480,572)
Net transfers among divisions .... 61,042,559 3,846,089 (3,425,280) (1,316,995) 6,532,233
--------------- ------------- ------------- ------------- ------------
Net increase (decrease) from
policy-related transactions .... 97,270,849 32,790,501 14,963,845 19,862,294 8,527,054
--------------- ------------- ------------- ------------- ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... (57,205) (90,730) (23,714) (3,902) (6,414)
--------------- ------------- ------------- ------------- ------------
INCREASE (DECREASE) IN NET ASSETS .. 149,164,318 84,211,829 27,200,068 20,254,458 9,053,236
NET ASSETS, BEGINNING OF PERIOD .... 1,146,585,274 811,006,200 333,497,020 241,838,471 12,431,938
--------------- ------------- ------------- ------------- ------------
NET ASSETS, END OF PERIOD .......... $ 1,295,749,592 $ 895,218,029 $ 360,697,088 $ 262,092,929 $ 21,485,174
=============== ============= ============= ============= ============
<FN>
See Notes to Financial Statements.
*Commencement of operations on April 1.
**Commencement of operations on April 3.
</FN>
</TABLE>
FSA-6
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
FOR THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
--------------------------------
AGGRESSIVE STOCK CONSERVATIVE INVESTORS
DIVISION DIVISION
-------------------------------- --------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............ $ (647,196) $ (461,663) $ 1,834,501 $ 1,698,862
Net realized gain (loss) ......... 6,970,296 1,019,300 (15,544) (94,217)
Change in unrealized appreciation/
depreciation on investments .... 59,260,520 21,475,053 (5,555,900) 3,932,402
------------- ------------- ------------- -------------
Net increase (decrease)
from operations ................ 65,583,620 22,032,690 (3,736,943) 5,537,047
------------- ------------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 42,010,619 30,546,618 11,246,617 11,227,025
Benefits and other policy-related
transactions (Note 3) .......... (18,810,099) (13,709,727) (6,892,681) (5,665,253)
Net transfers among divisions .... (2,167,345) 4,161,843 (2,188,450) (1,939,736)
------------- ------------- ------------- -------------
Net increase (decrease) from
policy-related transactions .... 21,033,175 20,998,734 2,165,486 3,622,036
------------- ------------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... (67,627) (45,834) 8,589 (22,930)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS .. 86,549,168 42,985,590 (1,562,868) 9,136,153
NET ASSETS, BEGINNING OF PERIOD .... 555,188,131 355,671,865 172,087,099 129,940,498
------------- ------------- ------------- -------------
NET ASSETS, END OF PERIOD .......... $ 641,737,299 $ 398,657,455 $ 170,524,231 $ 139,076,651
============= ============= ============= =============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
----------------------------------------------------------------------
GROWTH INVESTORS
BALANCED DIVISION DIVISION
-------------------------------- --------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............ $ 2,312,204 $ 2,403,807 $ 3,520,625 $ 2,853,354
Net realized gain (loss) ......... (374,262) (303,465) 596,618 (30,077)
Change in unrealized appreciation/
depreciation on investments .... 7,410,635 10,196,783 4,375,019 15,612,398
------------- ------------- ------------- -------------
Net increase (decrease)
from operations ................ 9,348,577 12,297,125 8,492,262 18,435,675
------------- ------------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3) ............ 16,973,862 17,741,771 43,180,982 38,607,572
Benefits and other policy-related
transactions (Note 3) .......... (13,129,552) (12,191,550) (19,360,421) (15,800,337)
Net transfers among divisions .... (8,097,359) (3,174,320) 1,736,579 305,362
------------- ------------- ------------- -------------
Net increase (decrease) from
policy-related transactions .... (4,253,049) 2,375,901 25,557,140 23,112,597
------------- ------------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4) ..... (20,779) (23,516) (18,137) (29,414)
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS .. 5,074,749 14,649,510 34,031,265 41,518,858
NET ASSETS, BEGINNING OF PERIOD .... 398,565,209 338,415,565 555,877,666 367,219,554
------------- ------------- ------------- -------------
NET ASSETS, END OF PERIOD .......... $ 403,639,958 $ 353,065,075 $ 589,908,931 $ 408,738,412
============= ============= ============= =============
<FN>
See Notes to Financial Statements.
</FN>
</TABLE>
FSA-7
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
1. General
Equitable Variable Life Insurance Company (Equitable Variable Life), a
wholly-owned subsidiary of The Equitable Life Assurance Society of the
United States (Equitable Life), established Separate Account FP (the
Account) as a unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. The Account
consists of thirteen 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,
the Equity Index Division and the International 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, Incentive Life
Plus,(TM) flexible premium 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.
Incentive Life Plus policies offered with a prospectus dated on or after
September 15, 1995, are referred to as Incentive Life Plus Second Series.
Incentive Life Plus policies issued with a prior prospectus are referred to
as Incentive Life Plus Original Series. 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.
Policyowners may allocate amounts in their individual accounts to the
Divisions of the Account and/or (except for SP-Flex policies) to the
guaranteed interest division of Equitable Variable Life's General Account.
Net transfers to (from) the guaranteed interest division of the General
Account and other Separate Accounts of ($2,168,974) and $3,164,689 for the
three months ended 1996 and 1995, 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 Life'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. Significant Accounting Policies
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Investments are made in shares of the Trust and are valued at the net asset
values per share of the respective Portfolios. The net asset value is
determined by the Trust using the market or fair value of the underlying
assets of the Portfolio.
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 Life. Under the provisions of the Policies,
Equitable Variable Life 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 Life pays no tax on investment income and capital gains reflected
in variable life insurance policy reserves. However, Equitable Variable Life
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.
FSA-8
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
MARCH 31, 1996
3. Asset Charges
Under the Policies, Equitable Variable Life 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, Incentive Life Plus Second Series and
Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship
2000 policyowners, and 0.85% for SP-Flex policyowners. Incentive Life Plus
Original Series deducts this charge from the Policy Account. Under SP-Flex,
Equitable Variable Life 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, Incentive Life Plus and the Series 2000 Policies,
mortality and administrative costs are charged in a different manner than
SP-Flex policies (see Notes 4 and 5).
Before amounts are allocated to the Account for Incentive Life, Incentive
Life Plus and the Series 2000 Policies, Equitable Variable Life deducts a
charge for taxes and either an initial policy fee (Incentive Life) or a
premium sales charge (Incentive Life Plus and Series 2000 Policies) from
premiums. Under SP-Flex, the entire initial premium is allocated to the
Account. Before any additional premiums under SP-Flex are allocated to the
Account, an administrative charge is deducted.
The amounts attributable to Incentive Life, Incentive Life Plus and the
Series 2000 policyowners' accounts are charged monthly by Equitable Variable
Life 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.
4. Amounts Retained by Equitable Variable Life in Separate Account FP
The amount retained by Equitable Variable Life in the Account arises
principally from (1) contributions from Equitable Variable Life, 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 Life are not subject to
charges for mortality and expense risks or mortality and administrative
costs.
Amounts retained by Equitable Variable Life in the Account may be
transferred at any time by Equitable Variable Life to its General Account.
5. Distribution and Servicing Agreements
Equitable Variable Life has entered into a Distribution and Servicing
Agreement with Equitable Life 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 Life.
Equitable Variable Life also has entered into an agreement with Equitable
Life under which Equitable Life 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.
6. Investment Returns
The Separate Account rates of return attributable to Incentive Life,
Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000
policyowners are different than those attributable to Survivorship 2000,
Incentive Life Plus Original Series and to SP-Flex policyowners because
asset charges are deducted at different rates under each policy (see Note
3).
The tables on this page and 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 whose
policy 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-9
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
INCENTIVE LIFE,
- --------------
INCENTIVE LIFE 2000,
- -------------------
INCENTIVE LIFE PLUS SECOND SERIES,
- ---------------------------------
AND CHAMPION 2000*
-------------
<TABLE>
<CAPTION>
THREE MONTHS JANUARY 26(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- -------------------------------------------------------------------- ----------------
MONEY MARKET DIVISION 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return ........ 1.26% 1.44% 5.74% 4.02% 3.00% 3.56% 6.18% 8.24% 9.18% 7.32% 6.63% 6.05%
Net return .......... 1.10% 1.29% 5.11% 3.39% 2.35% 2.94% 5.55% 7.59% 8.53% 6.68% 5.99% 5.47%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS APRIL 1(A) TO
INTERMEDIATE ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
GOVERNMENT --------------- -------------------------------- -------------
SECURITIES DIVISION 1996 1995 1995 1994 1993 1992 1991
- ------------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return ........ (0.79%) 3.68% 13.33% (4.37%) 10.58% 5.60% 12.26%
Net return .......... (0.94%) 3.52% 12.65% (4.95%) 9.88% 4.96% 11.60%
</TABLE>
THREE MONTHS YEARS ENDED OCTOBER 1(A)
ENDED MARCH 31, DECEMBER 31, DECEMBER 31,
--------------- ------------- ------------
QUALITY BOND DIVISION 1996 1995 1995 1994 1993
- --------------------- ---- ---- ---- ---- ----
Gross return ........ (1.45%) 3.84% 17.02% (5.10%) (0.51%)
Net return .......... (1.60%) 3.68% 16.32% (5.67%) (0.66%)
<TABLE>
<CAPTION>
THREE MONTHS JANUARY 26(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- -------------------------------------------------------------------- ----------------
HIGH YIELD DIVISION 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 5.62% 4.48% 19.92% (2.79%) 23.15% 12.31% 24.46% (1.12%) 5.13% 9.73% 4.68% --
Net return........... 5.46% 4.33% 19.20% (3.37%) 22.41% 11.64% 23.72% (1.71%) 4.50% 9.08% 4.05% --
</TABLE>
THREE MONTHS YEARS ENDED OCTOBER 1(A)
ENDED MARCH 31, DECEMBER 31, DECEMBER 31,
GROWTH & INCOME --------------- ------------- ------------
DIVISION 1996 1995 1995 1994 1993
- -------- ---- ---- ---- ---- ----
Gross return......... 2.25% 5.27% 24.07% (0.58%) (0.25%)
Net return........... 2.10% 5.11% 23.33% (1.17%) (0.41%)
THREE MONTHS YEAR ENDED MARCH 31(A) TO
ENDED MARCH 31, DECEMBER 31, DECEMBER 31,
--------------- ------------ ------------
EQUITY INDEX DIVISION 1996 1995 1995 1994
- --------------------- ---- ---- ---- ----
Gross return......... 5.25% 9.55% 36.48% 1.08%
Net return........... 5.10% 9.39% 35.66% 0.58%
<TABLE>
<CAPTION>
THREE MONTHS JANUARY 26(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- -------------------------------------------------------------------- ----------------
COMMON STOCK DIVISION 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 4.36% 6.35% 32.45% (2.14%) 24.84% 3.22% 37.88% (8.12%) 25.59% 22.43% 7.49% 15.65%
Net return........... 4.21% 6.19% 31.66% (2.73%) 24.08% 2.60% 37.06% (8.67%) 24.84% 21.70% 6.84% 15.01%
<FN>
- ---------------------
*Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992.
Sales of Incentive Life Plus Second Series commenced on September 15, 1995.
(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-10
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS AUGUST 31(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- -------------------------------------------------------------------- ----------------
GLOBAL DIVISION 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 3.71% 0.18% 18.81% 5.23% 32.09% (0.50%) 30.55% (6.07%) 26.93% 10.88% (13.27%)
Net return........... 3.55% 0.03% 18.11% 4.60% 31.33% (1.10%) 29.77% (6.63%) 26.17% 10.22% (13.45%)
</TABLE>
THREE MONTHS APRIL 3(A) TO
ENDED MARCH 31, DECEMBER 31,
---------------- -------------
INTERNATIONAL DIVISION 1996 1995 1995
- ---------------------- ---- ---- ----
Gross return......... 2.99% -- 11.29%
Net return........... 2.83% -- 10.79%
<TABLE>
<CAPTION>
THREE MONTHS JANUARY 26(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- --------------------------------------------------------------------- ----------------
AGGRESSIVE STOCK
DIVISION 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 11.68% 6.10% 31.63% (3.81%) 16.77% (3.16%) 86.86% 8.17% 43.50% 1.17% 7.31% 35.88%
Net return........... 11.51% 5.94% 30.85% (4.39%) 16.05% (3.74%) 85.75% 7.51% 42.64% 0.53% 6.66% 35.13%
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
- -----------------------
THREE MONTHS OCTOBER 2(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- -------------------------------------------------------- ---------------
BALANCED DIVISION 1996 1995 1995 1994 1993 1992 1991 1990 1989
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 2.50% 3.76% 19.75% (8.02%) 12.28% (2.84%) 41.26% 0.24% 25.83%
Net return........... 2.35% 3.61% 19.03% (8.57%) 11.64% (3.42%) 40.42% (0.36%) 25.08%
CONSERVATIVE INVESTORS
DIVISION
- --------
Gross return......... (1.99%) 4.34% 20.40% (4.10%) 10.76% 5.72% 19.87% 6.37% 3.09%
Net return........... (2.14%) 4.18% 19.68% (4.67%) 10.15% 5.09% 19.16% 5.73% 2.94%
GROWTH INVESTORS DIVISION
- -------------------------
Gross return......... 1.66% 5.00% 26.37% (3.15%) 15.26% 4.90% 48.89% 10.66% 3.98%
Net return........... 1.51% 4.84% 25.62% (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.
Sales of Incentive Life Plus Second Series commenced on September 15, 1995.
(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-11
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
SURVIVORSHIP 2000
- -----------------
<TABLE>
<CAPTION>
THREE MONTHS AUGUST 17(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- ------------------------ ---------------
MONEY MARKET DIVISION 1996 1995 1995 1994 1993 1992
- --------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return......... 1.26% 1.44% 5.74% 4.02% 3.00% 1.11%
Net return........... 1.03% 1.21% 4.80% 3.08% 2.04% 0.77%
INTERMEDIATE GOVERNMENT
SECURITIES DIVISION
- -------------------
Gross return......... (0.79%) 3.68% 13.33% (4.37%) 10.58% 0.90%
Net return........... (1.01%) 3.45% 12.31% (5.23%) 9.55% 0.56%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS OCTOBER 1(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- ------------------------ ---------------
QUALITY BOND DIVISION 1996 1995 1995 1994 1993
- --------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return......... (1.45%) 3.84% 17.02% (5.10%) (0.51%)
Net return........... (1.67%) 3.61% 15.97% (5.95%) (0.73%)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS AUGUST 17(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- ------------------------ ---------------
HIGH YIELD DIVISION 1996 1995 1995 1994 1993 1992
- ------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return......... 5.62% 4.48% 19.92% (2.79%) 23.15% 1.84%
Net return........... 5.38% 4.25% 18.84% (3.66%) 22.04% 1.50%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS OCTOBER 1(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
GROWTH & INCOME --------------- ------------------------ ---------------
DIVISION 1996 1995 1995 1994 1993
- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return......... 2.25% 5.27% 24.07% (0.58%) (0.25%)
Net return........... 2.02% 5.03% 22.96% (1.47%) (0.48%)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED MARCH 1(A) TO
ENDED MARCH 31, DECEMBER 31, DECEMBER 31,
--------------- ------------ -------------
EQUITY INDEX DIVISION 1996 1995 1995 1994
- --------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return......... 5.25% 9.55% 36.48% 1.08%
Net return........... 5.02% 9.30% 35.26% 0.33%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS AUGUST 17(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- ------------------------ ---------------
COMMON STOCK DIVISION 1996 1995 1995 1994 1993 1992
- --------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return......... 4.36% 6.35% 32.45% (2.14%) 24.84% 5.28%
Net return........... 4.13% 6.11% 31.26% (3.02%) 23.70% 4.93%
GLOBAL DIVISION
- ---------------
Gross return......... 3.71% 0.18% 18.81% 5.23% 32.09% 4.87%
Net return........... 3.47% (0.04%) 17.75% 4.29% 30.93% 4.52%
AGGRESSIVE STOCK
DIVISION
- --------
Gross return......... 11.68% 6.10% 31.63% (3.81%) 16.77% 11.49%
Net return........... 11.43% 5.86% 30.46% (4.68%) 15.70% 11.11%
</TABLE>
THREE MONTHS APRIL 3(A) TO
ENDED MARCH 31, DECEMBER 31,
--------------- -------------
INTERNATIONAL DIVISION 1996 1995 1995
- ---------------------- ---- ---- ----
Gross return......... 2.99% -- 11.29%
Net return........... 2.75% -- 10.55%
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
- -----------------------
THREE MONTHS AUGUST 17(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS --------------- ------------------------ ---------------
DIVISION 1996 1995 1995 1994 1993 1992
- -------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return......... (1.99%) 4.34% 20.40% (4.10%) 10.76% 1.38%
Net return........... (2.21%) 4.11% 19.32% (4.96%) 9.81% 1.04%
BALANCED DIVISION
- -----------------
Gross return......... 2.50% 3.76% 19.75% (8.02%) 12.28% 5.37%
Net return........... 2.27% 3.53% 18.68% (8.84%) 11.30% 5.02%
GROWTH INVESTORS DIVISION
- -------------------------
Gross return......... 1.66% 5.00% 26.37% (3.15%) 15.26% 6.89%
Net return........... 1.43% 4.77% 25.24% (4.02%) 14.24% 6.53%
<FN>
- ---------------------
(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 (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
INCENTIVE LIFE PLUS ORIGINAL SERIES*(b)
- -----------------------------------
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
--------------- ------------
1996 1995 1995
---- ---- ----
Money Market Division.............. 1.26% 1.39% 5.69%
Intermediate Government
Securities Division................ (0.79%) 3.66% 13.31%
Quality Bond Division.............. (1.45%) 3.93% 17.13%
High Yield Division................ 5.62% 4.52% 19.95%
Growth & Income Division........... 2.25% 5.53% 24.38%
Equity Index Division.............. 5.25% 9.59% 36.53%
Common Stock Division.............. 4.36% 6.85% 33.07%
Global Division.................... 3.71% 0.66% 19.38%
THREE MONTHS APRIL 30 TO
ENDED MARCH 31, DECEMBER 31,
--------------- ------------
1996 1995 1995
---- ---- ----
International Division............. 2.99% -- 11.29%
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
--------------- ------------
1996 1995 1995
---- ---- ----
Aggressive Stock Division.......... 11.69% 7.20% 33.00%
ASSET ALLOCATION SERIES
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
--------------- ------------
1996 1995 1995
---- ---- ----
Conservative Investors Division.... (1.99%) 4.50% 20.59%
Balanced Division.................. 2.50% 4.25% 20.32%
Growth Investors Division.......... 1.66% 5.46% 26.92%
- -----------------------------------
*Sales of Incentive Life Plus Original Series commenced on January 6, 1995.
(b) There are no Separate Account asset charges for this policy and therefore
the gross and net rates of return are the same. The rate of return for the
periods indicated is not an annual rate of return.
FSA-13
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
RATES OF RETURN:
SP-FLEX
- -------
<TABLE>
<CAPTION>
THREE MONTHS AUGUST 31(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- -------------------------------------------------------------------- ----------------
MONEY MARKET DIVISION 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 1.26% 1.44% 5.74% 4.02% 3.00% 3.56% 6.17% 8.24% 9.18% 7.32% 2.15%
Net return........... 0.80% 0.99% 3.86% 2.17% 1.13% 1.71% 4.29% 6.30% 7.24% 5.41% 1.62%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS APRIL 1(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
INTERMEDIATE GOVERNMENT --------------- ------------------------------------ -------------
SECURITIES DIVISION 1996 1995 1995 1994 1993 1992 1991
- ------------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return......... (0.79%) 3.68% 13.33% (4.37%) 10.58% 5.60% 12.10%
Net return........... (1.24%) 3.22% 11.31% (6.08%) 8.57% 3.71% 10.59%
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED SEPTEMBER 1(A) TO
ENDED MARCH 31, DECEMBER 31, DECEMBER 31,
--------------- ------------ -----------------
QUALITY BOND DIVISION 1996 1995 1995 1994
- --------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return......... (1.45%) 3.84% 17.02% (2.20%)
Net return........... (1.89%) 3.37% 14.94% (2.35%)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS AUGUST 31(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- -------------------------------------------------------------------- ----------------
HIGH YIELD DIVISION 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 5.62% 4.48% 19.92% (2.79%) 23.15% 12.31% 24.46% (1.12%) 5.13% 9.73% 1.95%
Net return........... 5.14% 4.02% 17.79% (4.52%) 20.96% 10.30% 22.25% (2.89%) 3.26% 7.78% 1.39%
</TABLE>
THREE MONTHS YEAR ENDED SEPTEMBER 1(A) TO
ENDED MARCH 31, DECEMBER 31, DECEMBER 31,
GROWTH & INCOME --------------- ------------ -----------------
DIVISION 1996 1995 1995 1994
- -------- ---- ---- ---- ----
Gross return......... 2.25% 5.27% 24.07% (3.40%)
Net return........... 1.79% 4.80% 21.87% (3.55%)
EQUITY INDEX DIVISION
- ---------------------
Gross return......... 5.25% 9.55% 36.48% (2.54%)
Net return........... 4.78% 9.06% 34.06% (2.69%)
<TABLE>
<CAPTION>
THREE MONTHS AUGUST 31(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- -------------------------------------------------------------------- ----------------
COMMON STOCK DIVISION 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 4.36% 6.35% 32.45% 2.14% 24.84% 3.23% 37.87% (8.12%) 25.59% 22.43% (22.57%)
Net return........... 3.90% 5.87% 30.10% (3.88%) 22.60% 1.38% 35.43% (9.76%) 23.36% 20.26% (23.00%)
GLOBAL DIVISION
- ---------------
Gross return......... 3.71% 0.18% 18.81% 5.23% 32.09% (0.50%) 30.55% (6.07%) 26.93% 10.88% (11.40%)
Net return........... 3.24% (0.27%) 16.70% 3.36% 29.77% (2.28%) 28.23% (7.75%) 24.67% 8.90% (11.86%)
</TABLE>
THREE MONTHS APRIL 3(A) TO
ENDED MARCH 31, DECEMBER 31,
--------------- -------------
INTERNATIONAL DIVISION 1996 1995 1995
- ---------------------- ---- ---- ----
Gross return......... 2.99% -- 11.29%
Net return........... 2.52% -- 9.82%
<TABLE>
<CAPTION>
THREE MONTHS AUGUST 31(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
AGGRESSIVE STOCK --------------- -------------------------------------------------------------------- ----------------
DIVISION 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 11.68% 6.10% 31.63% 3.81% 16.77% (3.16%) 86.86% 8.17% 43.50% 1.17% (24.28%)
Net return........... 0.80% 5.62% 29.30% (5.53%) 14.67% (4.89%) 83.54% 6.23% 40.95% (0.66%) (24.68%)
<FN>
- ---------------------
(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-14
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONCLUDED)
ASSET ALLOCATION SERIES
THREE MONTHS YEAR ENDED SEPTEMBER 1(A) TO
ENDED MARCH 31, DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS --------------- ------------ -----------------
DIVISION 1996 1995 1995 1994
- -------- ---- ---- ---- ----
Gross return......... (1.99%) 4.34% 20.40% (1.83%)
Net return........... (2.43%) 3.87% 18.26% (1.98%)
<TABLE>
<CAPTION>
THREE MONTHS AUGUST 31(A) TO
ENDED MARCH 31, YEARS ENDED DECEMBER 31, DECEMBER 31,
--------------- -------------------------------------------------------------------- ----------------
BALANCED DIVISION 1996 1995 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return......... 2.50% 3.76% 19.75% (8.02%) 12.28% (2.83%) 41.27% 0.24% 25.83% 13.27% (20.26%)
Net return........... 2.04% 3.30% 17.62% (9.66%) 10.31% (4.57%) 38.75% (1.56%) 23.59% 11.25% (20.71%)
</TABLE>
THREE MONTHS YEAR ENDED SEPTEMBER 1(A) TO
ENDED MARCH 31, DECEMBER 31, DECEMBER 31,
GROWTH INVESTORS --------------- ------------ -----------------
DIVISION 1996 1995 1995 1994
- -------- ---- ---- ---- ----
Gross return......... 1.66% 5.00% 26.37% (3.16%)
Net return........... 1.20% 4.53% 24.12% (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-15
<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 statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of Money Market Division,
Intermediate Government Securities Division, Quality Bond Division, High Yield
Division, Growth and Income Division, Equity Index Division, Common Stock
Division, Global Division, International Division, Aggressive Stock Division,
Conservative Investors Division, Balanced Division and Growth Investors
Division, separate investment divisions of Equitable Variable Life Insurance
Company ("Equitable Variable Life") Separate Account FP at December 31, 1995 and
the results of each of their operations and changes in each of their net assets
for each of the periods indicated, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Equitable Variable Life's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of shares in The Hudson River Trust at
December 31, 1995 with the transfer agent, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
New York, NY
February 7, 1996
FSA-16
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE
MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY
MARKET SECURITIES BOND YIELD INCOME 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 7)
Cost: $207,548,119..... $207,638,095
37,536,467..... $37,681,989
141,011,715..... $138,906,039
68,700,148..... $72,524,129
17,021,456..... $19,144,802
59,443,291..... $71,895,056
Receivable for sales of
shares of The Hudson
River Trust........... -- -- -- -- -- --
Receivable for policy-
related transactions.. 1,030,719 472,227 195,736 671,870 272,371 214,843
------------ ----------- ------------ ----------- ----------- -----------
Total Assets............ 208,668,814 38,154,216 139,101,775 73,195,999 19,417,173 72,109,899
------------ ----------- ------------ ----------- ----------- -----------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. 1,021,043 488,551 195,429 740,734 272,227 214,856
Payable for policy-
related transactions.. -- -- -- -- -- --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 514,240 516,621 618,900 524,303 526,633 271,428
------------ ----------- ------------ ----------- ---------- -----------
Total Liabilities....... 1,535,283 1,005,172 814,329 1,265,037 798,860 486,284
------------ ----------- ------------ ----------- ---------- -----------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS......... $207,133,531 $37,149,044 $138,287,446 $71,930,962 $18,618,313 $71,623,615
============ =========== ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
COMMON AGGRESSIVE
STOCK GLOBAL INTERNATIONAL STOCK
DIVISION DIVISION DIVISION DIVISION
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 7)
Cost: 966,230,780...... $1,148,055,059
297,303,481...... $333,829,077
11,991,226...... $12,659,132
475,758,260...... $556,029,378
Receivable for sales of
shares of The Hudson
River Trust........... -- -- -- --
Receivable for policy-
related transactions.. 233,000 421,042 137,166 800,569
-------------- ------------ ----------- ------------
Total Assets............ 1,148,288,059 334,250,119 12,796,298 556,829,947
-------------- ------------ ----------- ------------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. 679,729 246,368 143,511 1,121,615
Payable for policy-
related transactions.. -- -- -- --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 1,023,056 506,731 220,849 520,201
-------------- ------------ ----------- ------------
Total Liabilities....... 1,702,785 753,099 364,360 1,641,816
-------------- ------------ ----------- ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS....... $1,146,585,274 $333,497,020 $12,431,938 $555,188,131
============== ============ =========== ============
</TABLE>
See Notes to Financial Statements.
ASSET ALLOCATION SERIES
--------------------------------------------
CONSERVATIVE GROWTH
INVESTORS BALANCED INVESTORS
DIVISION DIVISION DIVISION
------------ ------------ ------------
ASSETS
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 7)
Cost: 162,300,470...... $172,662,590
356,282,500...... $399,379,687
474,917,898...... $556,703,771
Receivable for sales of
shares of The Hudson
River Trust........... 76,736 -- --
Receivable for policy-
related transactions.. -- -- 191,779
------------ ------------ ------------
Total Assets............ 172,739,326 399,379,687 556,895,550
------------ ------------ ------------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. -- 179,701 414,996
Payable for policy-
related transactions.. 81,465 47,918 --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 570,762 586,859 602,888
------------ ------------ ------------
Total Liabilities....... 652,227 814,478 1,017,884
------------ ------------ ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS....... $172,087,099 $398,565,209 $555,877,666
============ ============ ============
See Notes to Financial Statements.
FSA-17
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET DIVISION SECURITIES DIVISION
------------------------------------ --------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------ --------------------------------------
1995 1994 1993 1995 1994 1993
---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust......... $9,225,401 $5,368,883 $4,163,389 $2,010,283 $ 5,671,984 $14,930,827
Expenses (Note 3):
Mortality and expense risk charges............ 954,556 826,379 834,113 197,721 527,675 1,470,325
---------- ---------- ---------- ---------- ----------- -----------
NET INVESTMENT INCOME............................. 8,270,845 4,542,504 3,329,276 1,812,562 5,144,309 13,460,502
---------- ---------- ---------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments........... (432,347) 95,530 (339,754) (810,768) (10,163,976) 3,999,846
Realized gain distribution from
The Hudson River Trust...................... -- -- -- -- -- 11,449,074
---------- ---------- ---------- ---------- ----------- -----------
NET REALIZED GAIN (LOSS).......................... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920
Unrealized appreciation/depreciation on
investments:
Beginning of period........................... 32,760 (14,267) (224,885) (2,736,863) (1,617,237) 1,966,231
End of period................................. 89,976 32,760 (14,267) 145,522 (2,736,863) (1,617,237)
---------- ---------- ---------- ---------- ----------- -----------
Change in unrealized appreciation/depreciation
during the period............................. 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468)
---------- ---------- ---------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS.................................. (375,131) 142,557 (129,136) 2,071,617 (11,283,602) 11,865,452
---------- ---------- ---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................. $7,895,714 $4,685,061 $3,200,140 $3,884,179 $(6,139,293) $25,325,954
========== ========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
QUALITY BOND DIVISION
-------------------------------------------
OCTOBER 1*
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------- ------------
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust......... $ 7,958,285 $ 8,123,722 $ 1,221,840
Expenses (Note 3):
Mortality and expense risk charges............ 767,627 689,178 163,308
----------- ------------ ------------
NET INVESTMENT INCOME............................. 7,190,658 7,434,544 1,058,532
----------- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments........... (632,666) (410,697) (106)
Realized gain distribution from
The Hudson River Trust...................... -- -- 130,973
----------- ------------ ------------
NET REALIZED GAIN (LOSS).......................... (632,666) (410,697) 130,867
Unrealized appreciation/depreciation on
investments:
Beginning of period........................... (15,521,200) (1,886,621) --
End of period................................. (2,105,676) (15,521,200) (1,886,621)
----------- ------------ -----------
Change in unrealized appreciation/depreciation
during the period............................. 13,415,524 (13,634,579) (1,886,621)
----------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS.................................. 12,782,858 (14,045,276) (1,755,754)
----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................. $19,973,516 $ (6,610,732) $ (697,222)
=========== ============ ===========
See Notes to Financial Statements.
<FN>
* Commencement of Operations
</FN>
</TABLE>
FSA-18
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
HIGH YIELD DIVISION
----------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust................. $ 6,518,568 $ 4,578,946 $4,488,259
Expenses (Note 3):
Mortality and expense risk charges.................... 371,369 305,522 285,992
----------- ----------- ----------
NET INVESTMENT INCOME..................................... 6,147,199 4,273,424 4,202,267
----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments................... (179,454) (328,199) 107,852
Realized gain distribution from
The Hudson River Trust.............................. -- -- 1,030,687
----------- ----------- ----------
NET REALIZED GAIN (LOSS).................................. (179,454) (328,199) 1,138,539
Unrealized appreciation/depreciation on investments:
Beginning of period................................... (873,103) 4,734,999 763,746
End of period......................................... 3,823,981 (873,103) 4,734,999
----------- ----------- ----------
Change in unrealized appreciation/depreciation
during the period..................................... 4,697,084 (5,608,102) 3,971,253
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 4,517,630 (5,936,301) 5,109,792
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS......................................... $10,664,829 $(1,662,877) $9,312,059
=========== =========== ==========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION
--------------------------------------- --------------------------
OCTOBER 1* APRIL 1*
TO YEAR ENDED TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------ ------------- ----------- -------------
1995 1994 1993 1995 1994
---------- --------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust................. $ 380,677 $ 108,492 $ 3,394 $ 964,775 $ 596,180
Expenses (Note 3):
Mortality and expense risk charges.................... 69,716 19,204 1,833 289,199 152,789
---------- --------- ------- ----------- ---------
NET INVESTMENT INCOME..................................... 310,961 89,288 1,561 675,576 443,391
---------- --------- ------- ----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments................... 2,791 (11,709) (134) 3,060 (6,949)
Realized gain distribution from
The Hudson River Trust.............................. -- -- -- 536,890 134,154
---------- --------- ------- ----------- ---------
NET REALIZED GAIN (LOSS).................................. 2,791 (11,709) (134) 539,950 127,205
Unrealized appreciation/depreciation on investments:
Beginning of period................................... (141,585) (904) -- (399,286) --
End of period......................................... 2,123,346 (141,585) (904) 12,451,765 (399,286)
---------- --------- ------- ----------- ---------
Change in unrealized appreciation/depreciation
during the period..................................... 2,264,931 (140,681) (904) 12,851,051 (399,286)
---------- --------- ------- ----------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 2,267,722 (152,390) (1,038) 13,391,001 (272,081)
---------- --------- ------- ----------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS......................................... $2,578,683 $ (63,102) $ 523 $14,066,577 $ 171,310
========== ========= ======= =========== =========
See Notes to Financial Statements.
<FN>
* Commencement of Operations
</FN>
</TABLE>
FSA-19
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK DIVISION GLOBAL STOCK DIVISION
-------------------------------------------- -----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------------- -----------------------------------------
1995 1994 1993 1995 1994 1993
------------ ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson
River Trust.................... $ 14,259,262 $ 11,755,355 $ 10,311,886 $ 5,152,442 $ 2,768,605 $ 1,060,406
Expenses (Note 3):
Mortality and expense risk
charges........................ 6,050,368 4,741,008 4,005,102 1,743,898 1,211,620 466,897
------------ ------------ ------------ ----------- ----------- -----------
NET INVESTMENT INCOME................ 8,208,894 7,014,347 6,306,784 3,408,544 1,556,985 593,509
------------ ------------ ------------ ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on
investments.................... 16,793,683 292,144 4,176,629 3,049,444 3,347,704 1,333,766
Realized gain distribution from
The Hudson River Trust......... 63,838,178 43,936,280 85,777,775 9,214,950 4,821,242 11,642,904
------------ ------------ ------------ ----------- ----------- -----------
NET REALIZED GAIN (LOSS)............. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670
Unrealized appreciation
(depreciation) on investments:
Beginning of period.............. (2,048,649) 71,350,568 22,647,989 3,130,280 7,062,877 2,783,724
End of period.................... 181,824,279 (2,048,649) 71,350,568 36,525,596 3,130,280 7,062,877
------------ ------------ ------------ ----------- ----------- -----------
Change in unrealized appreciation/
depreciation during the period... 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153
------------ ------------ ------------ ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.............. 264,504,789 (29,170,793) 138,656,983 45,659,710 4,236,349 17,255,823
------------ ------------ ------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.......... $272,713,683 $(22,156,446) $144,963,767 $49,068,254 $ 5,793,334 $17,849,332
============ ============ ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
INTERNATIONAL
DIVISION AGGRESSIVE STOCK DIVISION
-------------- --------------------------------------------
APRIL 3*
TO
DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------- --------------------------------------------
1995 1995 1994 1993
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson
River Trust.................... $195,500 $ 1,268,689 $ 400,102 $ 766,228
Expenses (Note 3):
Mortality and expense risk
charges........................ 36,471 2,702,978 1,944,639 1,757,109
-------- ------------ ------------ ------------
NET INVESTMENT INCOME................ 159,029 (1,434,289) (1,544,537) (990,881)
-------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on
investments.................... (790) 11,560,966 (6,075,250) 35,696,507
Realized gain distribution from
The Hudson River Trust......... 51,741 61,903,470 -- 25,339,962
-------- ------------ ------------ ------------
NET REALIZED GAIN (LOSS)............. 50,951 73,464,436 (6,075,250) 61,036,469
Unrealized appreciation
(depreciation) on investments:
Beginning of period.............. -- 30,761,318 35,185,988 53,885,737
End of period.................... 667,906 80,271,118 30,761,318 35,185,988
-------- ------------ ------------ ------------
Change in unrealized appreciation/
depreciation during the period... 667,906 49,509,800 (4,424,670) (18,699,749)
-------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.............. 718,857 122,974,236 (10,499,920) 42,336,720
-------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.......... $877,886 $121,539,947 $(12,044,457) $ 41,345,839
======== ============ ============ ============
See Notes to Financial Statements.
<FN>
*Commencement of Operations
</FN>
</TABLE>
FSA-20
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONCLUDED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
---------------------------------------------------------------------------------
CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION
-------------------------------------- ----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------- ----------------------------------------
1995 1994 1993 1995 1994 1993
----------- ----------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust....... $ 8,169,109 $ 6,205,574 $4,088,977 $12,276,328 $ 10,557,487 $10,062,862
Expenses (Note 3):
Mortality and expense risk charges.......... 921,294 750,164 551,610 2,237,982 2,103,510 2,047,811
----------- ----------- ---------- ----------- ------------ -----------
NET INVESTMENT INCOME........................... 7,247,815 5,455,410 3,537,367 10,038,346 8,453,977 8,015,051
----------- ----------- ---------- ----------- ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments......... (378,551) (421,501) 91,739 (2,466,524) 858,164 1,446,919
Realized gain distribution from
The Hudson River Trust.................... 1,068,272 -- 4,651,717 10,894,130 -- 20,280,817
----------- ----------- ---------- ----------- ------------ -----------
NET REALIZED GAIN (LOSS)........................ 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736
Unrealized appreciation (depreciation) on
investments:
Beginning of period......................... (8,767,697) 1,915,037 2,223,612 (2,878,875) 37,960,661 30,072,900
End of period............................... 10,362,120 (8,767,697) 1,915,037 43,097,187 (2,878,875) 37,960,661
----------- ----------- ---------- ----------- ------------ -----------
Change in unrealized appreciation/depreciation
during the period........................... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761
----------- ----------- ---------- ----------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS................................ 19,819,538 (11,104,236) 4,434,881 54,403,668 (39,981,372) 29,615,497
----------- ----------- ---------- ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................... $27,067,353 $(5,648,826) $7,972,248 $64,442,014 $(31,527,395) $37,630,548
=========== =========== ========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-------------------------------------------
GROWTH INVESTORS DIVISION
-------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust......... $ 15,855,901 $ 10,663,204 $ 5,922,228
Expenses (Note 3):
Mortality and expense risk charges............ 2,796,354 1,995,747 1,274,117
------------ ------------ -----------
NET INVESTMENT INCOME............................. 13,059,547 8,667,457 4,648,111
------------ ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments........... 1,752,185 241,591 52,392
Realized gain distribution from
The Hudson River Trust...................... 7,421,853 -- 14,624,517
------------ ------------ -----------
NET REALIZED GAIN (LOSS).......................... 9,174,038 241,591 14,676,909
Unrealized appreciation (depreciation) on
investments:
Beginning of period........................... (770,693) 20,567,604 12,746,740
End of period................................. 81,785,873 (770,693) 20,567,604
------------ ------------ -----------
Change in unrealized appreciation/depreciation
during the period............................. 82,556,566 (21,338,297) 7,820,864
------------ ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS.................................. 91,730,604 (21,096,706) 22,497,773
------------ ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................. $104,790,151 $(12,429,249) $27,145,884
============ ============ ===========
</TABLE>
See Notes to Financial Statements.
FSA-21
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET DIVISION SECURITIES DIVISION
------------------------------------------ -------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------ -------------------------------------------
1995 1994 1993 1995 1994 1993
------------ ------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............. $ 8,270,845 $ 4,542,504 $ 3,329,276 $ 1,812,562 $ 5,144,309 $ 13,460,502
Net realized gain (loss).......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920
Change in unrealized appreciation/
depreciation on investments..... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468)
------------ ------------ ------------ ----------- ------------- -------------
Net increase (decrease)
from operations................. 7,895,714 4,685,061 3,200,140 3,884,179 (6,139,293) 25,325,954
------------ ------------ ------------ ----------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)............. 96,773,056 82,536,703 64,845,505 11,016,347 18,915,140 26,598,113
Benefits and other policy-related
transactions (Note 3)........... (39,770,849) (32,432,771) (31,747,197) (6,286,070) (5,813,181) (7,539,335)
Net transfers among divisions..... 4,776,165 (25,466,044) (50,510,704) 953,149 (125,116,319) (180,916,946)
------------ ------------ ------------ ----------- ------------- -------------
Net increase (decrease) from
policy-related transactions..... 61,778,372 24,637,888 (17,412,396) 5,683,426 (112,014,360) (161,858,168)
------------ ------------ ------------ ----------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4)...... (36,640) (24,067) 92,890 (72,636) 15,335 (69,330)
------------ ------------ ------------ ----------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS... 69,637,446 29,298,882 (14,119,366) 9,494,969 (118,138,318) (136,601,544)
NET ASSETS, BEGINNING OF PERIOD..... 137,496,085 108,197,203 122,316,569 27,654,075 145,792,393 282,393,937
------------ ------------ ------------ ----------- ------------- -------------
NET ASSETS, END OF PERIOD........... $207,133,531 $137,496,085 $108,197,203 $37,149,044 $ 27,654,075 $ 145,792,393
============ ============ ============ =========== ============= =============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
QUALITY BOND DIVISION
-------------------------------------------
OCTOBER 1*
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------- -----------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............. $ 7,190,658 $ 7,434,544 $ 1,058,532
Net realized gain (loss).......... (632,666) (410,697) 130,867
Change in unrealized appreciation/
depreciation on investments..... 13,415,524 (13,634,579) (1,886,621)
------------ ------------ -----------
Net increase (decrease)
from operations................. 19,973,516 (6,610,732) (697,222)
------------ ------------ -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)............. 2,516,135 850,240 181,283
Benefits and other policy-related
transactions (Note 3)........... (3,189,044) (2,891,278) (441,626)
Net transfers among divisions..... 2,462,969 25,765,197 100,786,909
------------ ------------ -----------
Net increase (decrease) from
policy-related transactions..... 1,790,060 23,724,159 100,526,566
------------ ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4)...... (712,602) 255,654 38,047
------------ ------------ -----------
INCREASE (DECREASE) IN NET ASSETS... 21,050,974 17,369,081 99,867,391
NET ASSETS, BEGINNING OF PERIOD..... 117,236,472 99,867,391 --
------------ ------------ -----------
NET ASSETS, END OF PERIOD........... $138,287,446 $117,236,472 $99,867,391
============ ============ ===========
See Notes to Financial Statements.
<FN>
*Commencement of Operations
</FN>
</TABLE>
FSA-22
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
HIGH YIELD DIVISION
------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................... $ 6,147,199 $ 4,273,424 $ 4,202,267
Net realized gain (loss)................................ (179,454) (328,199) 1,138,539
Change in unrealized appreciation/
depreciation on investments........................... 4,697,084 (5,608,102) 3,971,253
----------- ------------ -----------
Net increase (decrease) from operations................. 10,664,829 (1,662,877) 9,312,059
----------- ------------ -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)................................... 15,333,474 14,287,345 10,787,763
Benefits and other policy-related
transactions (Note 3)................................. (8,211,013) (7,162,537) (5,179,424)
Net transfers among divisions........................... 4,789,450 (11,048,174) 1,006,671
----------- ------------ -----------
Net increase (decrease) from policy-related
transactions.......................................... 11,911,911 (3,923,366) 6,615,010
----------- ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE
VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (100,679) 16,028 (31,889)
----------- ------------ -----------
INCREASE (DECREASE) IN NET ASSETS......................... 22,476,061 (5,570,215) 15,895,180
NET ASSETS, BEGINNING OF PERIOD........................... 49,454,901 55,025,116 39,129,936
----------- ------------ -----------
NET ASSETS, END OF PERIOD................................. $71,930,962 $ 49,454,901 $55,025,116
=========== ============ ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION
------------------------------------- --------------------------
OCTOBER 1* APRIL 1*
TO YEAR ENDED TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------- ----------- ----------- -----------
1995 1994 1993 1995 1994
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................... $ 310,961 $ 89,288 $ 1,561 $ 675,576 $ 443,391
Net realized gain (loss)................................ 2,791 (11,709) (134) 539,950 127,205
Change in unrealized appreciation/
depreciation on investments........................... 2,264,931 (140,681) (904) 12,851,051 (399,286)
----------- ---------- -------- ----------- -----------
Net increase (decrease) from operations................. 2,578,683 (63,102) 523 14,066,577 171,310
----------- ---------- -------- ----------- -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)................................... 6,464,035 2,953,965 182,381 10,308,871 690,540
Benefits and other policy-related
transactions (Note 3)................................. (1,385,132) (481,430) (6,581) (2,111,532) (472,818)
Net transfers among divisions........................... 5,274,221 3,033,230 279,153 18,305,589 30,736,505
----------- ---------- -------- ----------- -----------
Net increase (decrease) from policy-related
transactions.......................................... 10,353,124 5,505,765 454,953 26,502,928 30,954,227
----------- ---------- -------- ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE
VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (221,877) 6,113 4,131 (71,293) (134)
----------- ---------- -------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS......................... 12,709,930 5,448,776 459,607 40,498,212 31,125,403
NET ASSETS, BEGINNING OF PERIOD........................... 5,908,383 459,607 -- 31,125,403 --
----------- ---------- -------- ----------- -----------
NET ASSETS, END OF PERIOD................................. $18,618,313 $5,908,383 $459,607 $71,623,615 $31,125,403
=========== ========== ======== =========== ===========
See Notes to Financial Statements.
<FN>
*Commencement of Operations
</FN>
</TABLE>
FSA-23
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK DIVISION GLOBAL STOCK DIVISION
-------------------------------------------- ------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------------- ------------------------------------------
1995 1994 1993 1995 1994 1993
-------------- ------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
FROM OPERATIONS:
Net investment income..... $ 8,208,894 $ 7,014,347 $ 6,306,784 $ 3,408,544 $ 1,556,985 $ 593,509
Net realized gain (loss).. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670
Change in unrealized
appreciation/
depreciation on
investments............. 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153
-------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from operations......... 272,713,683 (22,156,446) 144,963,767 49,068,254 5,793,334 17,849,332
-------------- ------------ ------------ ------------ ------------ ------------
FROM POLICY-RELATED
TRANSACTIONS:
Net premiums (Note 3)..... 216,068,996 171,525,812 124,210,476 92,666,618 77,766,997 25,508,452
Benefits and other
policy-related
transactions (Note 3)... (118,456,643) (93,481,219) (77,837,895) (37,507,499) (23,371,745) (8,931,159)
Net transfers among
divisions............... (34,354,864) 19,730,410 (9,498,455) (12,472,104) 47,610,957 59,544,080
-------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from policy-related
transactions............ 63,257,489 97,775,003 36,874,126 42,687,015 102,006,209 76,121,373
-------------- ------------ ------------ ------------ ------------ ------------
NET (INCREASE) DECREASE IN
AMOUNT RETAINED BY
EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP
(Note 4).................. (392,099) 44,948 (124,376) (96,720) (17,737) 4,085
-------------- ------------ ------------ ------------ ------------ ------------
INCREASE IN NET ASSETS...... 335,579,073 75,663,505 181,713,517 91,658,549 107,781,806 93,974,790
NET ASSETS, BEGINNING OF
PERIOD.................... 811,006,201 735,342,696 553,629,179 241,838,471 134,056,665 40,081,875
-------------- ------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF
PERIOD.................... $1,146,585,274 $811,006,201 $735,342,696 $333,497,020 $241,838,471 $134,056,665
============== ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
INTERNATIONAL
DIVISION AGGRESSIVE STOCK DIVISION
----------- ------------------------------------------
APRIL 3*
TO
DECEMBER 31, YEAR ENDED DECEMBER 31,
----------- ------------------------------------------
1995 1995 1994 1993
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
FROM OPERATIONS:
Net investment income..... $ 159,029 $ (1,434,289) $ (1,544,537) $ (990,881)
Net realized gain (loss).. 50,951 73,464,436 (6,075,250) 61,036,469
Change in unrealized
appreciation/
depreciation on
investments............. 667,906 49,509,800 (4,424,670) (18,699,749)
----------- ------------ ------------ ------------
Net increase (decrease)
from operations......... 877,886 121,539,947 (12,044,457) 41,345,839
----------- ------------ ------------ ------------
FROM POLICY-RELATED
TRANSACTIONS:
Net premiums (Note 3)..... 2,028,670 121,962,483 101,932,221 77,930,596
Benefits and other
policy-related
transactions (Note 3)... (339,723) (63,165,185) (48,604,650) (39,462,340)
Net transfers among
divisions............... 9,885,952 19,367,834 4,346,636 (73,890,214)
----------- ------------ ------------ ------------
Net increase (decrease)
from policy-related
transactions............ 11,574,899 78,165,132 57,674,207 (35,421,958)
----------- ------------ ------------ ------------
NET (INCREASE) DECREASE IN
AMOUNT RETAINED BY
EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP
(Note 4).................. (20,847) (188,813) 35,791 (2,220)
----------- ------------ ------------ ------------
INCREASE IN NET ASSETS...... 12,431,938 199,516,266 45,665,541 5,921,661
NET ASSETS, BEGINNING OF
PERIOD.................... 0 355,671,865 310,006,324 304,084,663
----------- ------------ ------------ ------------
NET ASSETS, END OF
PERIOD.................... $12,431,938 $555,188,131 $355,671,865 $310,006,324
=========== ============ ============ ============
See Notes to Financial Statements.
<FN>
*Commencement of Operations
</FN>
</TABLE>
FSA-24
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-----------------------------------------------------------------------------------------
CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION
------------------------------------------- ------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------- ------------------------------------------
1995 1994 1993 1995 1994 1993
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.............. $ 7,247,815 $ 5,455,410 $ 3,537,367 $ 10,038,346 $ 8,453,977 $ 8,015,051
Net realized gain (loss)........... 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736
Change in unrealized appreciation/
depreciation on investments...... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from operations.................. 27,067,353 (5,648,826) 7,972,248 64,442,014 (31,527,395) 37,630,548
------------ ------------ ------------ ------------ ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3).............. 41,419,959 48,492,315 43,782,002 63,451,955 70,116,900 67,351,402
Benefits and other policy-related
transactions (Note 3)............ (22,866,003) (21,612,430) (17,644,077) (48,742,571) (45,655,363) (44,497,967)
Net transfers among divisions...... (3,379,296) (2,076,793) 6,165,330 (18,908,540) (19,954,097) (6,834,099)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) from
policy-related transactions...... 15,174,660 24,803,092 32,303,255 (4,199,156) 4,507,440 16,019,336
------------ ------------ ------------ ------------ ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE
IN SEPARATE ACCOUNT FP (Note 4).... (95,412) 22,600 18,535 (93,214) 47,322 256,506
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS.... 42,146,601 19,176,866 40,294,038 60,149,644 (26,972,633) 53,906,390
NET ASSETS, BEGINNING OF PERIOD...... 129,940,498 110,763,632 70,469,594 338,415,565 365,388,198 311,481,808
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF PERIOD............ $172,087,099 $129,940,498 $110,763,632 $398,565,209 $338,415,565 $365,388,198
============ ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
--------------------------------------------
GROWTH INVESTORS DIVISION
--------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.............. $ 13,059,547 $ 8,667,457 $ 4,648,111
Net realized gain (loss)........... 9,174,038 241,591 14,676,909
Change in unrealized appreciation/
depreciation on investments...... 82,556,566 (21,338,297) 7,820,864
------------ ------------ ------------
Net increase (decrease)
from operations.................. 104,790,151 (12,429,249) 27,145,884
------------ ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3).............. 155,616,059 139,140,391 105,136,825
Benefits and other policy-related
transactions (Note 3)............ (68,357,709) (54,863,821) (36,431,873)
Net transfers among divisions...... (3,269,896) 20,294,785 30,908,183
------------ ------------ ------------
Net increase (decrease) from
policy-related transactions...... 83,988,454 104,571,355 99,613,135
------------ ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE
IN SEPARATE ACCOUNT FP (Note 4).... (120,493) 15,372 (27,455)
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS.... 188,658,112 92,157,478 126,731,564
NET ASSETS, BEGINNING OF PERIOD...... 367,219,554 275,062,076 148,330,512
------------ ------------ ------------
NET ASSETS, END OF PERIOD............ $555,877,666 $367,219,554 $275,062,076
============ ============ ============
</TABLE>
See Notes to Financial Statements.
FSA-25
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. General
Equitable Variable Life Insurance Company (Equitable Variable Life), a
wholly-owned subsidiary of The Equitable Life Assurance Society of the
United States (Equitable Life), established Separate Account FP (the
Account) as a unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. The Account
consists of thirteen 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,
the Equity Index Division and the International 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, Incentive Life
Plus,(TM) flexible premium 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.
Incentive Life policies offered with the prospectus dated September 15,
1995, are referred to as Incentive Life Plus Second Series. Incentive Life
Plus policies issued with a prior prospectus are referred to as Incentive
Life Plus Original Series. 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.
Policyowners may allocate amounts in their individual accounts to the
Divisions of the Account and/or (except for SP-Flex policies) to the
guaranteed interest division of Equitable Variable Life's General Account.
Net transfers to the guaranteed interest division of the General Account and
other Separate Accounts of $6,569,372, $35,120,632 and $125,668,098 for the
years ended 1995, 1994 and 1993, 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 Life'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. Significant Accounting Policies
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Investments are made in shares of the Trust and are valued at the net asset
values per share of the respective Portfolios. The net asset value is
determined by the Trust using the market or fair value of the underlying
assets of the Portfolio.
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 Life. Under the provisions of the Policies,
Equitable Variable Life 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 Life pays no tax on investment income and capital gains reflected
in variable life insurance policy reserves. However, Equitable Variable Life
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. Asset Charges
Under the Policies, Equitable Variable Life 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, Incentive Life Plus Second Series and
Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship
2000 policyowners, and 0.85% for SP-Flex policyowners. Incentive Life Plus
Original Series deducts this charge from the Policy Account. Under SP-Flex,
Equitable Variable Life 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.
FSA-26
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Under Incentive Life, Incentive Life Plus and the Series 2000 Policies,
mortality and administrative costs are charged in a different manner than
SP-Flex policies (see Notes 4 and 5).
Before amounts are allocated to the Account for Incentive Life, Incentive
Life Plus and the Series 2000 Policies, Equitable Variable Life deducts a
charge for taxes and either an initial policy fee (Incentive Life) or a
premium sales charge (Incentive Life Plus and Series 2000 Policies) from
premiums. Under SP-Flex, the entire initial premium is allocated to the
Account. Before any additional premiums under SP-Flex are allocated to the
Account, an administrative charge is deducted.
The amounts attributable to Incentive Life, Incentive Life Plus and the
Series 2000 policyowners' accounts are charged monthly by Equitable Variable
Life 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.
4. Amounts Retained by Equitable Variable Life in Separate Account FP
The amount retained by Equitable Variable Life in the Account arises
principally from (1) contributions from Equitable Variable Life, 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 Life are not subject to
charges for mortality and expense risks or mortality and administrative
costs.
Amounts retained by Equitable Variable Life in the Account may be
transferred at any time by Equitable Variable Life to its General Account.
The following table shows the surplus contributions (withdrawals) by
Equitable Variable Life by investment division:
<TABLE>
<CAPTION>
INVESTMENT DIVISION 1995 1994 1993
------------------- ----------- ----------- ----------
<S> <C> <C> <C>
Common Stock $ (630,000) -- --
Money Market (250,000) -- $1,145,000
Balanced -- -- --
Aggressive Stock (350,000) -- --
High Yield (100,000) -- 330,000
Global (130,000) -- (6,895,000)
Conservative Investors -- -- 575,000
Growth Investors -- -- 130,000
Short-Term World Income -- $(5,165,329) --
Intermediate Government Securities (165,000) -- --
Growth & Income (685,000) -- 1,000,000
Quality Bond (4,800,000) -- 5,000,000
Equity Index -- 200,000 --
International 200,000 -- --
----------- ----------- ----------
$(6,910,000) $(4,965,329) $1,285,000
=========== =========== ==========
</TABLE>
5. Distribution and Servicing Agreements
Equitable Variable Life has entered into a Distribution and Servicing
Agreement with Equitable Life 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 Life.
Equitable Variable Life also has entered into an agreement with Equitable
Life under which Equitable Life 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.
6. Share Substitution
On February 22, 1994, Equitable Variable Life, 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 statements of operations and statements of changes in net
assets for the Intermediate Government Securities Portfolio is combined with
the Short-Term World Income Portfolio for periods prior to the merger on
February 22, 1994. The Short-Term World Income Division is not available for
future investment.
FSA-27
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
7. Investment Returns
The Separate Account rates of return attributable to Incentive Life,
Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000
policyowners are different than those attributable to Survivorship 2000,
Incentive Life Plus Original Series and to SP-Flex policyowners because
asset charges are deducted at different rates under each policy (see Note
3).
The tables on this page and 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 whose
policy 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.
RATES OF RETURN:
INCENTIVE LIFE,
- --------------
INCENTIVE LIFE 2000,
- --------------------
INCENTIVE LIFE PLUS SECOND SERIES
- ---------------------------------
AND CHAMPION 2000*
- -----------------
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.18 % 8.24 % 9.18 % 7.32 % 6.63 % 6.05 %
Net return................ 5.11 % 3.39 % 2.35 % 2.94 % 5.55 % 7.59 % 8.53 % 6.68 % 5.99 % 5.47 %
</TABLE>
APRIL 1(A) TO
INTERMEDIATE YEAR ENDED DECEMBER 31, DECEMBER 31,
GOVERNMENT -----------------------------------------------
SECURITIES DIVISION 1995 1994 1993 1992 1991
- ------------------- ---- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37)% 10.58 % 5.60 % 12.26 %
Net return................ 12.65 % (4.95)% 9.88 % 4.96 % 11.60 %
YEAR ENDED OCTOBER 1(A)
DECEMBER 31, DECEMBER 31,
----------------------------------
QUALITY BOND DIVISION 1995 1994 1993
- --------------------- ---- ---- ----
Gross return.............. 17.02 % (5.10)% (0.51)%
Net return................ 16.32 % (5.67)% (0.66)%
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 4.68 % --
Net return................ 19.20 % (3.37)% 22.41 % 11.64 % 23.72 % (1.71)% 4.50 % 9.08 % 4.05 % --
</TABLE>
YEAR ENDED OCTOBER 1(A) TO
DECEMBER 31, DECEMBER 31,
----------------------------------
GROWTH & INCOME DIVISION 1995 1994 1993
- ------------------------- ---- ---- ----
Gross return.............. 24.07 % (0.58)% (0.25)%
Net return................ 23.33 % (1.17)% (0.41)%
YEAR ENDED MARCH 31(A) TO
DECEMBER 31, DECEMBER 31,
-----------------------------------
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % 1.08 %
Net return................ 35.66 % 0.58 %
- -------------------------------
* Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992.
Sales of Incentive Life Plus Second Series commenced on September 15, 1995.
(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-28
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 32.45 % (2.14)% 24.84 % 3.22 % 37.88 % (8.12)% 25.59 % 22.43 % 7.49 % 15.65 %
Net return................ 31.66 % (2.73)% 24.08 % 2.60 % 37.06 % (8.67)% 24.84 % 21.70 % 6.84 % 15.01 %
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (13.27)%
Net return................ 18.11 % 4.60 % 31.33 % (1.10)% 29.77 % (6.63)% 26.17 % 10.22 % (13.45)%
</TABLE>
APRIL 3(A)
TO
DECEMBER 31,
INTERNATIONAL DIVISION 1995
- ---------------------- ----------
Gross return.............. 11.29 %
Net return................ 10.79 %
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 31.63 % (3.81)% 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % 7.31 % 35.88 %
Net return................ 30.85 % (4.39)% 16.05 % (3.74)% 85.75 % 7.51 % 42.64 % 0.53 % 6.66 % 35.13 %
</TABLE>
<TABLE>
<CAPTION>
JANUARY 26(A) TO
ASSET ALLOCATION SERIES YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------------------------------------------------------------------------------
BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.75 % (8.02)% 12.28 % (2.84)% 41.26 % 0.24 % 25.83 % 13.27 % (0.85)% 29.07 %
Net return................ 19.03 % (8.57)% 11.64 % (3.42)% 40.42 % (0.36)% 25.08 % 12.59 % (1.45)% 28.34 %
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 2(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE --------------------------------------------------------------------------------
INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989
- ------------------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 20.40 % (4.10)% 10.76 % 5.72 % 19.87 % 6.37 % 3.09 %
Net return................ 19.68 % (4.67)% 10.15 % 5.09 % 19.16 % 5.73 % 2.94 %
</TABLE>
<TABLE>
<CAPTION>
GROWTH INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989
- ------------------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 26.37 % (3.15)% 15.26 % 4.90 % 48.89 % 10.66 % 3.98 %
Net return................ 25.62 % (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>
RATES OF RETURN:
SURVIVORSHIP 2000
- -----------------
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992
- --------------------- ---- ---- ---- ----
Gross return.............. 5.74 % 4.02 % 3.00 % 1.11 %
Net return................ 4.80 % 3.08 % 2.04 % 0.77 %
INTERMEDIATE GOVERNMENT
SECURITIES DIVISION 1995 1994 1993 1992
- ------------------- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37)% 10.58 % 0.90 %
Net return................ 12.31 % (5.23)% 9.55 % 0.56 %
- ----------
(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-29
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
OCTOBER 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------------------------
QUALITY BOND DIVISION 1995 1994 1993
- --------------------- ---- ---- ----
Gross return.............. 17.02 % (5.10)% (0.51)%
Net return................ 15.97 % (5.95)% (0.73)%
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992
- ------------------- ---- ---- ---- ----
Gross return.............. 19.92 % (2.79)% 23.15 % 1.84 %
Net return................ 18.84 % (3.66)% 22.04 % 1.50 %
OCTOBER 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------
GROWTH & INCOME DIVISION 1995 1994 1993
- ------------------------ ---- ---- ----
Gross return.............. 24.07 % (0.58)% (0.25)%
Net return................ 22.96 % (1.47)% (0.48)%
YEAR ENDED MARCH 1(A) TO
DECEMBER 31, DECEMBER 31,
------------------------------
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % 1.08 %
Net return................ 35.26 % 0.33 %
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992
- --------------------- ---- ---- ---- ----
Gross return.............. 32.45 % (2.14)% 24.84 % 5.28 %
Net return................ 31.26 % (3.02)% 23.70 % 4.93 %
GLOBAL DIVISION
- ---------------
Gross return.............. 18.81 % 5.23 % 32.09 % 4.87 %
Net return................ 17.75 % 4.29 % 30.93 % 4.52 %
APRIL 3(A) TO
DECEMBER 31,
----------------
INTERNATIONAL DIVISION 1995
- ---------------------- ----
Gross return.............. 11.29 %
Net return................ 10.55 %
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992
- ------------------------- ---- ---- ---- ----
Gross return.............. 31.63 % (3.81)% 16.77 % 11.49 %
Net return................ 30.46 % (4.68)% 15.70 % 11.11 %
ASSET ALLOCATION SERIES
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS --------------------------------------------------
DIVISION 1995 1994 1993 1992
- -------- ---- ---- ---- ----
Gross return.............. 20.40 % (4.10)% 10.76 % 1.38 %
Net return................ 19.32 % (4.96)% 9.81 % 1.04 %
BALANCED DIVISION 1995 1994 1993 1992
- ----------------- ---- ---- ---- ----
Gross return.............. 19.75 % (8.02)% 12.28 % 5.37 %
Net return................ 18.68 % (8.84)% 11.30 % 5.02 %
GROWTH INVESTORS DIVISION 1995 1994 1993 1992
- ------------------------- ---- ---- ---- ----
Gross return.............. 26.37 % (3.15)% 15.26 % 6.89 %
Net return................ 25.24 % (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-30
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31,1995
RATES OF RETURN:
INCENTIVE LIFE PLUS ORIGINAL SERIES(B)*
- ---------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------
1995
----
Money Market Division........ 5.69%
Intermediate Government
Securities Division.......... 13.31%
Quality Bond Division........ 17.13%
High Yield Division.......... 19.95%
Growth & Income Division..... 24.38%
Equity Index Division........ 36.53%
Common Stock Division........ 33.07%
Global Division.............. 19.38%
APRIL 30 TO DECEMBER 31,
------------------------
1995
----
International Division....... 11.29%
YEAR ENDED DECEMBER 31,
------------------------
1995
----
Aggressive Stock Division.... 33.00%
ASSET ALLOCATION SERIES
YEAR ENDED DECEMBER 31,
------------------------
1995
----
Conservative Investors Division... 20.59%
Balanced Division................ 20.32%
Growth Investors Division......... 26.92%
- --------------------
*Sales of Incentive Life Plus Original Series commenced on January 6, 1995.
(b) There are no Separate Account asset charges for this policy and therefore
the gross and net rates of return are the same. The rate of return for the
period indicated is not an annual rate of return.
FSA-31
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31,1995
RATES OF RETURN:
SP-FLEX
- -------
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.17 % 8.24 % 9.18 % 7.32 % 2.15 %
Net return................ 3.86 % 2.17 % 1.13 % 1.71 % 4.29 % 6.30 % 7.24 % 5.41 % 1.62 %
</TABLE>
APRIL 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
INTERMEDIATE GOVERNMENT --------------------------------------------------
SECURITIES DIVISION 1995 1994 1993 1992 1991
- ------------------- ---- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37) % 10.58 % 5.60 % 12.10 %
Net return................ 11.31 % (6.08) % 8.57 % 3.71 % 10.59 %
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
-------------------------------
QUALITY BOND DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 17.02 % (2.20)%
Net return................ 14.94 % (2.35)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 1.95 %
Net return................ 17.79 % (4.52)% 20.96 % 10.30 % 22.25 % (2.89)% 3.26 % 7.78 % 1.39 %
</TABLE>
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
---------------------------------
GROWTH & INCOME DIVISION 1995 1994
- ------------------------ ---- ----
Gross return.............. 24.07 % (3.40)%
Net return................ 21.87 % (3.55)%
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % (2.54)%
Net return................ 34.06 % (2.69)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 32.45 % 2.14 % 24.84 % 3.23 % 37.87 % (8.12)% 25.59 % 22.43 % (22.57)%
Net return................ 30.10 % (3.88)% 22.60 % 1.38 % 35.43 % (9.76)% 23.36 % 20.26 % (23.00)%
GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (11.40)%
Net return................ 16.70 % 3.36 % 29.77 % (2.28)% 28.23 % (7.75)% 24.67 % 8.90 % (11.86)%
</TABLE>
APRIL 3(A) TO
DECEMBER 31,
-------------
INTERNATIONAL DIVISION 1995
- ---------------------- ----
Gross return.............. 11.29 %
Net return................ 9.82 %
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 31.63 % 3.81 % 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % (24.28)%
Net return................ 29.30 % (5.53)% 14.67 % (4.89)% 83.54 % 6.23 % 40.95 % (0.66)% (24.68)%
<FN>
- ------------------------------
(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-32
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
ASSET ALLOCATION SERIES
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS ---------------------------------------
DIVISION 1995 1994
- -------- ---- ----
Gross return.......... 20.40 % (1.83)%
Net return............ 18.26 % (1.98)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------------
BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 19.75 % (8.02)% 12.28 % (2.83)% 41.27 % 0.24 % 25.83 % 13.27 % (20.26)%
Net return............ 17.62 % (9.66)% 10.31 % (4.57)% 38.75 % (1.56)% 23.59 % 11.25 % (20.71)%
</TABLE>
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
GROWTH INVESTORS ------------------------------------
DIVISION 1995 1994
- -------- ---- ----
Gross return........... 26.37 % (3.16)%
Net return............. 24.12 % (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-33
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------------- ----------------
ASSETS (IN MILLIONS)
<S> <C> <C>
Investments:
Fixed maturities:
Available for sale, at estimated fair value........................................ $ 4,366.3 $ 2,138.8
Held to maturity, at amortized cost................................................ -- 2,008.5
Policy loans......................................................................... 1,300.1 1,185.2
Mortgage loans on real estate........................................................ 771.5 888.5
Equity real estate................................................................... 525.4 641.0
Other equity investments............................................................. 200.5 239.1
Other invested assets................................................................ 120.9 107.8
----------------- ----------------
Total investments.................................................................. 7,284.7 7,208.9
Cash and cash equivalents............................................................... 277.6 182.3
Deferred policy acquisition costs....................................................... 2,037.8 2,077.1
Other assets............................................................................ 250.6 240.7
Separate Accounts assets................................................................ 4,611.6 3,345.3
----------------- ----------------
TOTAL ASSETS............................................................................ $ 14,462.3 $ 13,054.3
================= ================
LIABILITIES
Policyholders' account balances......................................................... $ 7,045.9 $ 7,340.0
Future policy benefits and other policyholders' liabilities............................. 570.8 509.4
Other liabilities....................................................................... 521.4 441.1
Separate Accounts liabilities........................................................... 4,586.5 3,314.9
----------------- ----------------
Total liabilities.................................................................. 12,724.6 11,605.4
----------------- ----------------
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.......................................................... 1,480.7 1,355.7
Retained earnings....................................................................... 221.6 165.5
Net unrealized investment gains (losses)................................................ 44.6 (72.6)
Minimum pension liability............................................................... (10.7) (1.2)
----------------- ----------------
Total shareholder's equity......................................................... 1,737.7 1,448.9
----------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.............................................. $ 14,462.3 $ 13,054.3
================= ================
<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, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
REVENUES
<S> <C> <C> <C>
Universal life and investment-type product policy fee income...... $ 584.5 $ 552.6 $ 485.2
Premiums.......................................................... 33.7 40.1 46.9
Net investment income............................................. 529.1 526.8 557.6
Investment (losses) gains, net.................................... (.5) (4.6) 1.5
Other income...................................................... 2.1 2.9 3.0
----------------- ---------------- -----------------
Total revenues.................................................. 1,148.9 1,117.8 1,094.2
----------------- ---------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances.............. 376.1 389.3 439.2
Policyholders' benefits........................................... 267.5 242.3 251.0
Other operating costs and expenses................................ 419.5 413.8 356.7
----------------- ---------------- -----------------
Total benefits and other deductions............................. 1,063.1 1,045.4 1,046.9
----------------- ---------------- -----------------
Earnings before Federal income taxes and cumulative
effect of accounting change....................................... 85.8 72.4 47.3
Federal income tax expense........................................... 29.7 25.0 20.5
----------------- ---------------- -----------------
Earnings before cumulative effect of accounting change............... 56.1 47.4 26.8
Cumulative effect of accounting change, net of Federal income taxes. -- (11.4) --
----------------- ---------------- -----------------
Net Earnings......................................................... $ 56.1 $ 36.0 $ 26.8
================= ================ =================
<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, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- -----------------
(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, beginning of year.................... 1,355.7 1,305.7 1,055.7
Additional capital in excess of par value............................ 125.0 50.0 250.0
----------------- ---------------- -----------------
Capital in excess of par value, end of year.......................... 1,480.7 1,355.7 1,305.7
----------------- ---------------- -----------------
RETAINED EARNINGS, beginning of year................................. 165.5 129.5 102.7
Net earnings......................................................... 56.1 36.0 26.8
----------------- ---------------- -----------------
Retained earnings, end of year....................................... 221.6 165.5 129.5
----------------- ---------------- -----------------
NET UNREALIZED INVESTMENT (LOSSES) GAINS, beginning of year.......... (72.6) 22.3 11.1
Change in unrealized investment gains (losses)....................... 117.2 (94.9) 11.2
----------------- ---------------- -----------------
Net unrealized investment gains (losses), end of year................ 44.6 (72.6) 22.3
----------------- ---------------- -----------------
MINIMUM PENSION LIABILITY, beginning of year......................... (1.2) (6.3) --
Change in minimum pension liability.................................. (9.5) 5.1 (6.3)
----------------- ---------------- -----------------
Minimum pension liability, end of year............................... (10.7) (1.2) (6.3)
----------------- ---------------- -----------------
TOTAL SHAREHOLDER'S EQUITY, END OF YEAR.............................. $ 1,737.7 $ 1,448.9 $ 1,452.7
================= ================ =================
<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, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
NET EARNINGS......................................................... $ 56.1 $ 36.0 $ 26.8
ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH (USED) PROVIDED
BY OPERATING ACTIVITIES:
Interest credited to policyholders' account balances.............. 376.1 389.3 439.2
General Account policy charges.................................... (618.7) (572.8) (496.7)
Investment losses (gains), net.................................... .5 4.6 (1.5)
Other, net........................................................ 63.8 (17.2) 117.2
----------------- ---------------- -----------------
Net cash (used) provided by operating activities..................... (122.2) (160.1) 85.0
----------------- ---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities and repayments......................................... 640.7 511.8 1,165.8
Sales............................................................. 2,667.0 2,119.0 2,844.2
Return of capital from joint ventures and limited partnerships.... 23.9 14.2 56.3
Purchases......................................................... (3,065.9) (2,251.7) (4,414.0)
Other, net........................................................ (114.8) (102.2) (98.8)
----------------- ---------------- -----------------
Net cash provided (used) by investing activities..................... 150.9 291.1 (446.5)
----------------- ---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits........................................................ 581.1 602.8 612.9
Withdrawals..................................................... (636.6) (697.7) (506.2)
Capital contribution from Equitable Life.......................... 125.0 50.0 250.0
Other, net........................................................ (2.9) (1.8) 2.0
----------------- ---------------- -----------------
Net cash provided (used) by financing activities..................... 66.6 (46.7) 358.7
----------------- ---------------- -----------------
Change in cash and cash equivalents.................................. 95.3 84.3 (2.8)
Cash and cash equivalents, beginning of year......................... 182.3 98.0 100.8
----------------- ---------------- -----------------
Cash and Cash Equivalents, End of Year............................... $ 277.6 $ 182.3 $ 98.0
================= ================ =================
Supplemental cash flow information
Interest Paid..................................................... $ -- $ 5.7 $ 2.1
================= ================ =================
Income Taxes Refunded............................................. $ -- $ 8.4 $ .3
================= ================ =================
<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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are prepared in conformity
with generally accepted accounting principles ("GAAP").
The accompanying consolidated financial statements include the accounts of
Equitable Variable Life and its subsidiaries, (collectively "EVLICO").
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
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 1995 presentation.
Accounting Changes
In the first quarter of 1995, EVLICO adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan." This statement applies to all loans, including loans
restructured in a troubled debt restructuring involving a modification of
terms. This statement addresses the accounting for impairment of a loan by
specifying how allowances for credit losses should be determined. Impaired
loans within the scope of this statement are measured based on the present
value of expected future cash flows discounted at the loan's effective
interest rate, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. EVLICO provides for
impairment of loans through an allowance for possible losses. The adoption of
this statement did not have a material effect on the level of these
allowances or on EVLICO's consolidated statements of earnings and
shareholder's equity.
In the fourth quarter of 1994 (effective as of January 1, 1994), EVLICO
adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits,"
which required 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.
At December 31, 1993, EVLICO adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which expanded 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. Beginning
coincident with issuance of SFAS No. 115 implementation guidance in November
1995, the Financial Accounting Standards Board ("FASB") permitted companies a
one-time opportunity, through December 31, 1995, to reassess the
appropriateness of the classification of all securities held at that time. On
December 1, 1995, EVLICO transferred $1,806.7 million of securities
classified as held to maturity to the available for sale portfolio. As a
result, consolidated shareholder's equity increased by $17.9 million, net of
deferred policy acquisition costs and deferred Federal income tax.
New Accounting Pronouncements
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
the carrying amount of such assets may not be recoverable. EVLICO will
implement this statement as of January 1, 1996. EVLICO currently provides
allowances for possible losses for assets under the scope of this statement.
Management has not yet determined the impact of this statement on these
assets.
Valuation of Investments
Fixed maturities which have been identified as available for sale are
reported at estimated fair value. At December 31, 1994, fixed maturities
which EVLICO had both the ability and the intent to hold to maturity, were
stated principally at amortized cost. The amortized cost of fixed maturities
is adjusted for impairments in value deemed to be other than temporary.
F-5
<PAGE>
Mortgage loans on real estate are stated at unpaid principal balances, net of
unamortized discounts and valuation allowances. Effective with the adoption
of SFAS No. 114 on January 1, 1995, the valuation allowances are based on the
present value of expected future cash flows discounted at the loan's original
effective interest rate or the collateral value if the loan is collateral
dependent. However, if foreclosure is or becomes probable, the measurement
method used is collateral value. Prior to the adoption of SFAS No. 114, the
valuation allowances were 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 management believed may not be collectible in full. In
establishing valuation allowances, management previously considered, among
other things, the estimated fair value of the underlying collateral.
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 current estimated fair value, net of
disposition costs, or depreciated cost.
Policy loans are stated at unpaid principal balances.
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.
Common stocks are carried at estimated fair value and are included in other
equity investments.
Short-term investments are stated at amortized cost which approximates fair
value and are included with other invested assets.
Cash and cash equivalents includes cash on hand, amounts due from banks and
highly liquid debt instruments purchased with an original maturity of three
months or less.
All securities are recorded in the consolidated financial statements on a
trade date basis.
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 held by EVLICO 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 policyholders' account
balances for mortality charges, policy administration charges and surrender
charges. Policy benefits and claims that are charged to expenses include
benefit claims incurred in the period in excess of related policyholders'
account balances.
Premiums from life and annuity policies with life contingencies generally are
recognized as income when due. Benefits and expenses are matched with such
income so as to result in the recognition of profits over the life of the
contracts. This match is accomplished by means of the provision for
liabilities for future policy benefits and the deferral and subsequent
amortization of policy acquisition costs.
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 effect on the amortization
of deferred policy acquisition costs of revisions to estimated gross profits
is reflected in earnings in the period such estimated gross profits are
revised. The effect on the deferred policy acquisition cost asset that would
result from realization of unrealized gains (losses) is recognized with an
offset to unrealized gains (losses) in consolidated shareholder's equity as
of the balance sheet date.
Amortization charged to income amounted to $199.0 million, $200.2 million and
$135.5 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
F-6
<PAGE>
Policyholders' Account Balances and Future Policy Benefits
EVLICO's insurance contracts primarily are 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.
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. 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 generally are 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, 1995, 1994
and 1993, investment results of Separate Accounts were $342.2 million, $135.9
million and $344.1 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, 1995
Fixed Maturities:
Available for Sale:
Corporate................................. $ 3,053.5 $ 101.0 $ 22.0 $ 3,132.5
Mortgage-backed........................... 573.9 7.7 .4 581.2
U.S. Treasury securities and U.S. government
and agency securities.................. 569.2 9.2 2.6 575.8
States and political subdivisions......... 4.3 .1 -- 4.4
Foreign governments....................... 16.2 .8 -- 17.0
Redeemable preferred stock................ 56.8 3.7 5.1 55.4
---------------- ----------------- ----------------- ---------------
Total Available for Sale.................... $ 4,273.9 $ 122.5 $ 30.1 $ 4,366.3
================ ================= ================= ===============
Equity Securities:
Common stock................................ $ 36.2 $ 10.3 $ 4.7 $ 41.8
================ ================= ================= ===============
December 31, 1994
Fixed Maturities:
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
================ ================= ================= ===============
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
================ ================= ================= ===============
Equity Securities:
Common stock................................ $ 42.0 $ 10.1 $ 9.4 $ 42.7
================ ================= ================= ===============
</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, 1995 and 1994, respectively,
securities without a readily ascertainable market value having an amortized
cost of $1,233.7 million and $1,571.5 million, respectively, had estimated
fair values of $1,291.1 million and $1,512.2 million, respectively.
F-8
<PAGE>
The contractual maturity of bonds at December 31, 1995 are shown below:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
------------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
----------------- ----------------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less............................................................. $ 133.3 $ 133.4
Due in years two through five....................................................... 1,416.4 1,444.9
Due in years six through ten........................................................ 1,361.5 1,391.8
Due after ten years................................................................. 732.0 759.6
Mortgage-backed securities.......................................................... 573.9 581.2
----------------- ----------------
Total............................................................................... $ 4,217.1 $ 4,310.9
================= ================
</TABLE>
Bonds not due at a single maturity date have been included in the above table
in the year of final maturity. Actual maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balances, beginning of year.................................... $ 68.5 $ 87.3 $ 147.2
Additions charged to income.................................... 31.0 12.7 44.4
Deductions for writedowns and asset dispositions............... (33.8) (31.5) (104.3)
----------------- ----------------- -----------------
Balances, End of Year.......................................... $ 65.7 $ 68.5 $ 87.3
================= ================= =================
Balances, end of year comprise:
Mortgage loans on real estate............................... $ 15.9 $ 24.0 $ 46.7
Equity real estate.......................................... 49.8 44.5 40.6
----------------- ----------------- -----------------
Total.......................................................... $ 65.7 $ 68.5 $ 87.3
================= ================= =================
</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, 1995, 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 $21.5 million of fixed
maturities and $29.1 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, 1995,
approximately 11.0% of the $4,217.2 million aggregate amortized cost of bonds
held by EVLICO were considered to be other than investment grade.
In addition to its holding of corporate high yield securities, EVLICO is an
equity investor in limited partnership interests which primarily invest 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
$13.7 million and $13.3 million at December 31, 1995 and 1994, respectively,
of such restructured securities. The December 31, 1994 amount includes 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. Gross interest income that would have been
recorded in accordance with the original terms of restructured fixed
maturities amounted to $1.4 million, $1.1 million and $2.2 million in 1995,
1994 and 1993, respectively. Gross interest income on these fixed maturities
included in net investment income aggregated $1.4 million, $1.0 million and
$1.5 million in 1995, 1994 and 1993, respectively.
F-9
<PAGE>
At December 31, 1995 and 1994, 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 $36.0 million (4.6% of total mortgage loans on real estate)
and $35.2 million (3.9% of total mortgage loans on real estate),
respectively.
The payment terms of mortgage loans on real estate may from time to time be
restructured or modified. The investment in restructured mortgage loans on
real estate, based on amortized cost, amounted to $173.5 million and $130.8
million at December 31, 1995 and 1994, 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 $16.1 million,
$12.3 million and $13.9 million in 1995, 1994 and 1993, respectively. Gross
interest income on these loans included in net investment income aggregated
$14.0 million, $11.4 million and $11.5 million in 1995, 1994 and 1993,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
DECEMBER 31, 1995
------------------
(IN MILLIONS)
Impaired mortgage loans with provision for losses.... $ 99.0
Impaired mortgage loans with no provision for losses. 24.5
------------------
Recorded investment in impaired mortgage loans....... 123.5
Provision for losses................................. 14.5
------------------
Net Impaired Mortgage Loans.......................... $ 109.0
==================
Impaired mortgage loans with no provision for losses are loans where the fair
value of the collateral or the net present value of the loan equals or
exceeds the recorded investment. Interest income earned on loans where the
collateral value is used to measure impairment is recorded on a cash basis.
Interest income on loans where the present value method is used to measure
impairment is accrued on the net carrying value amount of the loan at the
interest rate used to discount the cash flows. Changes in the present value
attributable to changes in the amount or timing of expected cash flows are
reported as investment gains or losses.
During the year ended December 31, 1995, EVLICO's average recorded investment
in impaired mortgage loans was $99.2 million. Interest income recognized on
these impaired mortgage loans totaled $8.2 million for the year ended
December 31, 1995, including $2.2 million recognized on a cash basis.
EVLICO's investment in equity real estate is through direct ownership and
through investments in real estate joint ventures. At December 31, 1995 and
1994, the carrying value of equity real estate available for sale amounted to
$55.6 million and $138.4 million, respectively. For the years ended December
31, 1995, 1994 and 1993, respectively, real estate of $12.2 million, $59.0
million and $92.1 million was acquired in satisfaction of debt. At December
31, 1995 and 1994, EVLICO owned $196.6 million and $230.5 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 $51.0 million and
$51.1 million at December 31, 1995 and 1994, respectively. Depreciation
expense on real estate totaled $12.8 million, $12.7 million and $11.6 million
for the years ended December 31, 1995, 1994 and 1993, respectively.
F-10
<PAGE>
4. JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information of real estate joint ventures (10
and 12 individual ventures as of December 31, 1995 and 1994, 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,
------------------------------------------
1995 1994
------------------- ------------------
(IN MILLIONS)
<S> <C> <C>
FINANCIAL POSITION
Investments in real estate, at depreciated cost............................... $ 966.3 $ 1,047.0
Investments in securities, generally at estimated fair value.................. 648.5 3,061.2
Cash and cash equivalents..................................................... 99.2 46.4
Other assets.................................................................. 90.8 261.9
------------------- ------------------
Total assets.................................................................. 1,804.8 4,416.5
------------------- ------------------
Borrowed funds -- third party.................................................. 74.4 1,233.6
Other liabilities............................................................. 132.4 611.0
------------------- ------------------
Total liabilities............................................................. 206.8 1,844.6
------------------- ------------------
Partners' Capital............................................................. $ 1,598.0 $ 2,571.9
=================== ==================
Equity in partners' capital included above.................................... $ 243.8 $ 327.3
Equity in limited partnership interests not included above.................... 82.3 50.4
(Deficit) excess of equity in partners' capital over
investment cost and equity earnings........................................ (.4) 3.7
------------------- ------------------
Carrying Value................................................................ $ 325.7 $ 381.4
=================== ==================
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures............................ $ 152.3 $ 180.1 $ 136.6
Revenues of other limited partnership interests................... 86.9 102.5 318.9
Interest expense -- third party.................................... (23.1) (88.1) (79.7)
Interest expense -- The Equitable.................................. (5.6) -- --
Other expenses.................................................... (131.8) (172.4) (132.7)
----------------- ---------------- -----------------
Net Earnings...................................................... $ 78.7 $ 22.1 $ 243.1
================= ================ =================
Equity in net earnings included above............................. $ 14.4 $ 11.7 $ 34.0
Equity in net earnings of limited partnership
interests not included above................................... 12.9 6.3 12.0
Reduction of earnings in joint ventures
over equity ownership percentage and
amortization of differences in bases........................... -- (1.1) (.1)
----------------- ----------------- -----------------
Total Equity in Net Earnings...................................... $ 27.3 $ 16.9 $ 45.9
================= ================ =================
</TABLE>
F-11
<PAGE>
5. NET INVESTMENT INCOME AND INVESTMENT (LOSSES) GAINS
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................................. $ 319.5 $ 331.4 $ 319.9
Mortgage loans on real estate.................................... 70.3 86.7 105.7
Equity real estate............................................... 66.2 67.0 69.8
Policy loans..................................................... 86.8 79.5 76.1
Other equity investments......................................... 22.4 13.4 38.5
Other investment income.......................................... 30.5 24.5 17.0
----------------- ---------------- -----------------
Gross investment income.......................................... 595.7 602.5 627.0
Investment expenses.............................................. 66.6 75.7 69.4
----------------- ---------------- -----------------
Net Investment Income............................................ $ 529.1 $ 526.8 $ 557.6
================= ================ =================
</TABLE>
Investment (losses) gains, net, including changes in valuation allowances,
are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................................. $ 23.7 $ (6.8) $ 45.1
Mortgage loans on real estate.................................... (7.0) (13.3) (32.0)
Equity real estate............................................... (18.9) (5.3) (13.4)
Other equity investments......................................... 1.7 20.8 1.8
----------------- ---------------- -----------------
Investment (Losses) Gains, Net................................... $ (.5) $ (4.6) $ 1.5
================= ================ =================
</TABLE>
Writedowns of fixed maturities amounted to $11.1 million, $8.2 million and
$1.4 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
For the years ended December 31, 1995 and 1994, respectively, proceeds
received on sales of fixed maturities classified as available for sale
amounted to $2,551.6 million and $2,065.1 million. Gross gains of $49.6
million and $22.1 million and gross losses of $18.7 million and $24.4
million, respectively, were realized on these sales. The change in unrealized
investment gains (losses) related to fixed maturities classified as available
for sale for the years ended December 31, 1995 and 1994, amounted to $240.8
million and $(215.2) million, respectively.
Gross gains of $66.2 million and gross losses of $66.5 million were realized
on sales of investments in fixed maturities held for investment and available
for sale for the year ended December 31, 1993.
F-12
<PAGE>
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of equity, and the changes for the
corresponding years are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year....................................... $ (72.6) $ 22.3 $ 11.1
Changes in unrealized investment gains (losses).................. 244.7 (241.8) 3.4
Effect of adopting SFAS No. 115.................................. -- -- 72.2
Changes in unrealized investment (gains) losses attributable to:
Deferred policy acquisition costs............................. (64.4) 95.8 (58.2)
Deferred Federal income taxes................................. (63.1) 51.1 (6.2)
----------------- ---------------- -----------------
Balance, End of Year............................................. $ 44.6 $ (72.6) $ 22.3
================= ================ =================
Balance, end of year comprises:
Unrealized investment gains (losses) on:
Fixed maturities............................................ $ 92.4 $ (148.4) $ 66.8
Other equity investments.................................... 5.6 .7 25.6
Other....................................................... (2.7) (1.7) --
----------------- ---------------- -----------------
Total......................................................... 95.3 (149.4) 92.4
Amounts of unrealized investment (gains) losses attributable to:
Deferred policy acquisition costs........................... (26.8) 37.6 (58.2)
Deferred Federal income taxes............................... (23.9) 39.2 (11.9)
----------------- ---------------- -----------------
Total............................................................ $ 44.6 $ (72.6) $ 22.3
================= ================ =================
</TABLE>
6. FEDERAL INCOME TAXES
A summary of the Federal income tax expense in the consolidated statements of
earnings is shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current....................................................... $ -- $ (1.4) $ (3.4)
Deferred...................................................... 29.7 26.4 23.9
----------------- ---------------- -----------------
Total............................................................ $ 29.7 $ 25.0 $ 20.5
================= ================ =================
</TABLE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings before
Federal income taxes and cumulative effect of accounting change by the
expected Federal income tax rate of 35%.
The sources of the difference and the tax effects of each are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Expected Federal income tax expense.............................. $ 30.0 $ 25.3 $ 16.6
Tax rate adjustment.............................................. -- -- 4.0
Other............................................................ (.3) (.3) (.1)
----------------- ---------------- -----------------
Federal Income Tax Expense....................................... $ 29.7 $ 25.0 $ 20.5
================= ================ =================
</TABLE>
F-13
<PAGE>
The components of the net deferred Federal income tax account are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
--------------------------------- ---------------------------------
ASSETS LIABILITIES ASSETS LIABILITIES
--------------- --------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Deferred policy acquisition costs, reserves and
reinsurance....................................... $ -- $ 253.8 $ -- $ 250.6
Investments.......................................... -- 20.5 38.4 --
Compensation and related benefits.................... 44.3 -- 52.2 --
Other................................................ 7.9 -- 25.6 --
--------------- --------------- --------------- ---------------
Total................................................ $ 52.2 $ 274.3 $ 116.2 $ 250.6
=============== =============== =============== ===============
</TABLE>
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,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Deferred policy acquisition costs, reserves and
reinsurance................................................... $ 3.2 $ (11.4) $ (6.8)
Investments...................................................... (4.2) 26.1 11.4
Compensation and related benefits................................ 13.0 (2.8) 1.9
Other............................................................ 17.7 14.5 17.4
----------------- ---------------- -----------------
Deferred Federal Income Tax Expense.............................. $ 29.7 $ 26.4 $ 23.9
================= ================ =================
</TABLE>
At December 31, 1995, EVLICO had net operating loss carryforwards of
approximately $10.2 million. 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>
DECEMBER 31,
------------------------------------
1995 1994
----------------- ----------------
(IN MILLIONS)
<S> <C> <C>
Direct premiums..................................................................... $ 34.1 $ 40.2
Reinsurance ceded................................................................... (.4) (.1)
----------------- ----------------
Premiums............................................................................ $ 33.7 $ 40.1
================= ================
Universal Life and Investment-type Product Policy Fee Income Ceded.................. $ 31.0 $ 24.9
================= ================
Policyholders' Benefits Ceded....................................................... $ 18.7 $ 8.3
================= ================
</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.
F-14
<PAGE>
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:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Personnel and facilities......................................... $ 249.8 $ 257.9 $ 252.7
Agent commissions and fees....................................... 127.4 122.6 103.0
</TABLE>
These cost allocations include various employee related obligations for
pensions and postretirement benefits. At December 31, 1995 and 1994, EVLICO
recorded as a reduction of shareholder's equity its allocated portion of an
additional minimum pension liability of $10.7 million and $1.2 million, net
of Federal income taxes, respectively, representing the excess of the
accumulated benefit obligation over the fair value of plan assets and accrued
pension liability.
During 1995, 1994 and 1993, Equitable Life restructured certain operations in
connection with cost reduction programs. EVLICO recorded provisions of $6.7
million, $6.9 million and $17.3 million in 1995, 1994 and 1993, 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
$17.6 million, $19.2 million and $16.0 million during 1995, 1994 and 1993,
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 $2.9 million, $3.0 million and $3.1 million in
1995, 1994 and 1993, respectively, which were reported as other income.
On August 31, 1993, EVLICO sold $250.0 million of primarily privately placed
below investment grade fixed maturities to EQ Asset Trust 1993 (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 $190.2 million and $226.7 million
at December 31, 1995 and 1994, 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 rate
swap transactions is on an accrual basis. Gains and losses related to
interest rate swap transactions are amortized as yield adjustments over the
remaining life of the underlying hedged security. Income and expense
resulting from interest rate swap activities are reflected in net investment
income. The notional amount of matched interest rate swaps outstanding at
December 31, 1995 was $444.8 million. The average unexpired terms at December
31, 1995 is 3.0 years. At December 31, 1995, the cost of terminating
outstanding matched swaps in a loss position was $10.1 million and the
unrealized gain on outstanding matched swaps in a gain position was $3.4
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, 1995 and 1994.
F-15
<PAGE>
Fair value for mortgage loans on real estate are estimated by discounting
future contractual cash flows using interest rates at which loans with
similar characteristics and credit quality would be made. Fair values for
foreclosed mortgage loans and problem mortgage loans are limited to the
estimated fair value of the underlying collateral if lower.
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,
-------------------------------------------------------------------
1995 1994
-------------------------------- --------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
--------------- --------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Consolidated Financial Instruments:
Mortgage loans on real estate....................... $ 771.5 $ 809.4 $ 888.5 $ 865.3
Other joint ventures................................ 158.7 158.7 196.4 196.4
Policy loans........................................ 1,300.1 1,374.0 1,185.2 1,138.7
Policyholders' account balances:
SPDA............................................. 1,265.8 1,272.0 1,744.3 1,732.7
Annuities certain and SCNILC..................... 188.0 188.1 159.0 151.3
</TABLE>
10. COMMITMENTS AND CONTINGENT LIABILITIES
EVLICO is the obligor under certain structured settlement agreements which
it had entered into with unaffiliated insurance companies and beneficiaries.
To satisfy its obligations under these agreements, 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.
11. LITIGATION
A number of lawsuits have been filed against life and health insurers in the
jurisdictions in which EVLICO does business involving insurers' sales
practices, alleged agent misconduct, failure to properly supervise agents,
and other matters. Some of the lawsuits have resulted in the award of
substantial judgments against other insurers, including material amounts of
punitive amounts, or in substantial settlements. In some states juries have
substantial discretion in awarding punitive damages. EVLICO, like other life
and health insurers, from time to time is involved in such litigation as
well as other legal actions and proceedings in connection with its
businesses. Some of these litigations have been brought on behalf of various
alleged classes of claimants and certain of these claimants seek damages of
unspecified amounts. While the ultimate outcome of such matters cannot be
predicted with certainty, in the opinion of management no such matter is
likely to have a material adverse effect on EVLICO's financial position or
results of operations.
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. For the years ended December 31, 1995, 1994 and 1993,
statutory (loss) earnings totaled $(102.5) million, $27.3 million and
$(88.4) million, respectively. No amounts are expected to be available for
dividends from EVLICO to Equitable Life in 1996.
At December 31, 1995, EVLICO, in accordance with various government and
state regulations, had $4.2 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 and equity on a GAAP basis.
F-16
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net change in statutory surplus and capital stock................ $ (56.6) $ 64.8 $ 184.4
Change in asset valuation reserves............................... 57.8 18.5 26.0
----------------- ---------------- -----------------
Net change in statutory surplus, capital stock
and asset valuation reserves.................................. 1.2 83.3 210.4
Adjustments:
Future policy benefits and policyholders' account balances.... (12.9) (13.5) (22.5)
Initial fee liability......................................... (34.2) (20.3) (11.6)
Deferred policy acquisition costs............................. 25.1 34.7 62.2
Deferred Federal income taxes................................. (29.7) (20.2) (23.9)
Valuation of investments...................................... 38.3 19.9 25.9
Limited risk reinsurance...................................... 146.9 .1 (5.4)
Contribution from Equitable Life.............................. (125.0) (50.0) (250.0)
Other, net.................................................... 46.4 2.0 41.7
----------------- ---------------- -----------------
Net Earnings..................................................... $ 56.1 $ 36.0 $ 26.8
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Statutory surplus and capital stock.............................. $ 720.9 $ 777.6 $ 712.7
Asset valuation reserves......................................... 146.1 88.3 69.8
----------------- ---------------- -----------------
Statutory surplus, capital stock and asset valuation reserves.... 867.0 865.9 782.5
Adjustments:
Future policy benefits and policyholders' account balances.... (367.4) (354.5) (341.1)
Initial fee liability......................................... (234.7) (200.5) (180.3)
Deferred policy acquisition costs............................. 2,037.8 2,077.1 1,946.7
Deferred Federal income taxes................................. (222.1) (134.4) (159.5)
Valuation of investments...................................... 68.4 (219.2) 4.4
Limited risk reinsurance...................................... (231.7) (378.6) (378.7)
Postretirement and other pension liabilities.................. (111.6) (105.8) (122.7)
Other, net.................................................... (68.0) (101.1) (98.6)
----------------- ---------------- -----------------
Shareholder's Equity............................................. $ 1,737.7 $ 1,448.9 $ 1,452.7
================= ================ =================
</TABLE>
F-17
<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, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
1995, 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 loan impairments in 1995, for
postemployment benefits in 1994 and for investment securities in 1993.
PRICE WATERHOUSE LLP
New York, New York
February 7, 1996
F-18
<PAGE>
APPENDIX A
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 over 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 IL COLI II 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, 1995 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>
FOR THE
FOLLOWING LONG-TERM LONG-TERM INTERMEDIATE- U.S. CONSUMER
PERIODS ENDING COMMON GOVERNMENT CORPORATE TERM GOV'T TREASURY PRICE
12/31/95: STOCKS BONDS BONDS BONDS BILLS INDEX
- -------- ------ ---------- --------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
1 year ............. 37.43 31.67 26.39 16.80 5.60 2.74
3 years ............ 15.26 12.82 10.47 7.22 4.13 2.72
5 years ............ 16.57 13.10 12.07 8.81 4.29 2.83
10 years ............ 14.84 11.92 11.25 9.08 5.55 3.48
20 years ............ 14.59 10.45 10.54 9.69 7.28 5.23
30 years ............ 10.68 7.92 8.17 8.36 6.72 5.39
40 years ............ 10.78 6.38 6.75 7.02 5.73 4.46
50 years ............ 11.94 5.35 5.75 5.87 4.80 4.36
60 years ............ 11.34 5.20 5.46 5.34 4.01 4.10
Since 1926 .......... 10.54 5.17 5.69 5.25 3.72 3.12
Inflation Adjusted
Since 1926 .......... 7.20 1.99 2.49 2.07 0.58 0.00
<FN>
- ----------
*Source: Ibbotson, Roger G. and Rex A. Sinquefield, STOCKS, BONDS, BILLS, AND
INFLATION (SBBI), 1982, updated in STOCKS, BONDS, BILLS, AND INFLATION 1996
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 1969-1995, 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
1969-1995; 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>
VM514 (5/96) CAT. #126945
<PAGE>
Part II
REPRESENTATION REGARDING REASONABLENESS OF
AGGREGATE POLICY FEES AND CHARGES
Equitable represents that the fees and charges deducted under the Policies
described in this Registration Statement, in the aggregate, are reasonable in
relation to the services rendered, the expenses to be incurred, and the risks
assumed by Equitable under the Policies. Equitable bases its representation on
its assessment of all of the facts and circumstances, including such relevant
factors as: the nature and extent of such services, expenses and risks, the need
for Equitable to earn a profit, the degree to which the Policies include
innovative features, and regulatory standards for the grant of exemptive relief
under the Investment Company Act of 1940 used prior to October 1996, including
the range of industry practice.
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
UNDERTAKING PURSUANT TO RULE 484(b)(1) UNDER
THE SECURITIES ACT OF 1933
Equitable's By-Laws provide, in Article VII, as follows:
7.1 Indemnification of Directors, Officers, Employees and Incorporators. To
the extent permitted by the law of the State of New York and subject to all
applicable requirements thereof:
(a) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he,
his testator or intestate, is or was a director, officer, employee or
incorporator of the Company shall be indemnified by the Company;
(b) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he,
his testator or intestate serves or served any other organization in
any capacity at the request of the Company may be indemnified by the
Company; and
(c) the related expenses of any such person in any of said categories may
be advanced by the Company.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Reconciliation and Tie.
The Supplement dated January 1, 1997, (for inforce business) consisting of
94 pages.
The Prospectus dated January 1, 1997, consisting of 122 pages.
The Prospectus dated July 24, 1996, of Equitable Variable consisting of 81
pages.
Representation regarding reasonableness of aggregate policy fees and charges.
Undertaking to file reports.
Undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933.
The signatures.
Written Consents of the following persons:
Mary P. Breen, Vice President and Associate General Counsel of Equitable
(See exhibit 2(a))
Barbara Fraser, F.S.A., M.A.A.A., Vice President of Equitable (See exhibit 2(b))
Independent Public Accountants (See exhibit 6)
The following exhibits: Exhibits required by Article IX, paragraph A of Form
N-8B-2:
<TABLE>
<S> <C> <C>
1-A(1)(a)(i) Certified resolution re Authority to Market Variable Life
Insurance and Establish Separate Accounts.
1-A(2) Inapplicable.
1-A(3)(a) See Exhibit 1-A(8).
1-A(3)(b) Broker-Dealer and General Agent Sales Agreement.
1-A(3)(c) See Exhibit 1-A(8)(i).
1-A(4) Inapplicable.
1-A(5)(a)(i) Flexible Premium Variable Life Insurance Policy (96-300)
(IL COLI II) (Equitable Variable).
1-A(5)(a)(ii) Flexible Premium Variable Life Insurance Policy (96-300)
(IL COLI II) (Equitable).
1-A(5)(b) Name change endorsement (S.97-1).
+ 1-A(5)(c) Supplemental Term Insurance Rider on the Insured (R96-100).
(Equitable Variable).
+ 1-A(5)(d) Supplemental Term Insurance Rider on the Insured (R96-100).
(Equitable).
+ 1-A(5)(e) Substitution of Insured Rider (R94-212). (Equitable Variable)
+ 1-A(5)(f) Substitution of Insured Rider (R94-212). (Equitable)
+ 1-A(5)(g) Accelerated Death Benefit Rider (R94-102). (Equitable Variable)
+ 1-A(5)(h) Accelerated Death Benefit Rider (R94-102). (Equitable)
1-A(6)(a) Declaration and Charter of Equitable, as amended.
1-A(6)(b) By-Laws of Equitable, as amended.
1-A(7) Inapplicable.
1-A(8) Distribution and Servicing Agreement among EQ Financial
Consultants, Inc. (formerly known as Equico Securities, Inc.),
Equitable and Equitable Variable dated as of May 1, 1994.
1-A(8)(i) Schedule of Commissions.
1-A(9)(a) Agreement and Plan of Merger of Equitable
Variable with and into Equitable dated
September 19, 1996.
1-A(10)(i) Application EV4-200Y. (Equitable Variable)
1-A(10)(ii) Application EV4-200Y. (Equitable)
<FN>
+ State variations not included
</FN>
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Other Exhibits:
<S> <C> <C>
2(a) Opinion and Consent of Mary P. Breen, Vice President and
Associate General Counsel of Equitable (policy form 96-300.)
2(b)(i) Opinion and Consent of Barbara Fraser, F.S.A, M.A.A.A.,
Vice President of Equitable.
2(b)(ii) Consent of Barbara Fraser, F.S.A., M.A.A.A., Vice President
of Equitable, with respect to Exhibit 2(b)(i).
2(b)(iii) Opinion and Consent of Barbara Fraser, F.S.A, M.A.A.A.,
Vice President of Equitable.
3 Inapplicable.
4 Inapplicable.
5 Financial Data Schedule (See Exhibit 27 below).
6 Consent of Independent Public Accountant.
7(a) Powers-of-Attorney.
8 Description of Equitable's Issuance, Transfer and Redemption
Procedures for Flexible Premium Policies pursuant to Rule 6e-
3(T)(b)(12)(iii) under the Investment Company Act of 1940.
27 Financial Data Schedule.
</TABLE>
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City and State of New York on the 9th day of December,
1996.
SEPARATE ACCOUNT FP OF THE EQUITABLE
LIFE ASSURANCE SOCIETY OF THE UNITED STATES
By: THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES, DEPOSITOR
By: /s/ Samuel B. Shlesinger
------------------------
(Samuel B. Shlesinger)
Senior Vice President
Attest: /s/ Linda Galasso
-----------------
(Linda Galasso)
Assistant Secretary
December 9, 1996
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and State of New York on the
9th day of December, 1996.
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: /s/ Samuel B. Shlesinger
------------------------
(Samuel B. Shlesinger)
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated:
PRINCIPAL EXECUTIVE OFFICERS:
* Joseph J. Melone Chairman of the Board
* James M. Benson President and Chief Executive Officer
* William T. McCaffrey Senior Executive Vice President and Chief
Operating Officer
* Jerry M. de St. Paer Executive Vice President
PRINCIPAL FINANCIAL OFFICER:
* Stanley B. Tulin. Senior Executive Vice President and Chief
Financial Officer
PRINCIPAL ACCOUNTING OFFICER:
/s/ Alvin H. Fenichel
Alvin H. Fenichel Senior Vice President and Controller
December 9, 1996
*DIRECTORS:
Claude Bebear Jean-Rene Foutou Winthrop Knowlton
James M. Benson Norman C. Francis Arthur L. Liman
Christopher J. Brocksom Donald J. Greene George T. Lowy
Francoise Colloc'h John T. Hartley William T. McCaffrey
Henri de Castries John H.F. Haskell, Jr. Joseph J. Melone
Joseph L. Dionne W. Edwin Jarmain Didier Pineau-Valencienne
William T. Esrey G.Donald Johnson, Jr. George J. Sella, Jr.
Dave H. Williams
*By: /s/ Samuel B. Shlesinger
------------------------
(Samuel B. Shlesinger)
Attorney-in-Fact
December 9, 1996
II-5
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT NO. TAG VALUE
- ----------- ---------
<S> <C> <C>
1-A(1)(a)(i) Certified resolution re Authority to Market Variable Life
Insurance and Establish Separate Accounts. EX-99.1A1ai RESOLU
1-A(3)(b) Broker-Dealer and General Agent Sales Agreement. EX-99.1A3b BROKR AGR
1-A(5)(a)(i) Flexible Premium Variable Life Insurance Policy (96-300)
(IL COLI II) (Equitable Variable). EX-99.1A5ai POLICY
1-A(5)(a)(ii) Flexible Premium Variable Life Insurance Policy (96-300)
(IL COLI II) (Equitable). EX-99.1A5aii POLICY
1-A(5)(b) Name change endorsement (S.97-1). EX-99.1A5b ENDORS
1-A(5)(c) Supplemental Term Insurance Rider on the Insured (R96-100).
(Equitable Variable). EX-99.1A5c INS RIDER
1-A(5)(d) Supplemental Term Insurance Rider on the Insured (R96-100).
(Equitable). EX-99.1A5d Rider
1-A(5)(e) Substitution of Insured Rider (R94-212). (Equitable Variable) EX-99.1A5e RIDER
1-A(5)(f) Substitution of Insured Rider (R94-212). (Equitable) EX-99.1A5f RIDER
1-A(5)(g) Accelerated Death Benefit Rider (R94-102). (Equitable Variable) EX-99.1A5g RIDER
1-A(5)(h) Accelerated Death Benefit Rider (R94-102). (Equitable) EX-99.1A5h RIDER
1-A(6)(a) Declaration and Charter of Equitable Variable, as amended. EX-99.1A6a CHARTER
1-A(6)(b) By-Laws of Equitable Variable, as amended. EX-99.1A6b BYLAWS
1-A(8) Distribution and Servicing Agreement among EQ Financial
Consultants, Inc. (formerly known as Equico Securities,
Inc.), Equitable and Equitable Variable dated as of
May 1, 1994. EX-99.1A8 DIST AGR
1-A(8)(i) Schedule of Commissions. EX-99.1A8i SCHED COM
1-A(9)(a) Agreement and Plan of Merger of Equitable Variable with and
into Equitable dated September 19, 1996. EX-99.1A9a MERG AGR
1-A(10)(i) Application EV4-200Y. (Equitable Variable) EX-99.1-A10i APPLIC
1-A(10)(ii) Application EV4-200Y. (Equitable) EX-99.1A10ii
2(a) Opinion and Consent of Mary P. Breen, Vice President and
Associate General Counsel of Equitable (policy form 96-300.) EX-99.2a LEG OPIN
2(b)(i) Opinion and Consent of Barbara Fraser, F.S.A, M.A.A.A.,
Vice President of Equitable. EX-99.2bi ACT OPIN
2(b)(ii) Consent of Barbara Fraser, F.S.A., M.A.A.A., Vice President EX-99.2bi Opinion
of Equitable, with respect to Exhibit 2(b)(i).
2(b)(iii) Opinion and Consent of Barbara Fraser, F.S.A, M.A.A.A.,
Vice President of Equitable. EX-99.2bii ACT OPIN
6 Consent of Independent Public Accountant. EX-99.6 CONSENT
7(a) Powers-of-Attorney. EX-99.7a POW ATTY
8 Description of Equitable's Issuance, Transfer and Redemption
Procedures for Flexible Premium Policies pursuant to Rule
6e-3(T)(b)(12)(iii) under the Investment Company Act of 1940. EX-99.8 DESC PROCED
27 Financial Data Schedule. EX-27
</TABLE>
II-6
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
ASSISTANT SECRETARY'S CERTIFICATE
As an Assistant Secretary of The Equitable Life Assurance Society of the
United States (the "Corporation"), a corporation organized and existing under
the laws of the State of New York, I, Janet E. Hannon, hereby certify that
attached hereto marked Exhibit A is a true, correct, and complete copy of
Resolution B28-95, duly adopted by the Board of Directors of the Corporation at
a meeting held on September 21, 1995, at which a quorum was present and acting
throughout; and that said resolution has not been amended, annulled, rescinded,
or revoked, and is now in full force and effect.
IN WITNESS WHEREOF, I have hereunto affixed my signature and the seal of
the Corporation this 30th day of May, 1996.
SEAL /s/ Janet E. Hannon
-------------------
Assistant Secretary
7275N/21
<PAGE>
EXHIBIT A
AUTHORITY TO MARKET VARIABLE LIFE INSURANCE
AND ESTABLISH SEPARATE ACCOUNTS
-------------------------------
B28-95
WHEREAS, by memorandum to Executive Vice President and Chief Administrative
Officer William T. McCaffrey, dated September 6, 1995 (the "Memorandum"), Senior
Vice President Samuel B. Shlesinger referred to a proposal currently under
consideration by management to merge Equitable Variable Life Insurance Company
into Equitable Life (the "Proposed Merger");
WHEREAS, if the Proposed Merger were to occur, the Company would require
all necessary licenses and other approvals to carry on the business of EVLICO,
some of which must be applied for in advance upon authority granted by this
Board to engage in a variable life insurance business; and
WHEREAS, the Memorandum requests that this Board authorize, contingent upon
the effectiveness of the Proposed Merger, the conduct by the Company of a
variable life insurance business and other actions to facilitate the operation
of such business;
NOW, THEREFORE, BE IT
RESOLVED, That authorization is given to continue studying the feasibility
of merging EVLICO into the Company;
FURTHER RESOLVED, That, contingent upon the effectiveness of the Proposed
Merger, the Company shall commence a variable life insurance business in order
to perform its obligations under the EVLICO variable life insurance policies
issued prior to the Proposed Merger and to offer and sell variable life
insurance policies thereafter;
FURTHER RESOLVED, That the Company hereby establishes Separate Accounts I,
FP, PVT and P-1 (the "Separate Accounts") to become operational upon the
effectiveness of the Merger;
FURTHER RESOLVED, That the Separate Accounts shall fund variable life
insurance policies currently funded in corresponding separate accounts of EVLICO
and policies to be issued by Equitable Life after the Merger.
<PAGE>
FURTHER RESOLVED, That the Chief Investment Officer of the Company, with
power to sub-delegate, is authorized in his discretion as he may deem
appropriate from time to time and in accordance with applicable laws and
regulations (a) to divide the Separate Accounts into one or more divisions or
subdivisions, (b) to modify or eliminate any such division or subdivision, (c)
to change the designation of the Separate Accounts to another designation (d) to
designate additional divisions or subdivisions thereof and (e) to authorize and
establish any and all additional separate accounts as may be deemed by such
officer to by necessary or desirable for the Company's variable life insurance
business and having investment policies substantially similar to any current or
future separate account of the Company which has been or may be specifically
approved by this Board;
FURTHER RESOLVED, That the officers of the Company be, and each of them
hereby is, authorized to invest cash in the Separate Accounts or in any division
thereof as may be deemed necessary or appropriate to facilitate the commencement
of the Separate Account's operations or to meet any minimum capital requirements
under the Investment Company Act of 1940 (the "1949 Act") and to transfer cash
or securities from time to time between the Company's general account and any
Separate Account as deemed necessary or appropriate as long as such transfers
are not prohibited by law and are consistent with the terms of the variable life
insurance policies issued by the Company providing for allocations to such
Separate Accounts;
FURTHER RESOLVED, That authority is hereby delegated to the Chief Executive
Officer, the President and the Chief Investment Officer, with power to
sub-delegate, to adopt Rules and Regulations for Certain Operations of the
Separate Accounts, providing for, among other things, criteria by which the
Company shall institute procedures to provide for a pass-through of voting
rights to the owners of variable life insurance policies issued by the Company
providing for allocation to any Separate Account with respect to the shares of
any investment companies which are held in such Separate Account;
FURTHER RESOLVED, That the initial fundamental investment policy of each
Separate Account shall be the investment policy of the corresponding separate
account of EVLICO at the effective date of the Proposed Merger, provided,
however, that such investment policy may be changed from time to time in
accordance with applicable law by the Chief Investment Officer of the Company or
such other officer as he may designate;
FURTHER RESOLVED, That the Company may register under the Securities Act of
1933 (the "1933 Act") variable life insurance policies, or units of interest
thereunder, under which amounts will be allocated by the Company to the Separate
Accounts to support reserves for such policies and, in connection therewith, the
officers of the Company be, and each of them hereby is, authorized, with the
<PAGE>
assistance of accountants, legal counsel and other consultants, to prepare,
execute and file with the Securities and Exchange Commission, in the name and on
behalf of the Company, registration statements under the 1933 Act, including
prospectuses, supplements, exhibits and other documents relating thereto, and
amendments to the foregoing, in such form as the officer executing the same may
deem necessary or appropriate;
FURTHER RESOLVED, That the officers of the Company are authorized, with the
assistance of accountants, legal counsel and other consultants, to take all
actions necessary to register the Separate Accounts under the 1940 Act and to
take such related actions as they deem necessary and appropriate to carry out
the foregoing;
FURTHER RESOLVED, That the officers of the Company be, and each of them
hereby is, authorized to prepare, execute, and file with the Securities and
Exchange Commission such no-action requests and applications for such
exemptions from or orders under the federal or state securities laws as they may
from time to time deem necessary or desirable;
FURTHER RESOLVED, That the President of the Company is hereby appointed as
agent for service under any registration statement under the 1933 Act or the
1940 Act relating to the Separate Accounts, such person to by duly authorized to
receive communications and notices from the Securities and Exchange Commission
with respect to such registration statement and to exercise powers given to such
agent by the 1933 Act and 1940 Act and the rules and regulations thereunder, and
any other applicable law;
FURTHER RESOLVED, That the officers of the Company be, and each of them
hereby is, authorized to effect, in the name and on behalf of the Company, all
such registrations, filing and qualifications under applicable securities laws
and regulations and under insurance securities laws and insurance laws and
regulations of such states and other jurisdictions as they may deem necessary or
appropriate, with respect to the Company, and with respect to any variable life
insurance policies under which amounts will be allocated by the Company to the
Separate Accounts to support reserves for such policies; such authorization to
include registration, filing and qualification of the Company and of said
policies, as well as registration, filing and qualification of officers,
employees and agents of the Company as brokers, dealers, agents, salesmen, or
otherwise; and such authorization shall also include, in connection therewith,
authority to prepare, execute, acknowledge and file all such applications,
applications for exemptions, certificates, affidavits, covenants, consents to
service of process and other instruments and to take all such action as the
officer executing the same or taking such action may deem necessary or
desirable;
<PAGE>
B28-95 (continued)
FURTHER RESOLVED, That the standards of suitability and code of conduct
relating to the doing by the Company of a variable life insurance business, in
the forms annexed to the Memorandum, are hereby approved; and
FURTHER RESOLVED, That the officers of the Company are, and each of them
hereby is, authorized and instructed to take all such acts and prepare and
deliver all such documents in the name and on behalf of the Company, including
all documents required by state licensing authorities to conduct a variable life
insurance business, as may be necessary or desirable to effectuate the purposes
of the foregoing resolutions.
BROKER-DEALER AND GENERAL AGENT
SALES AGREEMENT
AGREEMENT, by and among EQ Financial Consultants, Inc. ("Distributor"),
__________________________ ("Broker-Dealer") and ___________________________
("General Agent").
W I T N E S S E T H :
WHEREAS, the Distributor and the Broker-Dealer are both broker-dealers
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended ("1934 Act"), and members of the National
Association of Securities Dealers, Inc.;
WHEREAS, the General Agent, which is an Affiliate of, or the same person
as, the Broker-Dealer, or whose employees are also employees of the
Broker-Dealer, is an insurance agency duly licensed to sell variable life
insurance and variable annuities in any state or other jurisdiction in which the
General Agent intends to perform hereunder;
WHEREAS, The Equitable Life Assurance Society of the United States
("Equitable") has appointed the Distributor as principal underwriter or
distributor of the Variable Accounts and the MVA Interests and as distributor of
the Contracts and has authorized the Distributor to recommend persons for
appointment as agents of Equitable to solicit applications for the sale of the
Contracts;
WHEREAS, it is intended that the General Agent shall be authorized to offer
and sell the Contracts to the general public subject to the terms and conditions
set forth more fully herein;
WHEREAS, Equitable has authorized the Distributor to enter into separate
written agreements with broker-dealers registered under the 1934 Act which agree
to participate in the distribution of the Contracts, and the parties hereto
desire that the Broker-Dealer be authorized to solicit applications for the sale
of the Contracts;
WHEREAS, Contracts may be issued by an insurance company which is an
Affiliate of Equitable and the Distributor may be authorized to promote the
offer and sale of such Contracts in the same manner that Equitable has
authorized the Distributor to act, as described above.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and promises herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
ss.1.1 Defined Terms. In addition to any terms defined elsewhere in this
Agreement, the terms defined in this Section 1.1, whenever used in this
Agreement (including in the Schedules and Exhibits), shall have the respective
meanings indicated.
a. Affiliated Person or Affiliate -- With respect to a person,
any other person controlling, controlled by, or under common control with, such
person.
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b. Agent -- An individual associated with the General Agent and
registered with the NASD as a representative of the Broker-Dealer who is
appointed by an Equitable Life Company as an insurance agent for the purpose of
soliciting applications for the Contracts.
c. Broker-of-Record -- The party designated in the Equitable
Life Companies records as the person, with respect to a Contract, who is
entitled to receive compensation payable with respect to such Contract and who
is authorized to contact directly the owner of such Contract. In the case of
compensation payable with respect to a Premium, the Broker-of-Record shall be
the party designated as such in the records of an Equitable Life Company, at the
time such Premium is accepted by such Equitable Life Company. In the case of any
payment of compensation payable with respect to Contract value or client
services, the Broker-of-Record shall be the party designated as such in the
records of an Equitable Life Company, in accordance with the rules and
procedures of the Equitable Life Companies at the time any such payment is
payable. In the case of compensation payable on annuitization of a Contract, the
Broker-of-Record shall be the party designated as such in the records of an
Equitable Life Company on the annuity commencement date specified in such
Contract.
d. Contract Prospectus -- The prospectus for the interests under
the Contracts included within a Contract Registration Statement and including
any Contract prospectus or supplement separately filed under the 1933 Act. The
Contract Prospectus also shall include the statement of additional information
which is part of the Contract Registration Statement, unless the context
otherwise requires.
e. Contract Registration Statements -- The most recent effective
registration statements, or most recent effective post-effective amendments
thereto, relating to interests under the Contracts and in the Variable Accounts,
as required by the 1933 Act and the 1940 Act, including financial statements
therein and all exhibits thereto.
f. Contracts -- All classes of life insurance policies and
annuity contracts, including certificates, issued by Equitable or by an
Affiliate of Equitable distributed by the Distributor, except those which are
identified in Schedule I. Schedule I may be modified from time to time, as
provided in Section 2.6.
g. Equitable Life Companies or, individually, an Equitable Life
Company -- Equitable and any Affiliate of Equitable which is an insurance
company.
h. MVA Interests -- The market value adjustment interests, if
any, under the Contracts.
i. NASD -- National Association of Securities Dealers, Inc.
j. 1940 Act -- Investment Company Act of 1940, as amended.
k. 1934 Act -- Securities Exchange Act of 1934, as amended.
l. 1933 Act -- Securities Act of 1933, as amended.
m. Premium -- Any premium, contribution or other consideration
relating to the Contracts.
n. SEC or Commission -- Securities and Exchange Commission.
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o. Trust -- The Hudson River Trust and any other entity available
for investment through the Variable Accounts under the Contracts.
p. Trust Prospectus -- The prospectus for the Trust included
within the Trust Registration Statement and including any Trust prospectus or
supplement separately filed under the 1933 Act. The Trust Prospectus also shall
include the statement of additional information which is part of the Trust
Registration Statement, unless the context otherwise requires.
q. Trust Registration Statement -- The most recent effective
registration statement or most recent effective post-effective amendment thereto
relating to the Trust as required by the 1933 Act and the 1940 Act, including
financial statements therein and all exhibits thereto.
r. Variable Accounts -- Segregated asset accounts, each of which
has been established by an Equitable Life Company pursuant to state law as a
funding vehicle for the Contracts. The Variable Accounts are divided into
divisions that invest in shares of the Trust.
ss.1.2 Cross-References. All references in this Agreement to a Section,
Article, Schedule or Exhibit are to a section, article, schedule or exhibit of
this Agreement, unless otherwise indicated.
ARTICLE II
AUTHORIZATION OF BROKER-DEALER AND GENERAL AGENT
ss.2.1 Authority to Distribute Contracts. Pursuant to the authority
granted to it by Equitable, the Distributor hereby authorizes the Broker-Dealer,
under the securities laws, and General Agent, under the insurance laws, each in
a non-exclusive capacity, to distribute the Contracts. The Broker-Dealer and the
General Agent accept such authorization and agree to use their best efforts to
find purchasers for the Contracts in each case acceptable to the Equitable Life
Company issuing such Contracts. The Broker-Dealer and the General Agent
understand that the public offering of and solicitation for interests under the
Contracts are not permitted to commence, or to continue, unless the Contract
Registration Statements have become effective and, with respect to each state or
other jurisdiction in which Contract applications are to be solicited, the
Contracts are qualified for sale under all applicable securities and insurance
laws. The Broker-Dealer and the General Agent agree that the solicitation of
applications for the sale of the Contracts will commence as soon as practicable
after the Contract Registration Statements have become effective.
ss.2.2 Notification by Distributor. The Distributor shall notify the
Broker-Dealer and the General Agent:
a. If there are no effective Contract Registration Statements,
when the Contract Registration Statements have become effective;
b. Of all states and other jurisdictions in which the Contracts
are qualified for sale and of the states and other jurisdictions in which the
Contracts may not be lawfully sold;
c. Of any request by the SEC for any amendments or supplements to
a Contract Registration Statement or of any request for additional information
that must be provided by the Broker-Dealer or the General Agent or any Affiliate
of the Broker-Dealer or the General Agent;
d. Of the issuance by the SEC of any stop order with respect to a
Contract Registration Statement or the initiation of any proceedings for that
purpose or for any other purpose relating to the registration and/or offering of
the Contracts;
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e. If any event occurs as a result of which the Contract
Prospectus(es) or any sales literature for the Contracts would include any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading.
The Distributor will provide the Broker-Dealer and the General Agent with
notification of these matters immediately by telephone, with notification in
writing promptly thereafter.
ss.2.3 Authority to Recommend Agent Appointments. The General Agent is
vested under this Agreement with power and authority to select and recommend
individuals who are associated with the General Agent and are registered
representatives of the Broker-Dealer for appointment as agents of Equitable, and
only individuals so recommended by the General Agent to the Distributor shall be
eligible to become Agents, provided that the number of Agents with appointments
in effect under this Agreement shall not at any time exceed five. Equitable
reserves the right in its sole discretion to refuse to appoint any proposed
agent or, once appointed, to terminate the same at any time with or without
cause.
ss.2.4 Limitations on Authority. Neither the Broker-Dealer nor the
General Agent shall possess or exercise any authority on behalf of the
Distributor or the Equitable Life Companies other than that expressly conferred
on the Broker-Dealer or the General Agent by this Agreement. In particular, and
without limiting the foregoing, neither the Broker-Dealer nor the General Agent
shall have any authority, nor shall either grant such authority to any Agent, on
behalf of the Distributor (i) to make, alter or discharge any Contract or other
contract entered into pursuant to a Contract; (ii) to waive any Contract
provision; (iii) to extend the time for payment of any Premiums; or (iv) to
receive any monies or Premiums from applicants for or purchasers of the
Contracts (except for the sole purpose of forwarding monies or Premiums to an
Equitable Life Company).
ss.2.5 Suitability. The Distributor wishes to ensure that the Contracts
solicited by Broker-Dealer will be issued to persons for whom the Contracts will
be suitable. Broker-Dealer shall take reasonable steps to ensure that Agents
shall not make recommendations to an applicant to purchase any Contract in the
absence of reasonable grounds to believe that the purchase of such Contract is
suitable for such applicant. While not limited to the following, a determination
of suitability shall be based on information furnished to an Agent after
reasonable inquiry concerning the applicant's insurance and investment
objectives, financial situation and needs.
ss.2.6 Insurer's Right to Reject Applications. The Broker-Dealer and the
General Agent acknowledge that each Equitable Life Company has the right in its
sole discretion to reject any applications or Premiums received by it and to
return or refund to an applicant such applicant's Premium. In the event that an
Equitable Life Company rejects an application solicited by an Agent, such
Equitable Life Company will return any Premium paid by the applicant to such
applicant, or to the soliciting Agent for prompt forwarding to such applicant.
In the event that a purchaser exercises his or her free look right under a
Contract, any amount to be refunded as provided in such Contract will be so
refunded to the purchaser by or on behalf of the Equitable Life Company that
issued such Contract, or to the soliciting Agent for prompt forwarding to such
purchaser.
ss.2.7 Contracts Included and Contracts Excluded Under Agreement. This
Agreement applies to all classes of annuity contracts or life insurance
contracts issued by an Equitable Life Company and distributed by the Distributor
("Contracts"). Schedule I to this Agreement describes the life insurance and
annuity contracts which are excluded as Contracts under this Agreement. Schedule
I may be amended by the Distributor in its sole discretion from time to time to
add or to delete classes of annuity contracts or life insurance contracts. The
provisions of this Agreement shall apply with equal force to all Contracts from
time to time covered by it unless the context otherwise requires.
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ss.2.8 Independent Contractor Status. The Distributor acknowledges that
the Broker-Dealer and the General Agent are each independent contractors.
Accordingly, while the Broker-Dealer and the General Agent agree to use their
best efforts to solicit applications for the Contracts, the Broker-Dealer and
the General Agent are not obliged or expected to give full time and energies to
the performance of their obligations hereunder or to sell or solicit a specified
number of Contracts, nor are the Broker-Dealer and the General Agent obliged or
expected to represent the Distributor or any Equitable Life Company exclusively.
Nothing herein contained shall constitute the Broker-Dealer, the General Agent,
or any agents or representatives of the Broker-Dealer or the General Agent as
employees of an Equitable Life Company or the Distributor.
ARTICLE III
LICENSING AND REGISTRATION OF BROKER-DEALER, GENERAL AGENT AND AGENTS
ss.3.1 Broker-Dealer Qualifications. The Broker-Dealer represents that it
is a broker-dealer registered with the SEC under the 1934 Act, and is a member
of the NASD. The Broker-Dealer must, at all times when performing its functions
and fulfilling its obligations under this Agreement, be duly registered as a
broker-dealer under the 1934 Act and in each state or other jurisdiction in
which Broker-Dealer intends to perform its functions and fulfill its obligations
hereunder and in which such registration is required, and be a member in good
standing of the NASD.
ss.3.2 General Agent Qualifications. The General Agent represents that it
is a licensed life insurance agent where required to solicit applications. The
General Agent must, at all times when performing its functions and fulfilling
its obligations under this Agreement, be duly licensed to sell the Contracts in
each state or other jurisdiction in which the General Agent intends to perform
its functions and fulfill its obligations hereunder.
ss.3.3 Qualifications of Broker-Dealer Representatives. The Broker-Dealer
represents and warrants that it shall take all necessary action to ensure that
no individual shall offer or sell the Contracts on behalf of Broker-Dealer in
any state or other jurisdiction in which the Contracts may lawfully be sold
unless such individual is an associated person of Broker-Dealer (as that term is
defined in Section 3(a)(18) of the 1934 Act), is neither subject to a statutory
disqualification (as that term is defined in the 1934 Act) nor prohibited from
engaging in the business of insurance (under the Violent Crime Control and Law
Enforcement Act of 1994), and is duly registered with the NASD and any
applicable state securities regulatory authority as a registered person of
Broker-Dealer qualified to distribute the Contracts in such state or other
jurisdiction.
ss.3.4 Qualifications of General Agent's Agents and Appointment of Agents.
The General Agent represents and warrants that it shall take all necessary
action to ensure that no individual shall offer or sell the Contracts on behalf
of the General Agent in any state or other jurisdiction unless such individual
is duly appointed as an agent of the General Agent, duly licensed and appointed
as an agent of the appropriate Equitable Life Company and appropriately
licensed, registered or otherwise qualified to offer and sell the Contracts to
be offered and sold by such individual under the insurance laws of such state or
jurisdiction. The General Agent understands that certain states may require that
a special variable contracts examination be passed by agent before he or she can
solicit applications for the Contracts. Nothing in this Agreement is to be
construed as requiring an Equitable Life Company to obtain a license or issue a
consent or appointment to enable any particular agent to sell Contracts. All
matters concerning the licensing of any individuals recommended for appointment
by the General Agent under any applicable state insurance law shall be a matter
directly between the General Agent and such individual. The General Agent shall
furnish the Equitable Life Companies with proof of proper licensing of such
individual or other proof, reasonably acceptable to the Equitable Life
Companies, of satisfaction by such individual of licensing requirements prior to
the appointment of any such individual as an agent of any Equitable Life
Company. In conjunction with the submission of appointment papers for all such
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individuals as insurance agents of an Equitable Life Company, the General Agent
shall fulfill all requirements set forth in the General Letter of
Recommendation, which is Exhibit A, and shall be deemed to represent that each
individual is competent and qualified to act as an agent for the Equitable Life
Companies and to hold himself or herself out in good faith to the general
public.
ARTICLE IV
BROKER-DEALER AND GENERAL AGENT COMPLIANCE
ss.4.1 Supervisory Responsibilities of General Agent. The General Agent
shall train, supervise and be solely responsible for the conduct of the Agents
in their solicitation activities in connection with the Contracts, and shall
supervise Agents' strict compliance with applicable rules and regulations of any
governmental or other insurance authorities that have jurisdiction over
insurance contract activities, as well as the rules and procedures of the
Equitable Life Companies pertaining to the solicitation, sale and submission of
applications for the Contracts and the provision of services relating to the
Contracts. The General Agent shall be solely responsible for background
investigations of the proposed agents to determine their qualifications, good
character and moral fitness to sell the Contracts.
ss.4.2 Supervisory Responsibilities of Broker-Dealer. The Broker-Dealer
shall be responsible for securities training, supervision and control of the
Agents in connection with their solicitation activities and any incidental
services with respect to the Contracts and shall supervise Agents' strict
compliance with applicable federal and state securities laws and NASD
requirements in connection with such solicitation activities and with the rules
and procedures of the Equitable Life Companies.
ss.4.3 Compliance With Applicable Laws. The Broker-Dealer and the General
Agent hereby represent and warrant that they are in compliance with all
applicable federal and state securities laws and regulations and all applicable
insurance laws and regulations, including, without limitation, state insurance
laws and regulations imposing insurance licensing requirements. The
Broker-Dealer and the General Agent each agree to carry out their respective
sales and administrative activities and obligations under this Agreement in
continued compliance with federal and state laws and regulations, including
those governing securities and insurance-related activities or transactions, as
applicable. The Broker-Dealer and the General Agent shall notify the Distributor
and the Equitable Life Companies immediately in writing if Broker-Dealer and/or
the General Agent fail to comply with any of the laws and regulations applicable
to either of them.
ss.4.4 Restrictions on Sales Activity. The Broker-Dealer and the General
Agent and Agents shall not offer or attempt to offer the Contracts, nor solicit
applications for the Contracts, nor deliver Contracts, in any state or other
jurisdiction in which the Contracts may not lawfully be sold or offered for
sale. For purposes of determining where the Contracts may be offered and
applications solicited, the Broker-Dealer and the General Agent may rely on
written notification, as revised from time to time, received from the
Distributor.
ss.4.5 Premiums and Other Payments. All Premiums and loan repayments
shall be sent promptly (and in any event not later than two business days after
receipt) to the appropriate Equitable Life Company at the address indicated in
the rules and procedures of the Equitable Life Companies, or at such other
address as the Equitable Life Companies or the Distributor may subsequently
specify in writing. Each initial Premium shall be accompanied by a properly
completed application for a Contract, unless such Premium is submitted in
accordance with the procedures set forth in Exhibit B, which have been accepted
and agreed to by the Broker-Dealer and the General Agent, as provided in Exhibit
B. Checks in payment of Premiums or outstanding loans shall be drawn to the
order of the appropriate Equitable Life Company.
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ss.4.6 Misdirected Payments. In the event that Premiums or loan
repayments are sent to the General Agent or Broker-Dealer, rather than to the
appropriate Equitable Life Company, the General Agent and Broker-Dealer shall
promptly (and in any event, within two business days) remit such Premiums to the
appropriate Equitable Life Company at the address indicated in the rules and
procedures of the Equitable Life Companies. The General Agent and Broker-Dealer
acknowledge that if any Premium or other payment is held at any time by either
of them, such Premium or other payment shall be held on behalf of the client,
and the General Agent or Broker-Dealer shall segregate such Premium or other
payment from their own funds and promptly (and in any event, within two business
days) remit such Premium or other payment to the Equitable Life Company issuing
the Contract pursuant to which such amounts have been paid.
ss.4.7 Delivery of Contracts. Upon issuance of a Contract by an Equitable
Life Company and delivery of such Contract to the Agent who solicited its
purchase, the soliciting Agent shall promptly deliver such Contract to its
purchaser. For purposes of this provision, "promptly" shall be deemed to mean
not later than five calendar days. Consistent with its administrative
procedures, each Equitable Life Company will assume that a Contract issued by it
will be delivered by the soliciting Agent to the purchaser of such Contract
within five calendar days. As a result, if a purchaser exercises the free look
rights under a Contract, the Broker-Dealer and the General Agent shall indemnify
the Equitable Life Company issuing a Contract for any loss incurred by such
Equitable Life Company that results from the soliciting Agent's failure to
deliver such Contract to its purchaser within the contemplated five-calendar-day
period.
ss.4.8 Restrictions on Communications. Neither the Broker-Dealer nor the
General Agent, nor any of their directors, partners, officers, employees,
registered persons, associated persons, agents or affiliated persons, in
connection with the offer or sale of the Contracts, shall give any information
or make any representations or statements, written or oral, concerning the
Contracts, the Variable Accounts or the Trust other than information or
representations contained in the Contract and Trust Prospectuses, statements of
additional information and Registration Statements, or in reports or proxy
statements therefor, or in promotional, sales or advertising material or other
information supplied and approved in writing by the Distributor.
ss.4.9 Directions Given on Behalf of Contract Owners. The Broker-Dealer
and the General Agent shall be solely responsible for the accuracy and propriety
of any instruction given or action taken by an Agent on behalf of an owner or
prospective owner of a Contract, including any instruction or action pursuant to
Exhibit B. Neither the Distributor nor the Equitable Life Companies shall have
any responsibility or liability for any action taken or omitted by it or by them
in good faith in reliance on or by acceptance of such an instruction or action.
ss.4.10 Restrictions on Sales Material and Name Usage. The Broker-Dealer
and the General Agent shall neither use nor authorize the use of any
promotional, sales or advertising material relating to the Contracts, the
Equitable Life Companies, the Variable Accounts, the MVA Interests or the Trust
without the prior written approval of the Distributor. Furthermore, the
Broker-Dealer and the General Agent shall neither use nor authorize the use of
the name of Equitable or of an Affiliate of Equitable, or any other name,
trademark, service mark, symbol or trade style that is now or may hereafter be
owned by Equitable or by an Affiliate of Equitable, except in the manner and to
the extent that such use may be specifically authorized in writing by Equitable
or the Distributor.
ss.4.11 Market Timing and Other Prohibitions. The Broker-Dealer and the
General Agent understand and acknowledge that the Distributor, in its sole
discretion and at any time during the term of this Agreement, may restrict or
prohibit the solicitation, offer or sale of Contracts and Premiums thereunder in
connection with any so-called "market timing" or "asset allocation" program,
plan, arrangement or service. Should the Distributor determine in its sole
discretion that the Broker-Dealer or
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the General Agent is soliciting, offering or selling, or has solicited, offered
or sold, Contracts or Premiums subject to any so-called "market timing" or
"asset allocation" program, plan, arrangement or service which is not permitted
under this Agreement (an "unapproved program"), the Distributor may take such
action which is necessary, in its sole discretion, to halt such solicitations,
offers or sales. Furthermore, in addition to any indemnification provided in
Article XI and any other liability that the Broker-Dealer and the General Agent
might have, the Distributor may hold the Broker-Dealer and the General Agent
liable for any damages or losses, actual or consequential, sustained by the
Distributor or any of its Affiliates, or the Trust or any Equitable Life
Company, as a result of any unapproved program which causes such losses or
damages following solicitation, offer or sale of a Contract or Premium subject
to any unapproved program or similar service made available by or through the
Broker-Dealer or the General Agent. Notwithstanding any prohibitions which may
be imposed pursuant to this Section 4.11, the Broker-Dealer and its registered
representatives who are Agents may provide incidental services in the form of
guidance to applicants and owners of Contracts regarding the allocation of
Premiums and Contract value, provided that such services are (i) solely
incidental to the Broker-Dealer's activities in connection with the sales of the
Contracts, (ii) subject to the supervision and control of the Broker-Dealer, and
(iii) furnished in accordance with rules and procedures prescribed by the
Equitable Life Companies.
ss.4.12 Tax Reporting Responsibility. The Broker-Dealer and the General
Agent shall be solely responsible under applicable tax laws for the reporting of
compensation paid to Agents and for any withholding of taxes from compensation
paid to Agents, including, without limitation, FICA, FUTA, and federal, state
and local income taxes.
ss.4.13 Maintenance of Books and Records. The General Agent represents
that it maintains and shall maintain such books and records concerning the
activities of the Agents as may be required by the appropriate insurance
regulatory agencies that have jurisdiction and that may be reasonably required
by the Distributor to reflect adequately the Contracts processed through the
General Agent. The General Agent shall make such books and records available to
the Distributor and/or an Equitable Life Company at any reasonable time upon
written request by the Distributor. The Broker-Dealer represents that it
maintains and shall maintain appropriate books and records concerning the
activities of the Agents as are required by the SEC, the NASD and other agencies
having jurisdiction and that may be reasonably required by the Distributor to
reflect adequately the Contracts processed through the General Agent.
Broker-Dealer shall make such books and records available to the Distributor
and/or an Equitable Life Company at any reasonable time upon written request by
the Distributor or an Equitable Life Company.
ss.4.14 Bonding of Agents and Others. The Broker-Dealer represents that
all directors, officers, employees, and registered representatives of the
Broker-Dealer who are appointed pursuant to this Agreement as Agents for state
insurance law purposes or who have access to funds of the Equitable Life
Companies, including but not limited to funds submitted with applications for
the Contracts or funds being returned to purchasers of Contracts, are and shall
be covered by a blanket fidelity bond, including coverage for larceny and
embezzlement, issued by a reputable bonding company. This bond shall be
maintained by the Broker-Dealer at the Broker-Dealer's expense. Such bond shall
be, at least, of the form, type and amount required under the NASD Rules of Fair
Practice. The Distributor may require evidence, satisfactory to it, that such
coverage is in force, and the Broker-Dealer shall give prompt written notice to
the Distributor of any cancellation or change of coverage. The Broker-Dealer
assigns any proceeds received from the fidelity bonding company to the Equitable
Life Companies to the extent of each Equitable Life Company's loss due to
activities covered by the bond. If there is any deficiency amount, as a result
of a deductible provision or otherwise, the Broker-Dealer shall promptly pay the
affected Equitable Life Company such amount on demand, and the Broker-Dealer
hereby indemnifies and holds harmless such Equitable Life Company from any such
deficiency and from the costs of collection thereof (including reasonable
attorneys' fees).
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ss.4.15 Reports to Insurers. The Broker-Dealer and the General Agent shall
promptly furnish to each Equitable Life Company or its authorized agent any
reports and information that such Equitable Life Company may reasonably request
for the purpose of meeting such Equitable Life Company's reporting and
recordkeeping requirements under the insurance laws of any state, under any
applicable federal or state securities laws, rules or regulations, or the rules
of the NASD.
ARTICLE V
STANDARD OF CONDUCT FOR AGENTS
ss.5.1 Basic Rules of Conduct. The Broker-Dealer and the General Agent
shall ensure that each Agent shall comply with a standard of conduct including,
but not limited to, the following:
a. An Agent shall be duly qualified, licensed and registered to
solicit and participate in the sale of Contracts as provided in Article III.
b. An Agent shall not solicit applications for the Contracts
without delivering the appropriate Contract Prospectus(es) the Trust Prospectus
and, where required by state insurance law (as set forth in a notice to be
supplied by the Equitable Life Companies), the then currently effective
statement of additional information for the Contracts, and any other information
whose delivery is specifically required. In soliciting applications for the
Contracts, an Agent shall only make statements, oral or written, which are in
accordance with the Contract Prospectus, the Trust Prospectus and written sales
literature regarding the Contracts authorized by the Distributor. An Agent shall
utilize only those applications for the Contracts provided to the General Agent
by the Distributor.
c. An Agent shall recommend the purchase of a Contract to an
applicant only if he or she has reasonable grounds to believe that such purchase
is suitable for the applicant in accordance with, among other things, applicable
regulations of any state regulatory authority, the SEC and the NASD. While not
limited to the following, a determination of suitability shall be based on
information supplied to an Agent after a reasonable inquiry concerning the
applicant's insurance and investment objectives and financial situation and
needs.
d. An Agent shall require that any payment of an initial Premium,
whether in the form of a check or otherwise, shall be drawn in U.S. dollars on a
bank located in the United States and made payable to the appropriate Equitable
Life Company and, if in the form of a check, signed by the applicant for the
Contract. An Agent shall not accept third-party checks or cash for Premiums.
e. All checks and applications for the Contracts received by an
Agent shall be forwarded promptly, and in any event not later than two business
days after receipt, to the processing office designated by the Equitable Life
Companies.
f. Every Contract received by an Agent shall be delivered
promptly, and in any event not later than five calendar days after receipt, to
its purchaser.
g. Any checks representing a return or refund of Premium which
are received by an Agent for delivery to an applicant or purchaser shall be
delivered promptly to the designated recipient.
h. An Agent shall have no authority to endorse checks to an
Equitable Life Company.
i. An Agent shall have no authority to alter, modify, waive or
change any of the terms, rates, charges or conditions of the Contracts.
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j. An Agent shall make no representations concerning the
continuation of non-guaranteed terms or provisions of the Contracts.
k. An Agent shall have no authority to advertise for, on behalf
of, or with respect to an Equitable Life Company, the Distributor, the Variable
Accounts, the MVA Interests, the Contracts or the Trust without prior written
approval and authorization from the Distributor.
l. An Agent shall have no authority to solicit applications for
Contracts or Premiums thereunder which will be subject to or in connection with
any so-called "market timing" or "asset allocation" program, plan, arrangement
or service which is an unapproved program.
m. An Agent shall not furnish any transfer or other instructions
by telephone to an Equitable Life Company on behalf of an owner of a Contract
without having first obtained from such owner a written authorization in a form
acceptable to the Equitable Life Companies.
n. An Agent shall not encourage a prospective purchaser to
surrender or exchange an insurance policy or contract issued by an Equitable
Life Company in order to purchase a Contract or, conversely, to surrender or
exchange a Contract in order to purchase another insurance policy or contract
issued by an Equitable Life Company, except to the extent such surrenders or
exchanges have been authorized by the Distributor. In the event that an
insurance policy or contract issued by an Equitable Life Company is surrendered
or exchanged in order to purchase a Contract, no compensation shall be paid
under this Agreement.
o. An Agent shall act in accordance with the rules and procedures
of the Equitable Life Companies, including their policy statements on ethical
conduct, in connection with any solicitation activities relating to the
Contracts.
ARTICLE VI
RESPONSIBILITIES OF DISTRIBUTOR FOR MARKETING MATERIALS AND REPORTS
ss.6.1 Prospectuses and Applications Provided by Distributor. During the
term of this Agreement, the Distributor upon request will make available to the
Broker-Dealer and the General Agent, for a reasonable charge, copies of the
Contract Prospectus(es), Trust Prospectus and applications for the Contracts.
Upon receipt from the Distributor of updated copies of the Contract
Prospectus(es), Trust Prospectus and applications for the Contracts, the
Broker-Dealer and the General Agent will promptly discard or destroy all copies
of such documents previously provided to them, except such copies as are needed
for purposes of maintaining proper records. Upon termination of this Agreement,
the Broker-Dealer and the General Agent will promptly return, to the
Distributor, all Contract and Trust Prospectuses, Contract applications, and
other materials and supplies furnished by the Distributor to the Broker-Dealer
or the General Agent or to the Agents.
ss.6.2 Sales Material Provided by Distributor. During the term of this
Agreement, the Distributor will be responsible for providing and approving all
promotional, sales and advertising material to be used by the Broker-Dealer and
the General Agent. The Distributor will file such materials or will cause such
materials to be filed with the SEC and the NASD, and with any state securities
regulatory authorities, as required.
ss.6.3 Information Provided by Distributor. The Distributor will compile
periodic marketing reports summarizing sales results to the extent reasonably
requested by the Broker-Dealer or the General Agent.
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ARTICLE VII
COMMISSIONS, FEES AND EXPENSES
ss.7.1 Compensation Schedule. During the term of this Agreement, the
Distributor shall pay to the General Agent (or to the Broker-Dealer, at the
request of the General Agent) as compensation for Contracts for which it is the
Broker-of-Record, the amounts set forth in Schedule II, as such Schedule II may
be amended or modified at any time, in any manner and without prior notice by
the Distributor, and subject to the other provisions of this Agreement. Any
amendment to Schedule II will be applicable to any Contract for which an
application or initial Premium is received by an Equitable Life Company on or
after the effective date of such amendment, in accordance with procedures
established by the Distributor. Compensation with respect to any Contract shall
be paid to the General Agent only for so long as the General Agent is the
Broker-of-Record for such Contract.
ss.7.2 Limitations on Compensation. No compensation shall be payable, and
any compensation already paid shall be returned to the Distributor (or to
Equitable, at the direction of the Distributor) on request, under each of the
following conditions:
a. if an Equitable Life Company, in its sole discretion,
determines not to issue the Contract applied for;
b. if an Equitable Life Company refunds the Premium paid by an
applicant, upon the exercise of applicant's right of withdrawal;
c. if an Equitable Life Company refunds the Premium paid by an
applicant, as a result of a complaint by the applicant, recognizing that the
Equitable Life Companies have sole discretion to refund Premiums; or
d. if the Distributor determines that any person signing an
application or any person or entity receiving compensation for soliciting
purchases of Contracts is not duly licensed to sell life insurance (and to sell
variable contracts if required by the state in question).
No compensation or reimbursement of any kind other than that described in this
Agreement is payable to the General Agent or the Broker-Dealer. In addition, the
Broker-Dealer and the General Agent recognize that, unless the provisions of
Exhibit B apply to the receipt of an initial Premium, all compensation payable
to the General Agent hereunder will be disbursed by or on behalf of the
Distributor after each Premium is received and accepted by the appropriate
Equitable Life Company.
ss.7.3 Expenses Paid by Broker-Dealer and General Agent. Neither the
Broker-Dealer nor the General Agent shall, directly or indirectly, expend or
contract for the expenditure of any funds of the Distributor or any Equitable
Life Company. The Broker-Dealer and the General Agent shall each pay all
expenses incurred by each of them in the performance of this Agreement, unless
otherwise specifically provided for in this Agreement or unless the Distributor
shall have agreed in advance in writing to share the cost of certain expenses.
Initial state appointment fees for agents of an Equitable Life Company who are
associated with the General Agent will be paid by such Equitable Life Company
unless otherwise paid by the General Agent or Broker-Dealer. Renewal state
appointment fees for any Agent shall be paid by such Equitable Life Company if,
in the sole discretion of such Equitable Life Company, its minimum production
and activity requirements for the payment of renewal appointment fees have been
met by such Agent. Each Equitable Life Company shall establish reasonable
minimum production and activity requirements for the payment of renewal state
appointment fees, which may be changed by such Equitable Life Company in its
sole discretion at any time without notice. Except as otherwise provided herein,
the Broker-Dealer will be obligated to pay all state appointment fees,
including, but not limited
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to, renewal appointment fees not paid for by an Equitable Life Company, transfer
fees and termination fees, and any other fees required to be paid to obtain
state insurance licenses for Agents.
ss.7.4 Offsets of Compensation Under Other Agreements. With respect to
commissions, compensation or any other amounts owed by the Distributor or any
Affiliate of the Distributor to the Broker-Dealer or the General Agent under any
other agreement, the Distributor shall have a right to set off against such
amounts any monies payable by the General Agent under this Agreement, including
Schedule II, to the Distributor, to the extent permitted by applicable law. This
right on the part of the Distributor shall not prevent both of them or either of
them from pursuing any other means or remedies available to them to recover such
monies payable by the General Agent.
ss.7.5 No Rights of Agents to Compensation Paid by Distributor. Agents
shall have no interest in this Agreement or right to any commissions to be paid
by the Distributor to the General Agent. The General Agent shall be solely
responsible for the payment of any commission or consideration of any kind to
Agents. The General Agent shall have no interest in any compensation paid by an
Equitable Life Company to the Distributor, now or hereafter, in connection with
the sale of any Contracts under this Agreement.
ARTICLE VIII
TERM AND EXCLUSIVITY OF AGREEMENT
ss.8.1 Limited Classes of Contracts. This Agreement relates solely to the
Contracts identified in Schedule I.
ss.8.2 Term. This Agreement shall remain in effect for a period of one
year from the Effective Date, and, unless terminated earlier pursuant to
Sections 8.3 or 8.4, shall automatically continue in effect for one-year periods
thereafter; provided, however, that it shall automatically terminate upon
termination of any distribution agreement between the Distributor and an
Equitable Life Company relating to the Contracts.
ss.8.3 Early Termination by Notice. This Agreement may be terminated by
any party hereto by giving notice to the other parties at least sixty (60) days
prior to an anniversary of the Effective Date.
ss.8.4 Termination for Cause. If Broker-Dealer or the General Agent shall
default in their respective obligations under this Agreement, or breach any of
their respective representations or warranties made in this Agreement, the
Distributor may, at its option, cancel and terminate this Agreement without
notice.
ss.8.5 Surviving Provisions. Upon termination of this Agreement, all
authorizations, rights, and obligations hereunder shall cease except:
a. the obligation to settle accounts hereunder, including the
payment of compensation with respect to Contracts in effect at the time of
termination or issued pursuant to applications received by an Equitable Life
Company prior to termination or Premiums received under such Contracts
subsequent to termination of this Agreement;
b. the provisions with respect to indemnification set forth in
Article XI;
c. the provisions of Section 4.13 that require the General Agent
and the Broker-Dealer to maintain certain books and records;
d. the confidentiality provisions contained in Section 10.3; and
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e. the provisions of subparagraph l. of Section 5.1 with respect
to the surrender or exchange of a Contract.
ARTICLE IX
COMPLAINTS AND INVESTIGATIONS
ss.9.1 Cooperation in Investigations and Proceedings. The Distributor,
the Broker-Dealer and the General Agent shall each cooperate fully in any
insurance regulatory investigation, proceeding or inquiry or in any judicial
proceeding arising in connection with the Contracts marketed under this
Agreement. In addition, the Distributor, the Broker-Dealer and the General Agent
shall cooperate fully in any securities regulatory investigation, proceeding or
inquiry or in any judicial proceeding with respect to the Distributor, the
Broker-Dealer, their Affiliates or their agents, to the extent that such
investigation or proceeding is in connection with the Contracts marketed under
this Agreement. Copies of documents received by any party to this Agreement in
connection with any judicial proceeding shall be furnished promptly to all of
the other parties.
ss.9.2 Notification and Related Requirements. Without limiting the
provisions of Section 9.1:
a. The Broker-Dealer and the General Agent will be notified
promptly of any customer complaint or notice of any regulatory investigation,
proceeding or inquiry or any judicial proceeding received by the Distributor or
an Equitable Life Company with respect to the Broker-Dealer, General Agent or
any Agent.
b. The Broker-Dealer and the General Agent will promptly notify
the Distributor and the appropriate Equitable Life Company of any customer
complaint or notice of any regulatory investigation, proceeding or inquiry or
any judicial proceeding received by the Broker-Dealer, the General Agent or
their Affiliates with respect to themselves, their Affiliates or any Agent in
connection with any Contract marketed under this Agreement or any activity
relating to any such Contract and, upon request by the Distributor, will
promptly provide copies of all relevant materials to the Distributor.
c. In the case of a customer complaint, the Distributor, the
Broker-Dealer and the General Agent will cooperate in investigating such
complaint, and any response by the Broker-Dealer or the General Agent to such
complaint will be sent to the Distributor for written approval not less than
five business days prior to its being sent to the customer or regulatory
authority, except that if a more prompt response is required, the proposed
response shall be communicated by telephone or facsimile. The Distributor shall
have final authority to determine the content of each such response.
ARTICLE X
ASSIGNMENT, AMENDMENT, CONFIDENTIALITY
ss.10.1 Non-Assignable Except to Certain Affiliates. This Agreement shall
be non-assignable by the parties hereto, except that a party may assign its
rights and obligations to any subsidiary of, or any company under common control
with, such party, provided that:
a. the assignee is duly licensed to perform all functions
required of that party under this Agreement;
b. the assignee undertakes to perform such party's functions
hereunder; and
c. in the event that the Broker-Dealer or the General Agent
determines to assign its rights and obligations under this Agreement:
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i. such proposed assignment is approved in advance by the
Distributor; and
ii. the Broker-Dealer or the General Agent or assignee
pays any state insurance agent appointment fees and any other charges or fees,
including taxes, that become due and payable as a result of the assignment.
ss.10.2 Prior Agreements and Amendments. This Agreement constitutes the
entire agreement between the parties hereto and supersedes all prior agreements,
either oral or written, between the parties relating to the Contracts and,
except for any amendment of Schedule I, pursuant to the terms of Section 2.6, or
Schedule II, pursuant to the terms of Section 7.1, may not be modified in any
way unless by written agreement.
ss.10.3 Confidentiality. Each party to this Agreement shall maintain the
confidentiality of any client list or any other proprietary information that it
may acquire in the performance of this Agreement and shall not use such
information for any purpose unrelated to the administration of the Contracts
without the prior written consent of the other parties.
ARTICLE XI
INDEMNIFICATION
ss.11.1 Indemnification of Distributor. The Broker-Dealer and the General
Agent, jointly and severally, shall indemnify and hold harmless each Equitable
Life Company, the Distributor and each person who controls or is associated with
an Equitable Life Company or the Distributor within the meaning of such terms
under the federal securities laws, and any officer, director, employee or agent
of the foregoing, against any and all losses, claims, damages or liabilities,
joint or several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in settlement of,
any action, suit or proceeding or any claim asserted), insofar as such losses,
claims, damages or liabilities arise out of or are based upon:
a. violation(s) by the Broker-Dealer, the General Agent or an
Agent of federal or state securities laws or regulations, insurance laws or
regulations, or any rule or requirement of the NASD;
b. any unauthorized use of sales or advertising material, any
oral or written misrepresentations, or any unlawful sales practices concerning
the Contracts, the Equitable Life Companies, the Variable Accounts, the MVA
Interests or the Trust, by the Broker-Dealer, the General Agent or an Agent;
c. claims by the Agents or other agents or representatives of the
General Agent or the Broker-Dealer for commissions or other compensation or
remuneration of any type;
d. any action or inaction by any clearing broker or broker
furnishing similar services through which the Broker-Dealer or the General Agent
processes any transaction pursuant to this Agreement;
e. any failure on the part of the Broker-Dealer, the General
Agent or an Agent to submit Premiums or applications for Contracts or accurate
and proper instructions of a Contract owner or prospective owner to the
Equitable Life Companies, or to submit the correct amount of a Premium, on a
timely basis and in accordance with Sections 4.5 and 4.6 and the rules and
procedures of the Equitable Life Companies.
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f. any failure on the part of the Broker-Dealer, the General
Agent, or an Agent to deliver Contracts to purchasers thereof on a timely basis
in accordance with Section 4.7 and in accordance with the rules and procedures
of the Equitable Life Companies; or
g. any other breach by the Broker-Dealer or the General Agent of
any provision of this Agreement, including, without limitation, Section 5.1.
This indemnification will be in addition to any liability which the
Broker-Dealer and the General Agent may otherwise have.
ss.11.2 Indemnification of Broker-Dealer and General Agent. The
Distributor shall indemnify and hold harmless the Broker-Dealer and the General
Agent and each person who controls or is associated with the Broker-Dealer or
the General Agent within the meaning of such terms under the federal securities
laws, and any officer, director, employee or agent of the foregoing, against any
and all losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they or any of them may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based upon negligent,
improper, fraudulent or unauthorized acts or omissions.
ss.11.3 Notification and Procedures. After receipt by a party entitled to
indemnification ("Indemnified Party") under this Article XI of notice of the
commencement of any action or threat of such action, if a claim in respect
thereof is to be made against any person obligated to provide indemnification
under this Article XI ("Indemnifying Party"), such Indemnified Party will notify
the Indemnifying Party in writing of the commencement thereof as soon as
practicable thereafter, provided that the omission so to notify the Indemnifying
Party will not relieve it from any liability under this Article XI, except to
the extent that the omission results in a failure of actual notice to the
Indemnifying Party and such Indemnifying Party is damaged solely as a result of
the failure to give such notice. The Indemnifying Party, upon the request of the
Indemnified Party, shall retain counsel reasonably satisfactory to the
Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party, unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnifying Party and the Indemnified Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The Indemnifying Party shall not be liable for
any settlement of any proceeding effected without its written consent, but if
such proceeding is settled with such consent or if final judgment is entered in
such proceeding for the plaintiff, the Indemnifying Party shall indemnify the
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment.
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ARTICLE XII
MISCELLANEOUS
ss.12.1 Headings. The headings in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
ss.12.2 Counterparts. This Agreement may be executed in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
ss.12.3 Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
ss.12.4 Notices. All notices under this Agreement shall be given in
writing and addressed as follows:
if to the Distributor, to:
EQ Financial Consultants, Inc.
1755 Broadway
New York, New York 10019
Attention: President
if to the Broker-Dealer or the General Agent, to:
__________________________________
__________________________________
__________________________________
Attention: _______________________
or to such other address as such party may hereafter specify in writing. Each
such notice shall be either hand delivered or transmitted by certified United
States mail, return receipt requested, and shall be effective upon delivery.
ss.12.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, excluding its conflict of
laws provisions. This Agreement shall also be subject to the rules of the NASD,
including its By-Laws; and all disputes arising hereunder shall be submitted to
arbitration under the Code of Arbitration Procedure of the NASD.
ss.12.6 Scope of Sales Material References. For purposes of this
Agreement, all references to sales, promotional, marketing or advertising
material shall include, without limitation, advertisements (such as material
published, or designed for use in, a newspaper, magazine or other periodical,
radio, television, telephone or tape recording, videotape display, signs or
billboards, motion pictures or other public media), sales literature (i.e., any
written communication distributed or made generally available to customers or
the public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature or published article), and educational or training materials or
other communications distributed or made generally available to some or all
Agents or employees of the Broker-Dealer or the General Agent.
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ss.12.7 Noninterference with Employees, Agents, and Clients.
a. During the term of this Agreement, neither the Broker-Dealer
nor the General Agent shall hire or solicit, as an employee, agent, consultant,
registered representative or other sales representative, or in any other
capacity, any individual who has been, at any time within six months prior to
such hiring or solicitation, an employee, agent or registered representative of
the Distributor or any affiliate of the Distributor. Violation of this provision
shall constitute a material breach of this Agreement.
b. During the term of this Agreement, the Broker-Dealer and the
General Agent agree not to solicit knowingly any person who is a client of a
member of the career agency force of Equitable (an "Equitable agent"). If, while
servicing a client, the Broker-Dealer or General Agent ascertains that the
person is also a client of an active Equitable agent, the Broker-Dealer or
General Agent will refer the client to the Equitable agent and, if possible,
notify the Equitable agent of the person's interest. The Broker-Dealer and the
General Agent agree that no commission will be payable under this Agreement in
connection with any sale of a Contract which involves a violation of the
foregoing rules regarding clients of Equitable agents. In the event that an
Agent and an Equitable agent each claim the same person as a client, the
client's desires will be taken into consideration in determining the application
of this Section 12.7(b).
ss.12.8 No Waiver of Rights. The rights, remedies and obligations
contained in this Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which the parties hereto
are entitled to under state and federal laws. Failure of any party to insist
upon strict compliance with any of the conditions of this Agreement shall not be
construed as a waiver of any of the conditions, but the same shall remain in
full force and effect. No waiver of any of the provisions of this Agreement
shall be deemed, or shall constitute, a waiver of any other provisions, whether
or not similar, nor shall any waiver constitute a continuing waiver.
ss.12.9 Scope of Agreement. All Schedules and Exhibits to this Agreement
are part of the Agreement.
ARTICLE XIII
SALES BY OR THROUGH BANKS
ss.13.1 Applicability of Article; Supplement Definitions. This Article
XIII applies only if the Broker-Dealer or the General Agent distributes
Contracts in one or more of the following circumstances (collectively referred
to as "Bank-Related Sales"): (i) on the premises of a bank, trust company,
savings bank, savings and loan association, or other institution (a) the
deposits of which are insured by the Federal Deposit Insurance Corporation
("FDIC") or (b) which is chartered, organized, regulated or supervised under the
authority of any federal or state bank or similar financial institution
regulatory agency or authority (collectively, "Banks"); (ii) by means of
personal, telephone, mail or other oral or written contacts originating from the
premises of a Bank; or (iii) to persons which are referred to the Broker-Dealer
or General Agent by a Bank. For purposes of this Article XIII, the term "Bank
Regulatory Requirements" shall include (i) the Interagency Statement on Retail
Sales of Non-deposit Products (February 15, 1994), published by the U.S. Office
of the Comptroller of the Currency, the Board of Governors of the Federal
Reserve System, the FDIC and the U.S. Office of Thrift Supervision, as
supplemented or amended from time to time, and (ii) any federal or state laws,
regulations, orders, directives, circulars, agreements in writing, memoranda,
commitments in writing or other legal or supervisory requirements which may be
administered, adopted, promulgated, enforced or applied with respect to any
Bank-Related Sales under this Agreement (regardless of whether any such
requirement is of general or specific applicability) by any federal or state
bank or financial institution regulatory agency or authority.
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ss.13.2 Written Agreement for Bank-Related Sales. The authorization to
distribute Contracts which is conferred on the Broker-Dealer and the General
Agent under Article II shall not include Bank-Related Sales unless such
activities are conducted under the terms of a written agreement with each and
any Bank where such Bank-Related Sales will take place which complies in all
respects with applicable Bank Regulatory Requirements. The Broker-Dealer or
General Agent shall, upon request of the Distributor, provide the Distributor
with a copy of each such written agreement. The Broker-Dealer and the General
Agent shall have exclusive responsibility for ensuring strict compliance with
the terms and conditions of any such written agreement.
ss.13.3 Compliance with Bank Regulatory Requirements. The Broker-Dealer
and the General Agent each represent and warrant, on behalf of itself and the
Agents, that it is in compliance with all Bank Regulatory Requirements
applicable to third parties engaged in Bank-Related Sales. The Broker-Dealer and
the General Agent shall have exclusive responsibility for ensuring strict
compliance with all Bank Regulatory Requirements with respect to any
Bank-Related Sales under this Agreement. The Broker-Dealer and the General Agent
each undertake to keep the Distributor promptly informed of any amendments,
supplements or changes to applicable Bank Regulatory Requirements which may
affect this Agreement.
ss.13.4 Production by Distributor of Certain Books and Records. The
Distributor agrees to provide to the Broker-Dealer or the General Agent, upon
request, any books and records relating to Contracts distributed through
Bank-Related Sales for purposes of making such records available for inspection
by any federal or state bank or financial institution regulatory agency with
jurisdiction over such Bank-Related Sales, or over a Bank through which such
sales are conducted. The Distributor's agreement under this Section 13.4 shall
not constitute or represent in any respect an admission or acknowledgment by
Distributor that such federal or state bank or financial institution regulatory
authority has any jurisdiction over Distributor or the activities of the
Distributor, and the Distributor expressly disclaims any such jurisdiction.
ss.13.5 Prospectuses and Applications Provided by Distributor; Sales
Materials. During the term of this Agreement, the Distributor will provide the
Broker-Dealer and the General Agent, without charge, with as many copies of the
Contract Prospectus(es), Trust Prospectus and applications for the Contracts,
containing those disclosures specifically required by any applicable Bank
Regulatory Requirements with respect to products not insured by the FDIC and
similar matters, as the Broker-Dealer or the General Agent reasonably may
request. The Broker-Dealer and the General Agent shall have exclusive
responsibility for ensuring the use and delivery of such materials, and any
sales materials described in Article VI, in compliance with applicable Bank
Regulatory Requirements. The terms of Article VI otherwise shall govern the
furnishing, use and return of such documents and materials.
ss.13.6 Supplemental Indemnification of Distributor. In addition to the
indemnifications provided to the Distributor under Section 11.1, the
Broker-Dealer and the General Agent, jointly and severally, shall indemnify each
person entitled to indemnification under Section 11.1 for any losses, claims,
damages or liabilities (as described in Section 11.1) arising out of or based on
violations or failures to comply with any Bank Regulatory Requirements. The
provisions of Article VI otherwise shall govern the terms and procedures with
respect to any indemnifications provided under this Section 13.6.
ss.13.7 Construction With Other Provisions. The provisions of this Article
XIII are in addition to the other terms and conditions of this Agreement. In the
event of any inconsistency between the provisions of this Article XIII and any
other term or condition of this Agreement, the requirements of this Article XIII
and not such other term or condition, shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers.
___________________________________
[Broker-Dealer]
By: _______________________________
Title:
___________________________________
[General Agent]
By: _______________________________
Title:
Agreed to and accepted as of the _______ day
of _________________, 199_____ in New York, New York
EQ FINANCIAL CONSULTANTS, INC.
By: __________________________________
Title: _________________________________
L5S_1.DOC/27424
MTX_1.DOC/29589
OPU_1.DOC/32034
10/95
octsa.doc
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EXHIBIT A
GENERAL LETTER OF RECOMMENDATION
The General Agent hereby certifies to the Equitable Life Companies that all
the following requirements have been fulfilled in conjunction with the
submission of appointment papers for all applicants as agents of an Equitable
Life Company submitted by the General Agent, as listed on Schedule A. The
General Agent will, upon request, forward proof of compliance with same to the
Equitable Life Companies in a timely manner.
1. We have made a thorough and diligent inquiry and investigation relative
to each applicant's identity, residence and business reputation and declare that
each applicant is personally known to us, has been examined by us, is known to
be of good moral character, has a good business reputation, is reliable, is
financially responsible and is worthy of a license. Each individual is
trustworthy, competent and qualified to act as an agent for the Equitable Life
Companies and to hold himself or herself out in good faith to the general
public. We vouch for each applicant.
2. We have on file a Form U-4 which was completed by each applicant. We
have fulfilled all the necessary investigative requirements for the registration
of each applicant as a registered representative through our NASD member firm,
and each applicant is presently registered as an NASD registered representative.
The above information in our files indicates no fact or condition which would
disqualify the applicant from receiving a license, and all the findings of all
investigative information is favorable.
3. We certify that all educational requirements have been met for the
specific state in which each applicant is requesting a license and that all such
persons have fulfilled the appropriate examination, education and training
requirements.
4. If the applicant is required to submit his or her picture, signature or
securities registration in the state in which he or she is applying for a
license, we certify that those items forwarded to the Equitable Life Companies
are those of the applicant and the securities registration is a true copy of the
original.
5. We hereby warrant that the applicant is not applying for a license with
an Equitable Life Company in order to place insurance chiefly or solely on his
or her life or property or on the lives, property or liability of relatives or
associates.
6. We certify that each applicant will receive close and adequate
supervision, and that we will make inspection when needed of any or all risks
written by these applicants, to the end that the insurance interest of the
public will be properly protected.
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7. We will not permit any applicant to transact insurance as an agent until
duly licensed therefor. No applicants have been given a contract or furnished
supplies, nor have any applicants been permitted to write or solicit business or
to act as an agent in any capacity, and they will not be so permitted until the
certificate of authority or license applied for is received.
This certification is given and agreed to as of the day and year first
above written.
___________________________________
[Broker-Dealer]
By: _______________________________
___________________________________
[General Agent]
By: _______________________________
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SCHEDULE A
APPLICANTS FOR APPOINTMENT AS AGENTS
1)_________________________________
2)_________________________________
3)_________________________________
4)_________________________________
5)_________________________________
___________________________________
[Broker-Dealer]
By: _______________________________
___________________________________
[General Agent]
By: _______________________________
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EXHIBIT B
SPECIAL PROCEDURES FOR INITIAL PREMIUM TRANSMITTAL
As indicated in Section 4.5, an initial Premium which is not accompanied by
a properly completed application for a Contract may be accepted by an Equitable
Life Company if the Broker-Dealer and the General Agent have accepted, agreed to
and complied with the procedures set forth in this Exhibit B.
Wire Transmittal and Submission of Application
1. The Broker-Dealer will cause the initial Premium to be paid to the
appropriate Equitable Life Company by wire transfer.
2. The wire transfer will be accompanied by a simultaneous telephone
facsimile transmission of application information in a form prescribed by the
Equitable Life Companies.
3. Any cost associated with the correction of an error made in the
investment of an initial Premium shall be borne by the Broker-Dealer, unless
such error results directly from any improper action of an Equitable Life
Company.
4. If no properly completed application for a Contract is received by an
Equitable Life Company within the period of time specified by it, and the
initial Premium is therefore returned to the proposed owner of the Contract, the
General Agent shall promptly repay to the Distributor, upon request from the
Distributor, any and all compensation received by the General Agent, based on
the Premium paid into the Contract, and shall pay any loss incurred as a result
of the Premium being returned, unless such loss results directly from any
improper action of an Equitable Life Company.
The procedures set forth in this Exhibit B, as further described in the
Contract Prospectus and as modified from time to time by the Equitable Life
Companies, are hereby accepted and agreed to as of the day and year first above
written.
___________________________________
[Broker-Dealer]
By: _______________________________
___________________________________
[General Agent]
By: _______________________________
-i-
<PAGE>
SCHEDULE I
EXCLUDED CONTRACTS
Contracts made available through the Income Management Group of
Equitable, including the following, are not covered by this Agreement:
NQ Accumulator
Rollover IRA
Assured Growth Plan
NQ Assured Payment Plan
(Certain Period and Life Annuity)
NQ Assured Payment Plan
(Certain Period Only)
-i-
[EVLICO LOGO]
THE EQUITABLE
VARIABLE LIFE
INSURANCE COMPANY
VARIABLE LIFE
INSURANCE
POLICY
INSURED PERSON RICHARD ROE
POLICY OWNER ABC CORPORATION
FACE AMOUNT $ 50,000
TARGET AMOUNT $100,000
DEATH BENEFIT OPTION A (SEE PAGE 6)
POLICY NUMBER XX XXX XXX
WE AGREE to pay the Insurance Benefit of this policy and to provide its other
benefits and rights in accordance with its provisions.
FLEXIBLE PREMIUM VARIABLE LIFE POLICY
This is a flexible premium variable life insurance policy. You can, within
limits:
o make premium payments at any time and in any amount;
o change the death benefit option;
o change the allocation of net premiums and deductions among your investment
options; and
o transfer amounts among your investment options.
THE DEATH BENEFIT IS GUARANTEED TO THE INSURED'S ATTAINED AGE 100 IF THE DEATH
BENEFIT IS ALWAYS OPTION A OR TO THE LATER OF ATTAINED AGE 80 OR 15 YEARS FROM
ISSUE IF THE DEATH BENEFIT IS EVER OPTION B, SUBJECT TO PREMIUMS HAVING BEEN
PAID IN ACCORDANCE WITH THE DEATH BENEFIT GUARANTEE PROVISION DESCRIBED IN THE
POLICY.
All of these rights and benefits are subject to the terms and conditions of this
policy. All requests for policy changes are subject to our approval and may
require evidence of insurability.
We will put your net premiums into your Policy Account. You may then allocate
them to one or more investment funds of our Separate Account(s) (SA) and to our
Guaranteed Interest Account (GIA).
THE PORTION OF YOUR POLICY ACCOUNT THAT IS IN AN INVESTMENT FUND OF OUR SA WILL
VARY UP OR DOWN DEPENDING ON THE UNIT VALUE OF SUCH INVESTMENT FUND, WHICH IN
TURN DEPENDS ON THE INVESTMENT PERFORMANCE OF THE SECURITIES HELD BY THAT SA
FUND. THERE ARE NO MINIMUM GUARANTEES AS TO SUCH PORTION OF YOUR POLICY ACCOUNT.
The portion of your Policy Account that is in our GIA will accumulate, after
deductions, at rates of interest we determine. Such rates will not be less than
4% a year.
THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED AS
DESCRIBED IN THIS POLICY.
This is a non-participating policy.
RIGHT TO EXAMINE POLICY. You may examine this policy and if for any reason you
are not satisfied with it, you may cancel it by returning this policy with a
written request for cancellation to our Administrative Office by the 10th day
after you receive it. If you do this, we will refund the premiums that were paid
on this policy.
A B C D A B C D
Pauline Sherman, Joseph J. Melone,
Vice President & Secretary Chairman & Chief Executive Officer
No. 96-300
<PAGE>
Contents
- --------
Policy Information 3
Table of Maximum Monthly Charges
for Benefits 4
Those Who Benefit from this Policy 5
The Insurance Benefit We Pay 5
Changing the Face Amount of Insur-
ance or the Death Benefit Option 7
The Premiums You Pay 7
Your Policy Account and How it
Works 9
Your Investment Options 9
The Value of Your Policy Account 11
The Cash Surrender Value of this
Policy 12
How a Loan Can Be Made 12
Our Separate Account(s) (SA) 14
Our Annual Report to You 15
How Benefits are Paid 15
Other Important Information 16
IN THIS POLICY:
- ---------------
"We," "our," and "us" mean
Equitable Variable Life Insurance
Company.
"You" and "your" mean the
owner of this policy at the time
an owner's right is exercised.
Unless otherwise stated, all
references to interest in this
policy are effective annual rates
of interest.
Attained age means age on the
birthday nearest to the beginning
of the current policy year.
ADMINISTRATIVE OFFICE
- ---------------------
The address of our Administra-
tive Office is shown on Page 3.
You should send premiums and
correspondence to that address
unless instructed otherwise.
Copies of the application for this
policy and any additional benefit
riders are attached to the policy.
INTRODUCTION
The premiums you pay, after deductions are made in accordance with the Table of
Expense Charges in the Policy Information section, are put into your Policy
Account. Amounts in your Policy Account are allocated at your direction to one
or more investment funds of our SA and to our GIA.
The investment funds of our SA invest in securities and other investments whose
value is subject to market fluctuations and investment risk. There is no
guarantee of principal or investment experience.
Our GIA earns interest at rates we declare in advance of each policy year. The
rates are guaranteed for each policy year. The principal, after deductions, is
also guaranteed.
If death benefit Option A is in effect, the death benefit is the Face Amount of
Insurance, and the amount of the death benefit is fixed except when it is a
percentage of your Policy Account. If death benefit Option B is in effect, the
death benefit is the Face Amount of Insurance plus the amount in your Policy
Account. The amount of the death benefit is variable. Under either option, the
death benefit will never be less than a percentage of your Policy Account as
stated on Page 6.
The death benefit is guaranteed to the Insured's attained age 100 if the Death
Benefit is always Option A or to the later of attained age 80 or 15 years from
issue if the Death Benefit is ever Option B, subject to premiums having been
paid in accordance with the Death Benefit Guarantee provision described in the
policy.
We make monthly deductions from your Policy Account to cover the cost of the
benefits provided by this policy and the cost of any benefits provided by riders
to this policy.
This is only a summary of what this policy provides. You should read all of it
carefully. Its terms govern your rights and our obligations.
No. 96-300 Page 2
<PAGE>
POLICY INFORMATION
INSURED PERSON RICHARD ROE
POLICY OWNER ABC CORPORATION
FACE AMOUNT
OF BASE POLICY $ 50,000
FACE AMOUNT
OF TERM RIDER $ 50,000
TARGET AMOUNT $100,000
(BASE POLICY + TERM)
DEATH BENEFIT OPTION A (SEE PAGE 6)
POLICY NUMBER xx xxx xxx
BENEFICIARY MARGARET H. ROE SEPARATE ACCOUNT [FP]
REGISTER DATE JANUARY 3, 1996 ISSUE AGE 35
DATE OF ISSUE JANUARY 3, 1996 SEX MALE
INSURED PERSON'S PREFERRED
RESIDENCE STATE SPECIMEN NON-TOBACCO USER
A MINIMUM INITIAL PREMIUM PAYMENT OF $555.45 IS DUE ON OR BEFORE DELIVERY OF THE
POLICY.
THE PLANNED PERIODIC PREMIUM OF [$600.00] IS PAYABLE [SEMI-ANNUALLY].
PREMIUM PAYMENTS ARE FOR THE INSURANCE BENEFIT AND ANY ADDITIONAL BENEFIT
RIDERS LISTED.
SUPPLEMENTAL TERM INSURANCE ON INSURED - EXPIRY DATE - JANUARY 2, 2061
DEATH BENEFIT GUARANTEE PREMIUM FOR BASIC LIFE INSURANCE
MONTHLY PREMIUM PREMIUM PERIOD
--------------- --------------
NOT APPLICABLE NOT APPLICABLE
-------------- --------------
THE PLANNED PERIODIC PREMIUMS SHOWN ABOVE MAY NOT BE SUFFICIENT TO CONTINUE THE
POLICY AND LIFE INSURANCE COVERAGE IN FORCE TO THE FINAL POLICY DATE, WHICH IS
THE POLICY ANNIVERSARY NEAREST THE INSURED PERSON'S 100TH BIRTHDAY. THE PERIOD
FOR WHICH THE POLICY AND COVERAGE WILL CONTINUE IN FORCE WILL DEPEND ON: (1) THE
AMOUNT, TIMING AND FREQUENCY OF PREMIUM PAYMENTS; (2) CHANGES IN THE FACE AMOUNT
OF INSURANCE AND THE DEATH BENEFIT OPTIONS; (3) CHANGES IN THE INTEREST RATES
CREDITED TO OUR GIA AND IN THE INVESTMENT PERFORMANCE OF THE INVESTMENT FUNDS OF
OUR SA; (4) CHANGES IN THE MONTHLY DEDUCTIONS FROM THE POLICY ACCOUNT FOR THIS
POLICY AND ANY BENEFITS PROVIDED BY RIDERS TO THIS POLICY; AND (5) LOAN AND
PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL ACTIVITY.
PAGE 3
(CONTINUED ON NEXT PAGE)
96-300-3
<PAGE>
POLICY INFORMATION CONTINUED - POLICY NUMBER XX XXX XXX
------------ TABLE OF MAXIMUM AUTOMATIC EXPENSE CHARGES ------------
DEDUCTIONS FROM PREMIUM PAYMENTS:
CHARGE FOR APPLICABLE TAXES (OTHER THAN TAXES DISCUSSED ON PAGE 11):
[2.00%] OF EACH PREMIUM PAYMENT. WE RESERVE THE RIGHT TO CHANGE THIS
PERCENTAGE TO CONFORM TO CHANGES IN THE LAW OR IF THE INSURED PERSON
CHANGES RESIDENCE.
PREMIUM SALES CHARGE:
FOR POLICY YEARS 1-10: 5.50% OF EACH PREMIUM PAYMENT.
FOR POLICY YEARS 11 AND LATER: 2.50% OF EACH PREMIUM PAYMENT.
DEDUCTIONS FROM YOUR POLICY ACCOUNT (THESE CHARGES ARE DEDUCTED AT THE BEGINNING
OF EACH POLICY MONTH):
ADMINISTRATIVE CHARGE:
FOR POLICY YEARS 1-3: $26.00 PER MONTH.
FOR POLICY YEARS 4-10: $13.50 PER MONTH.
FOR POLICY YEARS 11 AND LATER: $9.00 PER MONTH.
FOR MORTALITY AND EXPENSE RISK:
.03333% OF THE UNLOANED POLICY ACCOUNT VALUE.
ADMINISTRATIVE OFFICE
---------------------
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SPECIMEN SERVICE CENTER
100 SPECIMEN STREET
CITY, STATE 10001-6018
96-300-3 PAGE 3 - CONTINUED
<PAGE>
POLICY INFORMATION CONTINUED - POLICY NUMBER XX XXX XXX
-------- TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES --------
PER $1,000 OF NET AMOUNT AT RISK (SEE PAGE 9) FOR BASIC LIFE INSURANCE
INSURED INSURED INSURED
PERSON'S PERSON'S PERSON'S
ATTAINED ATTAINED ATTAINED
AGE RATE AGE RATE AGE RATE
35 0.14094 55 0.65401 75 5.03724
36 0.14762 56 0.72203 76 5.59039
37 0.15880 57 0.79429 77 6.17549
38 0.16682 58 0.87251 78 6.78686
39 0.17851 59 0.96090 79 7.44038
40 0.19103 60 1.05949 80 8.16249
41 0.20607 61 1.16916 81 8.97320
42 0.22110 62 1.29417 82 9.89813
43 0.23865 63 1.43714 83 10.95204
44 0.25619 64 1.59899 84 12.11846
45 0.27709 65 1.77812 85 13.37460
46 0.29966 66 1.97123 86 14.69860
47 0.32391 67 2.18097 87 16.08129
48 0.34984 68 2.40660 88 17.49682
49 0.37912 69 2.65338 89 18.96601
50 0.41009 70 2.93268 90 20.51212
51 0.44693 71 3.30181 91 22.16549
52 0.48965 72 3.61779 92 23.98724
53 0.53742 73 4.04199 93 26.06643
54 0.59276 74 4.52073 94 28.78427
95 32.81758
96 39.64294
97 53.06605
98 83.33238
99 83.33238
96-300-4 PAGE 4
<PAGE>
POLICY INFORMATION CONTINUED - POLICY NUMBER XX XXX XXX
-------- TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES --------
PER $1,000 OF SUPPLEMENTAL TERM INSURANCE BENEFIT
INSURED INSURED INSURED
PERSON'S PERSON'S PERSON'S
ATTAINED ATTAINED ATTAINED
AGE RATE AGE RATE AGE RATE
35 0.14800 55 0.68684 75 5.29661
36 0.15501 56 0.75828 76 5.87918
37 0.16465 57 0.83419 77 6.49561
38 0.17517 58 0.91635 78 7.13994
39 0.18744 59 1.00921 79 7.82897
40 0.20060 60 1.11279 80 8.59062
41 0.21638 61 1.22801 81 9.44613
42 0.23217 62 1.35937 82 10.42270
43 0.25060 63 1.50960 83 11.53615
44 0.26902 64 1.67968 84 12.76934
45 0.29097 65 1.86795 85 14.09843
46 0.31467 66 2.07093 86 15.50051
47 0.34014 67 2.29141 87 16.96608
48 0.36737 68 2.52862 88 18.46791
49 0.39812 69 2.78811 89 20.02823
50 0.43064 70 3.08183 90 21.67203
51 0.46933 71 3.47009 91 23.43192
52 0.51420 72 3.80253 92 25.37355
53 0.56437 73 4.24890 93 27.59288
54 0.62250 74 4.75279 94 30.49944
95 34.82486
96 42.17972
97 56.79054
98 83.33238
99 83.33238
96-300-4 PAGE 4 - CONTINUED
<PAGE>
- --------------------------------------------------------------------------------
THOSE WHO BENEFIT FROM THIS POLICY
OWNER. The owner of this policy is the insured person unless otherwise stated in
the application, or later changed.
As the owner, you are entitled to exercise all the rights of this policy while
the insured person is living. To exercise a right, you do not need the consent
of anyone who has only a conditional or future ownership interest in this
policy.
BENEFICIARY. The beneficiary is as stated in the application, unless later
changed. The beneficiary is entitled to the Insurance Benefit of this policy.
One or more beneficiaries for the Insurance Benefit can be named in the
application. If more than one beneficiary is named, they can be classed as
primary or contingent. If two or more persons are named in a class, their shares
in the benefit can be stated. The stated shares in the Insurance Benefit will be
paid to any primary beneficiaries who survive the insured person. If no primary
beneficiaries survive, payment will be made to any surviving contingent
beneficiaries. Beneficiaries who survive in the same class will share the
Insurance Benefit equally, unless you have made another arrangement with us.
If there is no designated beneficiary living at the death of the insured person,
we will pay the Insurance Benefit to the insured person's surviving children in
equal shares. If none survive, we will pay the insured person's estate.
CHANGING THE OWNER OR BENEFICIARY. While the insured person is living, you may
change the owner or beneficiary by written notice in a form satisfactory to us.
You can get such a form from our agent or by writing to us at our Administrative
Office. The change will take effect on the date you sign the notice; however, it
will not apply to any payment we make or other action we take before we receive
the notice. If you change the beneficiary, any previous arrangement you made as
to a payment option for benefits is cancelled. You may choose a payment option
for the new beneficiary in accordance with "How Benefits Are Paid" on Page 15.
ASSIGNMENT. You may assign this policy, if we agree. In any event, we will not
be bound by an assignment unless we have received it in writing at our
Administrative Office. Your rights and those of any other person referred to in
this policy will be subject to the assignment. We assume no responsibility for
the validity of an assignment. An absolute assignment will be considered as a
change of ownership to the assignee.
- --------------------------------------------------------------------------------
THE INSURANCE BENEFIT WE PAY
We will pay the Insurance Benefit of this policy to the beneficiary when we
receive at our Administrative Office (1) proof satisfactory to us that the
insured person died before the Final Policy Date; and (2) all other requirements
we deem necessary before such payment may be made. The Insurance Benefit
includes the following amounts, which we will determine as of the date of the
insured person's death:
o the death benefit described on Page 6;
o PLUS any other benefits then due from riders to this policy;
o MINUS any policy loan and accrued interest;
o MINUS any overdue deductions from your Policy Account if the insured person
dies during a grace period.
We will add interest to the resulting amount in accordance with applicable law.
We will compute the interest at a rate we determine, but not less than the
greater of (a) the rate we are paying on the date of payment under the Deposit
Option on Page 15, or (b) the rate required by any applicable law. Payment of
the Insurance Benefit may also be affected by other provisions of this policy.
See Pages 16 and 17, where we specify our right to contest the policy, the
suicide exclusion, and what happens if age or sex has been misstated. Special
exclusions or limitations (if any) are listed in the Policy Information section.
96-300-5 Page 5
<PAGE>
DEATH BENEFIT. The death benefit at any time will be determined under either
Option A or Option B below, whichever you have chosen and is in effect at such
time.
Under Option A, the death benefit is the greater of (a) the Face Amount of
Insurance; or (b) a percentage (see Table below) of the amount in your Policy
Account. Under this option, the amount of the death benefit is fixed, except
when it is determined by such percentage.
Under Option B, the death benefit is the greater of (a) the Face Amount of
Insurance plus the amount in your Policy Account; or (b) a percentage (see Table
below) of the amount in your Policy Account. Under this option the amount of the
death benefit is variable.
The percentages referred to above are the percentages from the following table
for the insured person's age (nearest birthday) at the beginning of the policy
year of determination.
TABLE OF PERCENTAGES
For ages not shown, the percentages shall
decrease by a ratable portion for each full year
INSURED INSURED
PERSON'S AGE PERCENTAGE PERSON'S AGE PERCENTAGE
- ------------ ---------- ------------ ----------
40 and under 250% 65 120%
45 215 70 115
50 185 75 thru 95 105
55 150 100 100
60 130
Section 7702 of the Internal Revenue Code of 1986, as amended (i.e., the
"Code"), gives a definition of life insurance which limits the amounts that may
be paid into a life insurance policy relative to the benefits it provides. Even
if this policy states otherwise, at no time will the "future benefits" under
this policy be less than an amount such that the "premiums paid" do not exceed
the Code's "guideline premium limitations". We may adjust the amount of premium
paid to meet these limitations. Also, at no time will the "death benefit" under
the policy be less than the "applicable percentage" of the "cash surrender
value" of the policy. The above terms are as defined in the Code. In addition,
we may take certain actions, described here and elsewhere in the policy, to meet
the definitions and limitations in the Code, based on our interpretation of the
Code. Please see "Policy Changes -- Applicable Tax Law" for more information.
DEATH BENEFIT GUARANTEE. Subject to the conditions set forth below, the death
benefit of this policy is guaranteed if the sum of premium payments accumulated
at 4%, less any partial withdrawals accumulated at 4%, is at least equal to the
sum of the Death Benefit Guarantee Premiums (shown on Page 3) accumulated at 4%,
and any outstanding loan and accrued loan interest does not exceed the cash
surrender value. Certain policy changes after issue will change the Death
Benefit Guarantee Premiums accordingly.
The death benefit is guaranteed to Insured's attained age 100 if the Death
Benefit is always Option A, or the later of the Insured's attained age 80 or 15
years from issue if the Death Benefit is ever Option B.
MATURITY BENEFIT. If the Insured person is living on the Final Policy Date
defined in the Policy Information section, we will pay you the amount in your
Policy Account on that date minus any policy loan and accrued interest. This
policy will then end.
96-300-5 Page 6
<PAGE>
- --------------------------------------------------------------------------------
CHANGING THE FACE AMOUNT OF INSURANCE OR THE DEATH BENEFIT OPTION
You may change the death benefit option or the Face Amount of Insurance by
written request to us at our Administrative Office, subject to our approval and
the following:
1. After the second policy year while this policy is in force, you may ask us to
reduce the Face Amount of Insurance but not to less than the minimum amount
for which we would then issue this policy under our rules. Any such reduction
in the Face Amount of Insurance may not be less than $10,000.
2. After the second policy year while this policy is in force, you can change
your death benefit option. If you ask us to change from Option A to Option B,
we will decrease the Face Amount of Insurance by the amount in your Policy
Account on the date the change takes effect. However, we reserve the right to
decline to make such change if it would reduce the Face Amount of Insurance
below the minimum amount for which we would then issue this policy under our
rules. We also reserve the right to request evidence of insurability for a
change to Option B. If you ask us to change from Option B to Option A, we
will increase the Face Amount of Insurance by the amount in your Policy
Account on the date the change takes effect. Such decreases and increases in
the Face Amount of Insurance are made so that the death benefit is the same
immediately before and after the change.
3. The change will take effect at the beginning of the policy month that
coincides with or next follows the date we approve your request.
4. We reserve the right to decline to make any change that we determine would
cause this policy to fail to qualify as life insurance under applicable tax
law as interpreted by us (see Page 16).
5. You may ask for a change by completing an application for change, which you
can get from our agent or by writing to us at our Administrative Office. A
copy of your application for change will be attached to the new Policy
Information section that we will issue when the change is made. The new
section and the application for change will become a part of this policy. We
may require you to return this policy to our Administrative Office to make a
policy change.
- --------------------------------------------------------------------------------
THE PREMIUMS YOU PAY
The minimum initial premium payment shown in the Policy Information section is
due on or before delivery of this policy. No insurance will take effect before a
premium at least equal to the minimum initial premium payment is paid. Other
premiums may be paid at any time while this policy is in force and before the
Final Policy Date at our Administrative Office.
We will send premium notices to you for the planned periodic premium shown in
the Policy Information section. You may skip planned periodic premium payments.
However, this may adversely affect the duration of the death benefit and your
policy's values. We will assume that any payment you make to us is a premium
payment, unless you tell us in writing that it is a loan repayment.
LIMITS. Each premium payment after the initial one must be at least $100. We may
increase this minimum limit 90 days after we send you written notice of such
increase. We reserve the right to require evidence of insurability for any
premium payment you may make which is in excess of the greater of the Death
Benefit Guarantee Premium or the Planned Periodic Premium shown on Page 3.
We also reserve the right not to accept premium payments or to return excess
amounts that we determine would cause this policy to fail to qualify as life
insurance under applicable tax law as interpreted by us (see Page 16).
GRACE PERIOD. At the beginning of each policy month, the Net Cash Surrender
Value will be compared to the total monthly deductions described on Page 9. If
the Net Cash Surrender Value is sufficient to cover the total monthly
deductions, the policy is not in default.
If the Net Cash Surrender Value at the beginning of any policy month is less
than such deductions for that month we will perform the following calculations
to determine whether the policy is in default:
1. Determine the Death Benefit Guarantee Premium fund. The Death Benefit
Guarantee Premium fund for any policy month is the accumulation of all the
death benefit guarantee premiums shown on Page 3 up to that month at 4%
interest.
96-300-7 Page 7
<PAGE>
2. Determine the actual premium fund. The actual premium fund for any policy
month is the accumulation of all the premiums received at 4% interest
minus all withdrawals accumulated at 4% interest.
3. If the result in Step 2 is greater than or equal to the result in Step 1,
and any loan and accrued loan interest does not exceed the Cash Surrender
Value, the policy is not in default. The death benefit guarantee will be
in effect and monthly deductions in excess of the Policy Account will be
waived.
4. If the result of Step 2 is less than the result in Step 1, or if the
result of Step 2 is greater than or equal to the result in Step 1 and any
loan and accrued loan interest exceeds the Cash Surrender Value, the
policy is in default as of the first day of this policy month. This is the
date of default.
If the Death Benefit Guarantee provision does not apply, the calculations in
Steps 1. - 4. above will not be performed. In that case, if the Net Cash
Surrender Value at the beginning of any policy month is less than the monthly
deductions for that month, the policy is in default as of the first day of such
policy month.
If the policy is in default, we will send you and any assignee on our records at
last known addresses written notice stating that a grace period of 61 days has
begun as of the date of default. The notice will also state the amount of
payment that is due.
The payment required will not be more than an amount sufficient to increase the
Net Cash Surrender Value to cover all monthly deductions for 3 months beginning
with the date of default, calculated assuming no interest or investment
performance were credited to or charged against the Policy Account and no policy
changes were made.
If we do not receive such amount at our Administrative Office before the end of
the grace period, we will then (1) withdraw and retain the entire amount in your
Policy Account; and (2) send a written notice to you and any assignee on our
records at last known addresses stating that this policy has ended without
value.
If we receive the requested amount before the end of the grace period, but the
Net Cash Surrender Value is still insufficient to cover total monthly
deductions, we will send a written notice that a new 61-day grace period has
begun and request an additional payment.
If the insured person dies during a grace period, we will pay the Insurance
Benefit as described on Page 5.
RESTORING YOUR POLICY BENEFITS. If this policy has ended without value, you may
restore policy benefits while the insured person is alive if you:
1. Ask for restoration of policy benefits within 6 months from the end of the
grace period; and
2. Provide evidence of insurability satisfactory to us; and
3. Make a required payment. The required payment will not be more than an
amount sufficient to cover (i) the monthly administrative charges from the
beginning of the grace period to the effective date of restoration; (ii)
total monthly deductions for 3 months, calculated from the effective date
of restoration; and (iii) the charge for applicable taxes and the premium
sales charge associated with this payment. We will determine the amount of
this required payment as if no interest or investment performance were
credited to or charged against your Policy Account.
From the required payment we will deduct the charge for applicable taxes and the
premium sales charge. The policy account on the date of restoration will be
equal to the balance of the required payment.
The effective date of the restoration of policy benefits will be the beginning
of the policy month which coincides with or next follows the date we approve
your request.
We will start to make monthly charges again as of the effective date of
restoration. The monthly administrative charges from the beginning of the grace
period to the effective date of restoration will be deducted from the Policy
Account as of the effective date of restoration.
96-300-7 Page 8
<PAGE>
- --------------------------------------------------------------------------------
YOUR POLICY ACCOUNT AND HOW IT WORKS
PREMIUM PAYMENTS. When we receive your premium payments, we subtract the expense
charges shown in the table in the Policy Information section. We put the balance
(the net premium) into your Policy Account as of the date we receive the premium
payment at our Administrative Office, and before any deductions from your Policy
Account due on that date are made. However, we will put the initial net premium
payment into your Policy Account as of the Register Date if it is later than the
date of receipt. No premiums will be applied to your Policy Account until the
minimum initial premium payment is received at our Administrative Office.
MONTHLY DEDUCTIONS. At the beginning of each policy month we make a deduction
from your Policy Account. Such deductions for any policy month is the sum of the
following amounts determined as of the beginning of that month:
o the monthly charge for mortality and expense risk;
o the monthly administrative charge;
o the monthly cost of insurance for the insured person; and
o the monthly cost of any benefits provided by riders to this policy.
The monthly cost of insurance is the sum of our current monthly cost of
insurance rate per $1000 of net amount at risk plus any extra charge per $1,000
of net amount at risk shown in the Policy Information section, times the net
amount at risk at the beginning of the policy month divided by $1,000. The net
amount at risk at any time is the death benefit minus the amount in your Policy
Account at that time.
We will determine cost of insurance rates from time to time. Any change in the
cost of insurance rates we use will be as described in "Changes in Policy Cost
Factors" on Page 16. They will never be more than those shown in the Table of
Guaranteed Maximum Cost of Insurance Rates Per $1000 of Net Amount At Risk on
Page 4.
OTHER DEDUCTIONS. We also make the following other deductions from your Policy
Account as they occur:
o We deduct a withdrawal charge if you make a partial withdrawal of the Net Cash
Surrender Value (see Page 12).
o We deduct a charge for certain transfers (see Page 10).
- --------------------------------------------------------------------------------
YOUR INVESTMENT OPTIONS
ALLOCATIONS. This policy provides investment options for the amount in your
Policy Account. Amounts put into your Policy Account and deductions from it are
allocated to the investment funds of our SA and to the unloaned portion of our
GIA at your direction. You specified your initial premium allocation and
deduction allocation percentages in your application for this policy, a copy of
which is attached to this policy. Unless you change them, such percentages shall
also apply to subsequent premium and deduction allocations. However, any amounts
which are put into your Policy Account prior to the Allocation Date and which
are to be allocated to the investment funds of our SA will initially be
allocated to (and monthly deductions taken from) the Money Market Fund of our
SA. The Allocation Date is the first business day (see Page 11) twenty calendar
days after the date of issue of this policy. On the Allocation Date, any such
amounts then in the Money Market Fund will be allocated in accordance with the
directions contained in your policy application.
Allocation percentages must be zero or a whole number not greater than 100. The
sum of the premium allocation percentages and of the deduction allocation
percentages must each equal 100.
You may change such allocation percentages by written notice to our
Administrative Office. A change will take effect on the date we receive it at
our Administrative Office except for changes received on or prior to the
Allocation Date which will take effect on the first business day following the
Allocation Date.
96-300-9 Page 9
<PAGE>
If we cannot make a monthly deduction on the basis of the deduction allocation
percentages then in effect, we will make that deduction based on the proportion
that your unloaned value in our GIA and your values in the investment funds of
our SA bear to the total unloaned value in your Policy Account.
TRANSFERS. At your written request to our Administrative Office, we will
transfer amounts from your value in any investment fund of our SA to one or more
other funds of our SA or to our GIA. Any such transfer will take effect on the
date we receive your written request at our Administrative Office. However, no
transfers will be made prior to the Allocation Date.
Once during each policy year you may ask us by written request to our
Administrative Office to transfer an amount you specify from your unloaned value
in our GIA to one or more investment funds of our SA. However, we will make such
a transfer only if (1) we receive your written request at our Administrative
Office within 30 days before or after a policy anniversary; and (2) the amount
you specify is not more than 25% of your unloaned value in our GIA as of the
date the transfer takes effect. The transfer will take effect on the date we
receive your written request for it at our Administrative Office but not before
the policy anniversary.
We reserve the right to make a transfer charge up to $25.00 for each transfer of
amounts among your investment options. The transfer charge, if any, is deducted
from the amounts transferred from the investment funds of our SA and the GIA
based on the proportion that the amount transferred from each investment fund
and the GIA bears to the total amount being transferred. A transfer from the
Money Market Fund on the Allocation Date (if applicable) will not incur a
transfer charge. If you ask us to transfer the entire amount of your value in
the investment funds of our SA to our GIA, we will not make a charge for that
transfer.
- --------------------------------------------------------------------------------
THE VALUE OF YOUR POLICY ACCOUNT
The amount in your Policy Account at any time is equal to the sum of the amounts
you then have in our GIA and the investment funds of our SA under this policy.
YOUR VALUE IN OUR GIA. The amount you have in our GIA at any time is equal to
the amounts allocated and transferred to it, plus the interest credited to it,
minus amounts deducted, transferred and withdrawn from it.
We will credit the amount in our unloaned GIA with interest rates we determine.
We will determine such interest rates annually in advance for unloaned amounts
in our GIA. The interest rates we determine each year will apply to the policy
year that follows the date of determination. Any change in the interest rates we
determine will be as described in "Changes in Policy Cost Factors" on Page 16.
Such interest rates will not be less than 4%. Interest accrues and is credited
on unloaned amounts in the GIA daily. However, we will credit interest on the
initial net premium from the Register Date, if it is later than the date of
receipt, provided that the initial premium is at least equal to the minimum
initial premium shown on page 3 of the policy.
96-300-9 Page 10
<PAGE>
We credit interest on the loaned portion of our GIA daily. The interest rate we
credit to the loaned portion of our GIA will be determined at the beginning of
each calendar year 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. In no event will we credit less than 4% a year.
YOUR VALUE IN THE INVESTMENT FUNDS OF OUR SA. The amount you have in an
investment fund of our SA under this policy at any time is equal to the number
of units this policy then has in that fund multiplied by the fund's unit value
at that time.
Amounts allocated, transferred or added to an investment fund of our SA are used
to purchase units of that fund; units are redeemed when amounts are deducted,
loaned, transferred or withdrawn. These transactions are called policy
transactions.
The number of units a policy has in an investment fund at any time is equal to
the number of units purchased minus the number of units redeemed in that fund to
that time. The number of units purchased or redeemed in a policy transaction is
equal to the dollar amount of the policy transaction divided by the fund's unit
value on the date of the policy transaction. Policy transactions may be made on
any day. The unit value that applies to a transaction made on a business day
will be the unit value for that day. The unit value that applies to a
transaction made on a non-business day will be the unit value for the next
business day.
We determine unit values for the investment funds of our SA 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. A business day immediately preceded by one
or more non-business calendar days will include those non-business days as part
of that business day. For example, a business day which falls on a Monday will
consist of that Monday and the immediately preceding Saturday and Sunday.
The unit value of an investment fund of our SA on any business day is equal to
the unit value for that fund on the immediately preceding business day
multiplied by the net investment factor for that fund on that business day.
The net investment factor for an investment fund of our SA on any business day
is (a) divided by (b), minus (c), where:
(a) is the net asset value of the shares in designated investment companies that
belong to the investment fund at the close of business on such business day
before any policy transactions are made on that day, plus the amount of any
dividend or capital gain distribution paid by the investment companies on that
day;
(b) is the value of the assets in that investment fund at the close of business
on the immediately preceding business day after all policy transactions were
made for that day; and
(c) is any charge for that day for taxes or amounts set aside as a reserve for
taxes.
The net asset value of an investment company's shares held in each investment
fund shall be the value reported to us by that investment company.
96-300-11 Page 11
<PAGE>
- --------------------------------------------------------------------------------
THE CASH SURRENDER VALUE OF THIS POLICY
CASH SURRENDER VALUE. The Cash Surrender Value on any date is equal to the
amount in your Policy Account on that date.
NET CASH SURRENDER VALUE. The Net Cash Surrender Value is equal to the Cash
Surrender Value minus any policy loan and accrued loan interest. You may give up
this policy for its Net Cash Surrender Value at any time while the insured
person is living. You may do this by sending us a written request for it and
this policy to our Administrative Office. We will compute the Net Cash Surrender
Value as of the date we receive your request for it and this policy at our
Administrative Office. All insurance coverage under this policy ends on such
date.
PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. After the first policy year and
while the insured person is living, you may ask for a partial Net Cash Surrender
Value withdrawal by written request to our Administrative Office. Your request
will be subject to our approval based on our rules in effect when we receive
your request. The amount withdrawn from the Policy Account is equal to the
amount requested plus an expense charge equal to the lesser of $25.00 and 2% of
the amount withdrawn. We have the right to decline a request for a partial Net
Cash Surrender Value withdrawal. A partial withdrawal will result in a reduction
in the Cash Surrender Value and in your Policy Account equal to the amount
withdrawn plus the expense charge as well as a reduction in your death benefit.
If the death benefit is Option A, the withdrawal may also result in a decrease
in the face amount.
You may tell us how much of each partial withdrawal is to come from your
unloaned value in our GIA and from your values in each of the investment funds
of our SA. If you do not tell us or we cannot make the withdrawal based on your
directions, we will make the withdrawal and expense charge deduction based on
the proportion that your unloaned value in our GIA and your values in the
investment funds of our SA bear to the total unloaned value in your Policy
Account.
Such withdrawal and resulting reduction in the death benefit, in the Cash
Surrender Value and in your Policy Account will take effect on the date we
receive your written request at our Administrative Office. We will send you a
new Policy Information section if a withdrawal results in a reduction in the
Face Amount of Insurance. It will become a part of this policy. We may require
you to return this policy to our Administrative Office to make a change.
- --------------------------------------------------------------------------------
HOW A LOAN CAN BE MADE
POLICY LOANS. You can take a loan on this policy while it has a loan value. This
policy will be the only security for the loan. Any amount on loan is part of
your Policy Account (see Page 11). We refer to this as the loaned portion of
your Policy Account.
LOAN VALUE. The loan value on any date is 90% of the Cash Surrender Value on
that date.
The amount of the loan may not be more than the loan value. If you request an
increase to an existing loan, the additional amount requested will be added to
the amount of the existing loan and accrued loan interest.
96-300-11 Page 12
<PAGE>
Your request for a policy loan must be in writing to our Administrative Office.
You may tell us how much of the requested loan is to be allocated to your
unloaned value in our GIA and your value in each investment fund of our SA. Such
values will be determined as of the date we receive your request. If you do not
tell us or if we cannot allocate the loan on the basis of your direction , we
will allocate it based on the proportion that your unloaned value in our GIA and
your values in the investment funds of our SA bear to the total unloaned value
in your Policy Account.
The loaned portion of your Policy Account will be maintained as a part of our
GIA. Thus, when a loaned amount is allocated to an investment fund of our SA, we
will redeem units of that investment fund sufficient in value to cover the
amount of the loan so allocated and transfer that amount to our GIA.
LOAN INTEREST. Interest on a loan accrues daily at an adjustable loan interest
rate. We will determine the rate at the beginning of each calendar year, subject
to the following paragraphs. It will apply to any new or outstanding loan under
the policy during the calendar year next following the date of determination.
The maximum loan interest rate for a calendar year shall be the greater of: (1)
the "Published Monthly Average," as defined below, for the calendar month that
ends two months before the date of determination; or (2) 5%. "Published Monthly
Average" means the Monthly Average Corporates yield shown in Moody's Corporate
Bond Yield Averages published by Moody's Investors Service, Inc., or any
successor thereto. If such averages are no longer published, we will use such
other averages as may be established by regulation by the insurance supervisory
official of the jurisdiction in which this policy is delivered. In no event will
the loan interest rate for a calendar year be greater than the maximum rate
permitted by applicable law. We reserve the right to establish a rate lower than
the maximum.
No change in the rate shall be less than 1/2 of 1% a year. We may increase the
rate whenever the maximum rate as determined by clause (1) of the preceding
paragraph exceeds the rate being charged by 1/2 of 1% or more. We will reduce
the rate to or below the maximum rate as determined by clause (1) of the
preceding paragraph if such maximum is lower than the rate being charged by 1/2
of 1% or more.
We will notify you of the initial loan interest rate when you make a loan. We
will also give you advance written notice of any increase in the interest rate
of any outstanding loan.
Loan interest is due on each policy anniversary. If the interest is not paid
when due, then the difference between the loan interest due and the interest
credited on the loaned portion of the GIA will be added to your outstanding loan
and allocated based on the proportion that your unloaned value in our GIA and
your values in the investment funds of our SA bear to the total unloaned value
in your Policy Account. The unpaid interest will then be treated as part of the
loaned amount and will bear interest at the loan rate.
When unpaid loan interest is allocated to an investment fund of our SA, we will
redeem units of that investment fund sufficient in value to cover the amount of
the interest so allocated and transfer that amount to our GIA.
LOAN REPAYMENT. You may repay all or part of a policy loan at any time while the
insured person is alive and this policy is in force.
Repayments will first be allocated to our GIA until you have repaid any unloaned
amounts that were allocated to our GIA. You may tell us how to allocate payments
above that amount among our GIA and the investment funds of our SA. If you do
not tell us, we will make the allocation based on the proportion that your
unloaned value in our GIA and your values in the investment funds of our SA bear
to the total unloaned value in your Policy Account.
Failure to repay a policy loan or, to pay loan interest will not terminate this
policy unless at the beginning of a policy month the Net Cash Surrender Value is
less than the total monthly deduction then due. In that case, the Grace Period
provision will apply (see Page 7).
A policy loan will have a permanent effect on your benefits under this policy
even if it is repaid.
96-300-13 Page 13
<PAGE>
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OUR SEPARATE ACCOUNT(S) (SA)
We established and we maintain or SA under the laws of New York State. Realized
and unrealized gains and losses from the assets of our SA are credited or
charged against it without regard to our other income, gains, or losses. Assets
are put in our SA to support this policy and other variable life insurance
policies. Assets may be put in our SA for other purposes, but not to support
contracts or policies other than variable contracts.
The assets of our SA are our property. The portion of its assets equal to the
reserves and other policy liabilities with respect to our SA will not be
chargeable with liabilities arising out of any other business we conduct. We may
transfer assets of an investment fund in excess of the reserves and other
liabilities with respect to that fund to another investment fund or to our
General Account.
INVESTMENT FUNDS. Our SA consists of investment funds. Each fund may invest its
assets in a separate class of shares of a designated investment company or
companies or make direct investments in securities. The investment funds of our
SA that you chose for your initial allocations are shown on the application for
this policy, a copy of which is attached to this policy. We may from time to
time make other investment funds available to you or we may create a new SA. We
will provide you with written notice of all material details including
investment objectives and all charges.
We have the right to change or add designated investment companies. We have the
right to add or remove investment funds. We have the right to withdraw assets of
a class of policies to which this policy belongs from an investment fund and put
them in another investment fund. We also have the right to combine any two or
more investment funds. The term investment fund in this policy shall then refer
to any other investment fund in which the assets of a class of policies to which
this policy belongs were placed.
We have the right to:
1. register or deregister any SA available under this policy under the
Investment Company Act of 1940;
2. run any SA available under this policy under the direction of a committee,
and discharge such committee at any time;
3. restrict or eliminate any voting rights of policy owners, or other persons
who have voting rights as to any SA available under this policy; and
4. operate any SA available under this policy or one or more of its investment
funds by making direct investments or in any other form. If we do so, we may
invest the assets of such SA or one or more of the investment funds in any
legal investments. We will rely upon our own or outside counsel for advice in
this regard. Also, unless otherwise required by law or regulation, an
investment adviser or any investment policy may not be changed without our
consent. If required by law or regulation, the investment policy of an
investment fund of any SA available under this policy will not be changed by
us unless approved by the Superintendent of Insurance of New York State or
deemed approved in accordance with such law or regulation. If so required,
the process for getting such approval is on file with the insurance
supervisory official of the jurisdiction in which this policy is delivered.
If any of these changes result in a material change in the underlying
investments of an investment fund of our SA, we will notify you of such change,
as required by law. If you have value in that investment fund, if you wish, we
will transfer it at your written direction from that fund (without charge) to
another fund of our SA or to our GIA, and you may then change your premium and
deduction allocation percentages.
96-300-13 Page 14
<PAGE>
- --------------------------------------------------------------------------------
OUR ANNUAL REPORT TO YOU
For each policy year we will send you a report for this policy that shows the
current death benefit, the value you have in our GIA and the value you have in
each investment fund of any SA available under this policy, the Cash Surrender
Value and any policy loan with the current loan interest rate. It will also show
the premiums paid and any other information as may be required by the insurance
supervisory official of the jurisdiction in which this policy is delivered.
- --------------------------------------------------------------------------------
HOW BENEFITS ARE PAID
You can have the Insurance Benefit, your Net Cash Surrender Value withdrawals or
your Policy Account payable on the Final Policy Date paid immediately in one
sum. Or, you can choose another form of payment for all or part of them. If you
do not arrange for a specific choice before the insured person dies, the
beneficiary will have this right when the insured person dies. If you do make an
arrangement, however, the beneficiary cannot change it after the insured person
dies.
Payments under the following options will not be affected by the investment
experience of any investment fund of our SA after proceeds are applied under
such options.
The options are:
1. DEPOSIT: The sum will be left on deposit for a period mutually agreed upon.
We will pay interest at the end of every month, every 3 months, every 6
months or every 12 months, as chosen.
2. INSTALLMENT PAYMENTS: There are two ways that we pay installments:
A. FIXED PERIOD: We will pay the sum in equal installments for a specified
number of years (not more than 30). The installments will be at least
those shown in the Table of Guaranteed Payments on Page 18.
B. FIXED AMOUNT: We will pay the sum in installments as mutually agreed
upon until the original sum, together with interest on the unpaid
balance, is used up.
3. MONTHLY LIFE INCOME: We will pay the sum as a monthly income for life. The
amount of the monthly payment will be at least that shown in the Table of
Guaranteed Payments on Page 18. You may choose any one of three ways to
receive monthly life income. We will guarantee payments for at least 10 years
(called "10 Years Certain"); at least 20 years (called "20 Years Certain");
or until the payments we make equal the original sum (called "Refund
Certain").
4. OTHER: We will apply the sum under any other option requested that we make
available at the time of payment.
The payee may name and change a successor payee for any amount we would
otherwise pay to the payee's estate.
Any arrangements involving more than one of the options, or a payee who is not a
natural person (for example, a corporation) or who is a fiduciary, must have our
approval. Also, details of all arrangements will be subject to our rules at the
time the arrangement takes effect. These include rules on: the minimum amount we
will apply under an option and minimum amounts for installment payments;
withdrawal or commutation rights; naming payees and successor payees; and
proving age and survival.
Payment choices (or any later changes) will be made and will take effect in the
same way as a change of beneficiary. Amounts applied under these options will
not be subject to the claims of creditors or to legal process, to the extent
permitted by law,
96-300-15 Page 15
<PAGE>
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OTHER IMPORTANT INFORMATION
YOUR CONTRACT WITH US. This policy is issued in consideration of payment of the
initial premium payment shown in the Policy Information section.
This policy, and the attached copy of the initial application and all subsequent
applications to change this policy, and all additional Policy Information
sections added to this policy, make up the entire contract. The rights conferred
by this policy are in addition to those provided by applicable Federal and State
laws and regulations.
Only our Chairman of the Board, our President or one of our Vice Presidents can
modify this contract or waive any of our rights or requirements under it. The
person making these changes must put them in writing and sign them.
POLICY CHANGES -- APPLICABLE TAX LAW. For you and the beneficiary to receive the
tax treatment accorded to life insurance under Federal law, this policy must
qualify initially and continue to qualify as life insurance under the Code or
successor law. Therefore, we have reserved earlier in this policy the right to
decline to accept premium payments, change death benefit options, change the
Face Amount of Insurance, or to make partial withdrawals, that would cause this
policy to fail to qualify as life insurance under applicable tax law as
interpreted by us. Further, we reserve the right to make changes in this policy
or its riders (for example, in the percentages on Page 6) or to require
additional premium payments or to make distributions from this policy or to
change the Face Amount of Insurance to the extent we deem it necessary to
continue to qualify this policy as life insurance. Any such changes will apply
uniformly to all policies that are affected. You will be given advance written
notice of such changes.
CHANGES IN POLICY COST FACTORS. Changes in policy cost factors (interest rates
we credit, cost of insurance deductions, expense charges and mortality and
expense risk charges) will be by class and based upon changes in future
expectations for such elements as: investment earnings, mortality, persistency,
expenses and taxes. Any change in policy cost factors will be determined in
accordance with procedures and standards on file, if required, with the
insurance supervisory official of the jurisdiction in which this policy is
delivered.
WHEN THE POLICY IS INCONTESTABLE. We have the right to contest the validity of
this policy based on material misstatements made in the initial application for
this policy. We also have the right to contest the validity of any policy change
or restoration based on material misstatements made in any application for that
change or restoration. However, we will not contest the validity of this policy
after it has been in effect during the lifetime of the insured person for two
years from the date of issue shown in the Policy Information section. We will
not contest any policy change that requires evidence of insurability, or any
restoration of this policy, after the change or restoration has been in effect
for two years during the insured person's lifetime.
No statement shall be used to contest a claim unless contained in an
application.
All statements made in an application are representations and not warranties.
See any additional benefit riders for modifications of this provision that apply
to them.
WHAT IF AGE OR SEX HAS BEEN MISSTATED? If the insured person's age or sex has
been misstated on any application, the death benefit and any benefits provided
by riders to this policy shall be those which would be purchased by the most
recent deduction for the cost of insurance, and the cost of any benefits
provided by riders, at the correct age and sex.
96-300-15 Page 16
<PAGE>
HOW THE SUICIDE EXCLUSION AFFECTS BENEFITS. If the insured person commits
suicide (while sane or insane) within two years after the Date of Issue shown in
the Policy Information section, our liability will be limited to the payment of
a single sum. This sum will be equal to the premiums paid, minus any loan and
accrued loan interest and minus any partial withdrawal of the Net Cash Surrender
Value. If the insured person commits suicide (while sane or insane) within two
years after the effective date of a change that you asked for that increases the
death benefit, then our liability as to the increase in amount will be limited
to the payment of a single sum equal to any monthly cost of insurance deductions
made for such increase.
HOW WE MEASURE POLICY PERIODS AND ANNIVERSARIES. We measure policy years, policy
months, and policy anniversaries from the Register Date shown in the Policy
Information section. Each policy month begins on the same day in each calendar
month as the day of the month in the Register Date.
HOW, WHEN AND WHAT WE MAY DEFER. We may not be able to obtain the value of the
assets of the investment funds of our SA if: (1) the New York Stock Exchange is
closed; or (2) the Securities and Exchange Commission requires trading to be
restricted or declares an emergency. During such times, as to amounts allocated
to the investment funds of our SA, we may defer:
1. Determination and payment of Net Cash Surrender Value withdrawals;
2. Determination and payment of any death benefit in excess of the Face Amount
of Insurance;
3. Payment of loans;
4. Determination of the unit values of the investment funds of our SA; and
5. Any requested transfer or the transfer on the Allocation Date.
As to amounts allocated to our GIA, we may defer payment of any Net Cash
Surrender Value withdrawal or loan amount for up to six months after we receive
a request for it. We will allow interest, at a rate of at least 3% a year, on
any Net Cash Surrender Value payment derived from our GIA that we defer for 30
days or more.
THE BASIS WE USE FOR COMPUTATION. We provide Cash Surrender Values that are at
least equal to those required by law. If required to do so, we have filed with
the insurance supervisory official of the jurisdiction in which this policy is
delivered a detailed statement of our method of computing such values. We
compute reserves under this policy by the Commissioners Reserve Valuation
Method.
We base minimum cash surrender values and reserves on the Commissioners 1980
Standard Ordinary, Male and Female, Smoker and Non-Smoker, Mortality Tables. We
also use these tables as the basis for determining maximum insurance costs,
taking account of sex, attained age, underwriting class and Tobacco User status
of the insured person. We use an effective annual interest rate of 4%.
POLICY ILLUSTRATIONS. Upon request we will give you an illustration of policy
values based upon both guaranteed and current cost factor assumptions, and
assumed rates of return. However, if you ask us to do this more than once in any
policy year, we reserve the right to charge you a fee for this service.
96-300-17 Page 17
<PAGE>
TABLE OF GUARANTEED PAYMENTS
(MINIMUM AMOUNT FOR EACH $1,000 APPLIED)
OPTION 2A
FIXED PERIOD INSTALLMENTS
NUMBER MONTHLY ANNUAL
OF YEARS' INSTALL- INSTALL-
INSTALLMENTS MENT MENT
- ------------ ------- -------
1 $84.28 $1000.00
2 42.66 506.17
3 28.79 341.60
4 21.86 259.33
5 17.70 210.00
6 14.93 177.12
7 12.95 153.65
8 11.47 136.07
9 10.32 122.40
10 9.39 111.47
11 8.64 102.54
12 8.02 95.11
13 7.49 88.83
14 7.03 83.45
15 6.64 78.80
16 6.30 74.73
17 6.00 71.15
18 5.73 67.97
19 5.49 65.13
20 5.27 62.58
21 5.08 60.28
22 4.90 58.19
23 4.74 56.29
24 4.60 54.55
25 4.46 52.95
26 4.34 51.48
27 4.22 50.12
28 4.12 48.87
29 4.02 47.70
30 3.93 46.61
If installments are paid every 3 months, they will be 25.23% of the annual
installments. If they are paid every 6 months, they will be 50.31% of the annual
installments.
OPTION 3
MONTHLY LIFE INCOME
<TABLE>
<CAPTION>
10 Years Certain 20 Years Certain Refund Certain
---------------------------- ----------------------------- -----------------------------
Age Male Female Male Female Male Female
- ---------------- ------------- ------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
50 $3.48 $3.19 $3.42 $3.17 $3.37 $3.14
51 3.54 3.23 3.47 3.21 3.42 3.17
52 3.59 3.28 3.51 3.25 3.46 3.21
53 3.65 3.32 3.56 3.29 3.51 3.25
54 3.70 3.37 3.61 3.33 3.56 3.29
55 3.77 3.42 3.66 3.37 3.61 3.34
56 3.83 3.47 3.72 3.42 3.67 3.38
57 3.90 3.52 3.77 3.47 3.72 3.43
58 3.97 3.58 3.83 3.52 3.78 3.48
59 4.04 3.64 3.88 3.57 3.84 3.53
60 4.12 3.70 3.94 3.62 3.90 3.58
61 4.20 3.76 4.00 3.68 3.97 3.64
62 4.29 3.83 4.06 3.74 4.04 3.69
63 4.38 3.90 4.12 3.79 4.11 3.75
64 4.48 3.98 4.18 3.85 4.19 3.82
65 4.58 4.06 4.25 3.92 4.26 3.88
66 4.68 4.14 4.31 3.98 4.35 3.95
67 4.79 4.23 4.37 4.04 4.43 4.02
68 4.90 4.32 4.43 4.11 4.52 4.10
69 5.02 4.42 4.50 4.18 4.62 4.18
70 5.14 4.52 4.56 4.25 4.71 4.26
71 5.26 4.63 4.62 4.31 4.82 4.35
72 5.39 4.75 4.67 4.38 4.92 4.44
73 5.52 4.87 4.73 4.45 5.03 4.53
74 5.66 4.99 4.78 4.51 5.14 4.63
75 5.80 5.12 4.83 4.58 5.27 4.74
76 5.95 5.26 4.88 4.64 5.39 4.84
77 6.10 5.40 4.93 4.70 5.53 4.96
78 6.25 5.55 4.97 4.75 5.66 5.08
79 6.40 5.70 5.01 4.80 5.80 5.20
80 6.56 5.85 5.04 4.86 5.96 5.33
81 6.72 6.01 5.08 4.90 6.11 5.45
82 6.88 6.18 5.11 4.95 6.27 5.60
83 7.04 6.34 5.13 4.99 6.43 5.73
84 7.20 6.51 5.16 5.03 6.62 5.89
85 & over 7.36 6.67 5.18 5.07 6.81 6.04
</TABLE>
Amounts for Monthly Life Income are based on age nearest birthday when income
starts. Amounts for ages not shown will be furnished on request.
96-300-17 Page 18
<PAGE>
EQUITABLE
VARIABLE LIFE INSURANCE COMPANY
A Stock Life Insurance Company
Home Office: 787 Seventh Avenue, New York, New York 10019-6018
Flexible Premium Variable Life Insurance Policy. Insurance payable upon death
before Final Policy Date. Policy Account less outstanding loans and accrued
interest is payable on Final Policy Date. Adjustable Death Benefit. Premiums may
be paid while insured person is living and before the Final Policy Date.
Premiums must be sufficient to keep the policy in force. Values provided by this
policy are based on declared interest rates, and on the investment experience of
the investment funds of a separate account which in turn depends on the
investment performance of the securities held by such investment fund. They are
not guaranteed as to dollar amount. Investment options are described on Page 9.
This is a non-participating policy.
No. 96-300
INSURED PERSON RICHARD ROE [EQUITABLE LOGO]
POLICY OWNER ABC CORPORATION THE
EQUITABLE
FACE AMOUNT $50,000
THE EQUITABLE
TARGET AMOUNT $100,000 LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
DEATH BENEFIT OPTION A (SEE PAGE 6)
VARIABLE LIFE
POLICY NUMBER XX XXX XXX INSURANCE
POLICY
- --------------------------------------------------------------------------------
WE AGREE to pay the Insurance Benefit of this policy and to provide its other
benefits and rights in accordance with its provisions.
FLEXIBLE PREMIUM VARIABLE LIFE POLICY
This is a flexible premium variable life insurance policy. You can, within
limits:
o make premium payments at any time and in any amount;
o change the death benefit option;
o change the allocation of net premiums and deductions among your investment
options; and
o transfer amounts among your investment options.
THE DEATH BENEFIT IS GUARANTEED TO THE INSURED'S ATTAINED AGE 100 IF THE DEATH
BENEFIT IS ALWAYS OPTION A OR TO THE LATER OF ATTAINED AGE 80 OR 15 YEARS FROM
ISSUE IF THE DEATH BENEFIT IS EVER OPTION B, SUBJECT TO PREMIUMS HAVING BEEN
PAID IN ACCORDANCE WITH THE DEATH BENEFIT GUARANTEE PROVISION DESCRIBED IN THE
POLICY.
All of these rights and benefits are subject to the terms and conditions of
this policy. All requests for policy changes are subject to our approval and
may require evidence of insurability.
We will put your net premiums into your Policy Account. You may then allocate
them to one or more investment funds of our Separate Account(s) (SA) and to
our Guaranteed Interest Account (GIA).
THE PORTION OF YOUR POLICY ACCOUNT THAT IS IN AN INVESTMENT FUND OF OUR SA
WILL VARY UP OR DOWN DEPENDING ON THE UNIT VALUE OF SUCH INVESTMENT FUND,
WHICH IN TURN DEPENDS ON THE INVESTMENT PERFORMANCE OF THE SECURITIES HELD BY
THAT SA FUND. THERE ARE NO MINIMUM GUARANTEES AS TO SUCH PORTION OF YOUR
POLICY ACCOUNT.
The portion of your Policy Account that is in our GIA will accumulate, after
deductions, at rates of interest we determine. Such rates will not be less
than 4% a year.
THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED AS
DESCRIBED IN THIS POLICY.
This is a non-participating policy.
RIGHT TO EXAMINE POLICY. You may examine this policy and if for any reason you
are not satisfied with it, you may cancel it by returning this policy with a
written request for cancellation to our Administrative Office by the 10th day
after you receive it. If you do this, we will refund the premiums that were
paid on this policy.
/s/ Pauline Sherman /s/ James M. Benson
Pauline Sherman, Vice President & Secretary James M. Benson, President & Chief
Executive Officer
No. 96-300
<PAGE>
CONTENTS
- --------
Policy Information 3
Table of Maximum Monthly Charges
for Benefits 4
Those Who Benefit from this Policy 5
The Insurance Benefit We Pay 5
Changing the Face Amount of Insurance
or the Death Benefit Option 7
The Premiums You Pay 7
Your Policy Account and How it
Works 9
Your Investment Options 9
The Value of Your Policy Account 11
The Cash Surrender Value of this
Policy 12
How a Loan Can Be Made 12
Our Separate Account(s) (SA) 14
Our Annual Report to You 15
How Benefits are Paid 15
Other Important Information 16
IN THIS POLICY:
- ---------------
"We," "our," and "us" mean The Equitable Life Assurance Society of the United
States.
"You" and "your" mean the owner of this policy at the time an owner's right is
exercised.
Unless otherwise stated, all references to interest in this policy are effective
annual rates of interest.
Attained age means age on the birthday nearest to the beginning of the current
policy year.
ADMINISTRATIVE OFFICE
- ---------------------
The address of our Administrative Office is shown on Page 3. You should send
premiums and correspondence to that address unless instructed otherwise.
Copies of the application for this policy and any additional benefit riders are
attached to the policy.
INTRODUCTION
The premiums you pay, after deductions are made in accordance with the Table of
Expense Charges in the Policy Information section, are put into your Policy
Account. Amounts in your Policy Account are allocated at your direction to one
or more investment funds of our SA and to our GIA.
The investment funds of our SA invest in securities and other investments whose
value is subject to market fluctuations and investment risk. There is no
guarantee of principal or investment experience.
Our GIA earns interest at rates we declare in advance of each policy year. The
rates are guaranteed for each policy year. The principal, after deductions, is
also guaranteed.
If death benefit Option A is in effect, the death benefit is the Face Amount of
Insurance, and the amount of the death benefit is fixed except when it is a
percentage of your Policy Account. If death benefit Option B is in effect, the
death benefit is the Face Amount of Insurance plus the amount in your Policy
Account. The amount of the death benefit is variable. Under either option, the
death benefit will never be less than a percentage of your Policy Account as
stated on Page 6.
The death benefit is guaranteed to the Insured's attained age 100 if the Death
Benefit is always Option A or to the later of attained age 80 or 15 years from
issue if the Death Benefit is ever Option B, subject to premiums having been
paid in accordance with the Death Benefit Guarantee provision described in the
policy.
We make monthly deductions from your Policy Account to cover the cost of the
benefits provided by this policy and the cost of any benefits provided by riders
to this policy.
This is only a summary of what this policy provides. You should read all of it
carefully. Its terms govern your rights and our obligations.
No. 96-300 Page 2
<PAGE>
POLICY INFORMATION
INSURED PERSON RICHARD ROE
POLICY OWNER ABC CORPORATION
FACE AMOUNT
OF BASE POLICY $ 50,000
FACE AMOUNT
OF TERM RIDER $ 50,000
--------
TARGET AMOUNT $100,000
(BASE POLICY + TERM)
DEATH BENEFIT OPTION A (SEE PAGE 6)
POLICY NUMBER XX XXX XXX
BENEFICIARY MARGARET H. ROE SEPARATE ACCOUNT [FP]
REGISTER DATE JANUARY 3, 1996 ISSUE AGE 35
DATE OF ISSUE JANUARY 3, 1996 SEX MALE
INSURED PERSON'S PREFERRED
RESIDENCE STATE SPECIMEN NON-TOBACCO USER
A MINIMUM INITIAL PREMIUM PAYMENT OF $555.45 IS DUE ON OR BEFORE DELIVERY OF THE
POLICY.
THE PLANNED PERIODIC PREMIUM OF [$600.00] IS PAYABLE [SEMI-ANNUALLY].
PREMIUM PAYMENTS ARE FOR THE INSURANCE BENEFIT AND ANY ADDITIONAL BENEFIT RIDERS
LISTED.
SUPPLEMENTAL TERM INSURANCE ON INSURED - EXPIRY DATE - JANUARY 2, 2061
DEATH BENEFIT GUARANTEE PREMIUM FOR BASIC LIFE INSURANCE
MONTHLY PREMIUM PREMIUM PERIOD
--------------- --------------
NOT APPLICABLE NOT APPLICABLE
-------------- --------------
THE PLANNED PERIODIC PREMIUMS SHOWN ABOVE MAY NOT BE SUFFICIENT TO CONTINUE THE
POLICY AND LIFE INSURANCE COVERAGE IN FORCE TO THE FINAL POLICY DATE, WHICH IS
THE POLICY ANNIVERSARY NEAREST THE INSURED PERSON'S 100TH BIRTHDAY. THE PERIOD
FOR WHICH THE POLICY AND COVERAGE WILL CONTINUE IN FORCE WILL DEPEND ON: (1) THE
AMOUNT, TIMING AND FREQUENCY OF PREMIUM PAYMENTS; (2) CHANGES IN THE FACE AMOUNT
OF INSURANCE AND THE DEATH BENEFIT OPTIONS; (3) CHANGES IN THE INTEREST RATES
CREDITED TO OUR GIA AND IN THE INVESTMENT PERFORMANCE OF THE INVESTMENT FUNDS OF
OUR SA; (4) CHANGES IN THE MONTHLY DEDUCTIONS FROM THE POLICY ACCOUNT FOR THIS
POLICY AND ANY BENEFITS PROVIDED BY RIDERS TO THIS POLICY; AND (5) LOAN AND
PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL ACTIVITY.
PAGE 3
96-300-3 (CONTINUED ON NEXT PAGE)
<PAGE>
POLICY INFORMATION CONTINUED - POLICY NUMBER XX XXX XXX
----------- TABLE OF MAXIMUM AUTOMATIC EXPENSE CHARGES -----------
DEDUCTIONS FROM PREMIUM PAYMENTS:
CHARGE FOR APPLICABLE TAXES (OTHER THAN TAXES DISCUSSED ON PAGE 11):
[2.00%] OF EACH PREMIUM PAYMENT. WE RESERVE THE RIGHT TO CHANGE THIS
PERCENTAGE TO CONFORM TO CHANGES IN THE LAW OR IF THE INSURED PERSON
CHANGES RESIDENCE.
PREMIUM SALES CHARGE:
FOR POLICY YEARS 1-10: 5.50% OF EACH PREMIUM PAYMENT.
FOR POLICY YEARS 11 AND LATER: 2.50% OF EACH PREMIUM PAYMENT.
DEDUCTIONS FORM YOUR POLICY ACCOUNT (THESE CHARGES ARE DEDUCTED AT THE BEGINNING
OF EACH POLICY MONTH):
ADMINISTRATIVE CHARGE:
FOR POLICY YEARS 1-3: $26.00 PER MONTH.
FOR POLICY YEARS 4-10: $13.50 PER MONTH.
FOR POLICY YEARS 11 AND LATER: $9.00 PER MONTH.
FOR MORTALITY AND EXPENSE RISK:
.03333% OF THE UNLOANED POLICY ACCOUNT VALUE.
ADMINISTRATIVE OFFICE
---------------------
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SPECIMEN SERVICE CENTER
100 SPECIMEN STREET
CITY, STATE 10001-6018
96-300-3 PAGE 3 - CONTINUED
<PAGE>
POLICY INFORMATION CONTINUED - POLICY NUMBER XX XXX XXX
---------TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES---------
PER $1,000 OF NET AMOUNT AT RISK (SEE PAGE 9) FOR BASIC LIFE INSURANCE
INSURED INSURED INSURED
PERSON'S PERSON'S PERSON'S
ATTAINED ATTAINED ATTAINED
AGE RATE AGE RATE AGE RATE
35 0.14094 55 0.65401 75 5.03724
36 0.14762 56 0.72203 76 5.59039
37 0.15680 57 0.79429 77 6.17549
38 0.16682 58 0.87251 78 6.78686
39 0.17851 59 0.96090 79 7.44038
40 0.19103 60 1.05949 80 8.16249
41 0.20607 61 1.16916 81 8.97320
42 0.22110 62 1.29417 82 9.89813
43 0.23865 63 1.43714 83 10.95204
44 0.25619 64 1.59899 84 12.11846
45 0.27709 65 1.77812 85 13.37460
46 0.29966 66 1.97123 86 14.69860
47 0.32391 67 2.18097 87 16.08129
48 0.34984 68 2.40660 88 17.49682
49 0.37912 69 2.65338 89 18.96601
50 0.41009 70 2.93268 90 20.51212
51 0.44693 71 3.30181 91 22.16549
52 0.48965 72 3.61779 92 23.98724
53 0.53742 73 4.04199 93 26.06643
54 0.59276 74 4.52073 94 28.78427
95 32.81758
96 39.64294
97 53.06605
98 83.33238
99 83.33238
96-300-4 PAGE 4
(CONTINUED ON NEXT PAGE)
<PAGE>
POLICY INFORMATION CONTINUED - POLICY NUMBER XX XXX XXX
----------TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES----------
PER $1,000 OF SUPPLEMENTAL TERM INSURANCE BENEFIT
INSURED INSURED INSURED
PERSON'S PERSON'S PERSON'S
ATTAINED ATTAINED ATTAINED
AGE RATE AGE RATE AGE RATE
35 0.14800 55 0.68684 75 5.29661
36 0.15501 56 0.75828 76 5.87918
37 0.16465 57 0.83419 77 6.49561
38 0.17517 58 0.91635 78 7.13994
39 0.18744 59 1.00921 79 7.82897
40 0.20060 60 1.11279 80 8.59062
41 0.21638 61 1.22801 81 9.44613
42 0.23217 62 1.35937 82 10.42270
43 0.25060 63 1.50960 83 11.53615
44 0.26902 64 1.67968 84 12.76934
45 0.29097 65 1.86795 85 14.09843
46 0.31467 66 2.07093 86 15.50051
47 0.34014 67 2.29141 87 16.96608
48 0.36737 68 2.52862 88 18.46791
49 0.39812 69 2.78811 89 20.02823
50 0.43064 70 3.08183 90 21.67203
51 0.46933 71 3.47009 91 23.43192
52 0.51420 72 3.80253 92 25.37355
53 0.56437 73 4.24890 93 27.59288
54 0.62250 74 4.75279 94 30.49944
95 34.82486
96 42.17972
97 56.79054
98 83.33238
99 83.33238
96-300-4 PAGE 4 - CONTINUED
<PAGE>
- --------------------------------------------------------------------------------
THOSE WHO BENEFIT FROM THIS POLICY
OWNER. The owner of this policy is the insured person unless otherwise stated in
the application, or later changed.
As the owner, you are entitled to exercise all the rights of this policy while
the insured person is living. To exercise a right, you do not need the consent
of anyone who has only a conditional or future ownership interest in this
policy.
BENEFICIARY. The beneficiary is an stated in the application, unless later
changed. The beneficiary is entitled to the Insurance Benefit of this policy.
One or more beneficiaries for the Insurance Benefit can be named in the
application. If more than one beneficiary is named, they can be classed as
primary or contingent. If two or more persons are named in a class, their shares
in the benefit can be stated. The stated shares in the Insurance Benefit will be
paid to any primary beneficiaries who survive the insured person. If no primary
beneficiaries survive, payment will be made to any surviving contingent
beneficiaries. Beneficiaries who survive in the same class will share the
Insurance Benefit equally, unless you have made another arrangement with us.
If there is no designated beneficiary living at the death of the insured person,
we will pay the Insurance Benefit to the insured person's surviving children in
equal shares. If none survive, we will pay the insured person's estate.
CHANGING THE OWNER OR BENEFICIARY. While the insured person is living, you may
change the owner or beneficiary by written notice in a form satisfactory to us.
You can get such a form from our agent or by writing to us at our Administrative
Office. The change will take effect on the date you sign the notice; however, it
will not apply to any payment we make or other action we take before we receive
the notice. If you change the beneficiary, any previous arrangement you made as
to a payment option for benefits is cancelled. You may choose a payment option
for the new beneficiary in accordance with "How Benefits Are Paid" on Page 15.
ASSIGNMENT. You may assign this policy, if we agree. In any event, we will not
be bound by an assignment unless we have received it in writing at our
Administrative Office. Your rights and those of any other person referred to in
this policy will be subject to the assignment. We assume no responsibility for
the validity of an assignment. An absolute assignment will be considered as a
change of ownership to the assignee.
- --------------------------------------------------------------------------------
THE INSURANCE BENEFIT WE PAY
We will pay the Insurance Benefit of this policy to the beneficiary when we
receive at our Administrative Office (1) proof satisfactory to us that the
insured person died before the Final Policy Date; and (2) all other requirements
we deem necessary before such payment may be made. The Insurance Benefit
includes the following amounts, which we will determine as of the date of the
insured person's death:
o the death benefit described on Page 6;
o PLUS any other benefits then due from riders to this policy;
o MINUS any policy loan and accrued interest;
o MINUS any overdue deductions from your Policy Account if the insured
person dies during a grace period.
We will add interest to the resulting amount in accordance with applicable law.
We will compute the interest at a rate we determine, but not less than the
greater of (a) the rate we are paying on the date of payment under the Deposit
Option on Page 15, or (b) the rate required by any applicable law. Payment of
the Insurance Benefit may also be affected by other provisions of this policy.
See Pages 16 and 17, where we specify our right to contest the policy, the
suicide exclusion, and what happens if age or sex has been misstated. Special
exclusions or limitations (if any) are listed in the Policy Information section.
96-300-5 Page 5
<PAGE>
DEATH BENEFIT. The death benefit at any time will be determined under either
Option A or Option B below, whichever you have chosen and is in effect at such
time.
Under Option A, the death benefit is the greater of (a) the Face Amount of
Insurance; or (b) a percentage (see Table below) of the amount in your Policy
Account. Under this option, the amount of the death benefit is fixed, except
when it is determined by such percentage.
Under Option B, the death benefit is the greater of (a) the Face Amount of
Insurance plus the amount in your Policy Account; or (b) a percentage (see Table
below) of the amount in your Policy Account. Under this option the amount of the
death benefit is variable.
The percentages referred to above are the percentages from the following table
for the insured person's age (nearest birthday) at the beginning of the policy
year of determination.
TABLE OF PERCENTAGES
For ages not shown, the percentages shall
decrease by a ratable portion for each full year
INSURED INSURED
PERSON'S AGE PERCENTAGE PERSON'S AGE PERCENTAGE
------------ ---------- ------------ ----------
40 and under 250% 65 120%
45 215 70 115
50 185 75 thru 95 105
55 150 100 100
60 130
Section 7702 of the Internal Revenue Code of 1986, as amended (i.e., the
"Code"), gives a definition of life insurance which limits the amounts that may
be paid into a life insurance policy relative to the benefits it provides. Even
if this policy states otherwise, at no time will the "future benefits" under
this policy be less than an amount such that the "premiums paid" do not exceed
the Code's "guideline premium limitations". We may adjust the amount of premium
paid to meet these limitations. Also, at no time will the "death benefit" under
the policy be less than the "applicable percentage" of the "cash surrender
value" of the policy. The above terms are as defined in the Code. In addition,
we may take certain actions, described here and elsewhere in the policy, to meet
the definitions and limitations in the Code, based on our interpretation of the
Code. Please see "Policy Changes -- Applicable Tax Law" for more information.
DEATH BENEFIT GUARANTEE. Subject to the conditions set forth below, the death
benefit of this policy is guaranteed if the sum of premium payments accumulated
at 4%, less any partial withdrawals accumulated at 4%, is at least equal to the
sum of the Death Benefit Guarantee Premiums (shown on Page 3) accumulated at 4%,
and any outstanding loan and accrued loan interest does not exceed the cash
surrender value. Certain policy changes after issue will change the Death
Benefit Guarantee Premiums accordingly.
The death benefit is guaranteed to Insured's attained age 100 if the Death
Benefit is always Option A, or the later of the Insured's attained age 80 or 15
years from issue if the Death Benefit is ever Option B.
MATURITY BENEFIT. If the Insured person is living on the Final Policy Date
defined in the Policy Information section, we will pay you the amount in your
Policy Account on that date minus any policy loan and accrued interest. This
policy will then end.
96-300-5 Page 6
<PAGE>
- --------------------------------------------------------------------------------
CHANGING THE FACE AMOUNT OF INSURANCE OR THE DEATH BENEFIT OPTION
You may change the death benefit option or the Face Amount of Insurance by
written request to us at our Administrative Office, subject to our approval and
the following:
1. After the second policy year while this policy is in force, you may ask us
to reduce the Face Amount of Insurance but not to less than the minimum
amount for which we would then issue this policy under our rules. Any such
reduction in the Face Amount of Insurance may not be less than $10,000.
2. After the second policy year while this policy is in force, you can change
your death benefit option. If you ask us to change from Option A to Option
B, we will decrease the Face Amount of Insurance by the amount in your
Policy Account on the date the change takes effect. However, we reserve the
right to decline to make such change if it would reduce the Face Amount of
Insurance below the minimum amount for which we would then issue this policy
under our rules. We also reserve the right to request evidence of
insurability for a change to Option B. If you ask us to change from Option B
to Option A, we will increase the Face Amount of Insurance by the amount in
your Policy Account on the date the change takes effect. Such decreases and
increases in the Face Amount of Insurance are made so that the death benefit
is the same immediately before and after the change.
3. The change will take effect at the beginning of the policy month that
coincides with or next follows the date we approve your request.
4. We reserve the right to decline to make any change that we determine would
cause this policy to fail to qualify as life insurance under applicable tax
law as interpreted by us (see Page 16).
5. You may ask for a change by completing an application for change, which you
can get from our agent or by writing to us at our Administrative Office. A
copy of your application for change will be attached to the new Policy
Information section that we will issue when the change is made. The new
section and the application for change will become a part of this policy. We
may require you to return this policy to our Administrative Office to make a
policy change.
- --------------------------------------------------------------------------------
THE PREMIUMS YOU PAY
The minimum initial premium payment shown in the Policy Information section is
due on or before delivery of this policy. No insurance will take effect before a
premium at least equal to the minimum initial premium payment is paid. Other
premiums may be paid at any time while this policy is in force and before the
Final Policy Date at our Administrative Office.
We will send premium notices to you for the planned periodic premium shown in
the Policy Information section. You may skip planned periodic premium payments.
However, this may adversely affect the duration of the death benefit and your
policy's values. We will assume that any payment you make to us is a premium
payment, unless you tell us in writing that it is a loan repayment.
LIMITS. Each premium payment after the initial one must be at least $100. We may
increase this minimum limit 90 days after we send you written notice of such
increase. We reserve the right to require evidence of insurability for any
premium payment you may make which is in excess of the greater of the Death
Benefit Guarantee Premium or the Planned Periodic Premium shown on Page 3.
We also reserve the right not to accept premium payments or to return excess
amounts that we determine would cause this policy to fail to qualify as life
insurance under applicable tax law as interpreted by us (see Page 16).
GRACE PERIOD. At the beginning of each policy month, the Net Cash Surrender
Value will be compared to the total monthly deductions described on Page 9. If
the Net Cash Surrender Value is sufficient to cover the total monthly
deductions, the policy is not in default.
If the Net Cash Surrender Value at the beginning of any policy month is less
than such deductions for that month we will perform the following calculations
to determine whether the policy is in default:
1. Determine the Death Benefit Guarantee Premium fund. The Death Benefit
Guarantee Premium fund for any policy month is the accumulation of all
the death benefit guarantee premiums shown on Page 3 up to that month at
4% interest.
96-300-7 Page 7
<PAGE>
2. Determine the actual premium fund. The actual premium fund for any
policy month is the accumulation of all the premiums received at 4%
interest minus all withdrawals accumulated at 4% interest.
3. If the result in Step 2 is greater than or equal to the result in Step
1, and any loan and accrued loan interest does not exceed the Cash
Surrender Value, the policy is not in default. The death benefit
guarantee will be in effect and monthly deductions in excess of the
Policy Account will be waived.
4. If the result of Step 2 is less than the result in Step 1, or if the
result of Step 2 is greater than or equal to the result in Step 1 and
any loan and accrued loan interest exceeds the Cash Surrender Value, the
policy is in default as of the first day of this policy month. This is
the date of default.
If the Death Benefit Guarantee provision does not apply, the calculations in
Steps 1. - 4. above will not be performed. In that case, if the Net Cash
Surrender Value at the beginning of any policy month is less than the monthly
deductions for that month, the policy is in default as of the first day of such
policy month.
If the policy is in default, we will send you and any assignee on our records at
last known addresses written notice stating that a grace period of 61 days has
begun as of the date of default. The notice will also state the amount of
payment that is due.
The payment required will not be more than an amount sufficient to increase the
Net Cash Surrender Value to cover all monthly deductions for 3 months beginning
with the date of default, calculated assuming no interest or investment
performance were credited to or charged against the Policy Account and no policy
changes were made.
If we do not receive such amount at our Administrative Office before the end of
the grace period, we will then (1) withdraw and retain the entire amount in your
Policy Account; and (2) send a written notice to you and any assignee on our
records at last known addresses stating that this policy has ended without
value.
If we receive the requested amount before the end of the grace period, but the
Net Cash Surrender Value is still insufficient to cover total monthly
deductions, we will send a written notice that a new 61-day grace period has
begun and request an additional payment.
If the insured person dies during a grace period, we will pay the Insurance
Benefit as described on Page 5.
RESTORING YOUR POLICY BENEFITS. If this policy has ended without value, you may
restore policy benefits while the insured person is alive if you:
1. Ask for restoration of policy benefits within 6 months from the end of
the grace period; and
2. Provide evidence of insurability satisfactory to us; and
3. Make a required payment. The required payment will not be more than an
amount sufficient to cover (i) the monthly administrative charges from
the beginning of the grace period to the effective date of restoration;
(ii) total monthly deductions for 3 months, calculated from the
effective date of restoration; and (iii) the charge for applicable taxes
and the premium sales charge associated with this payment. We will
determine the amount of this required payment as if no interest or
investment performance were credited to or charged against your Policy
Account.
From the required payment we will deduct the charge for applicable taxes and the
premium sales charge. The policy account on the date of restoration will be
equal to the balance of the required payment.
The effective date of the restoration of policy benefits will be the beginning
of the policy month which coincides with or next follows the date we approve
your request.
We will start to make monthly charges again as of the effective date of
restoration. The monthly administrative charges from the beginning of the grace
period to the effective date of restoration will be deducted from the Policy
Account as of the effective date of restoration.
96-300-7 Page 8
<PAGE>
- --------------------------------------------------------------------------------
YOUR POLICY ACCOUNT AND HOW IT WORKS
PREMIUM PAYMENTS. When we receive your premium payments, we subtract the expense
charges shown in the table in the Policy Information section. We put the balance
(the net premium) into your Policy Account as of the date we receive the premium
payment at our Administrative Office, and before any deductions from your Policy
Account due on that date are made. However, we will put the initial net premium
payment into your Policy Account as of the Register Date if it is later than the
date of receipt. No premiums will be applied to your Policy Account until the
minimum initial premium payment is received at our Administrative Office.
MONTHLY DEDUCTIONS. At the beginning of each policy month we make a deduction
from your Policy Account. Such deduction for any policy month is the sum of the
following amounts determined as of the beginning of that month:
o the monthly charge for mortality and expense risk;
o the monthly administrative charge;
o the monthly cost of insurance for the insured person; and
o the monthly cost of any benefits provided by riders to this policy.
The monthly cost of insurance is the sum of our current monthly cost of
insurance rate per $1000 of net amount at risk plus any extra charge per $1,000
of net amount at risk shown in the Policy Information section, times the net
amount at risk at the beginning of the policy month divided by $1,000. The net
amount at risk at any time is the death benefit minus the amount in your Policy
Account at that time.
We will determine cost of insurance rates from time to time. Any change in the
cost of insurance rates we use will be as described in "Changes in Policy Cost
Factors" on Page 16. They will never be more than those shown in the Table of
Guaranteed Maximum Cost of Insurance Rates Per $1000 of Net Amount At Risk on
Page 4.
OTHER DEDUCTIONS. We also make the following other deductions from your Policy
Account as they occur:
o We deduct a withdrawal charge if you make a partial withdrawal of the Net
Cash Surrender Value (see Page 12).
o We deduct a charge for certain transfers (see Page 10).
- --------------------------------------------------------------------------------
YOUR INVESTMENT OPTIONS
ALLOCATIONS. This policy provides investment options for the amount in your
Policy Account. Amounts put into your Policy Account and deductions from it are
allocated to the investment funds of our SA and to the unloaned portion of our
GIA at your direction. You specified your initial premium allocation and
deduction allocation percentages in your application for this policy, a copy of
which is attached to this policy. Unless you change them, such percentages shall
also apply to subsequent premium and deduction allocations. However, any amounts
which are put into your Policy Account prior to the Allocation Date and which
are to be allocated to the investment funds of our SA will initially be
allocated to (and monthly deductions taken from) the Money Market Fund of our
SA. The Allocation Date is the first business day (see Page 11) twenty calendar
days after the date of issue of this policy. On the Allocation Date, any such
amounts then in the Money Market Fund will be allocated in accordance with the
directions contained in your policy application.
Allocation percentages must be zero or a whole number not greater than 100. The
sum of the premium allocation percentages and of the deduction allocation
percentages must each equal 100.
You may change such allocation percentages by written notice to our
Administrative Office. A change will take effect on the date we receive it at
our Administrative Office except for changes received on or prior to the
Allocation Date which will take effect on the first business day following the
Allocation Date.
96-300-9 Page 9
<PAGE>
If we cannot make a monthly deduction on the basis of the deduction allocation
percentages then in effect, we will make that deduction based on the proportion
that your unloaned value in our GIA and your values in the investment funds of
our SA bear to the total unloaned value in your Policy Account.
TRANSFERS. At your written request to our Administrative Office, we will
transfer amounts from your value in any investment fund of our SA to one or more
other funds of our SA or to our GIA. Any such transfer will take effect on the
date we receive your written request at our Administrative Office. However, no
transfers will be made prior to the Allocation Date.
Once during each policy year you may ask us by written request to our
Administrative Office to transfer an amount you specify from your unloaned value
in our GIA to one or more investment funds of our SA. However, we will make such
a transfer only if (1) we receive your written request at our Administrative
Office within 30 days before or after a policy anniversary; and (2) the amount
you specify is not more than 25% of your unloaned value in our GIA as of the
date the transfer takes effect. The transfer will take effect on the date we
receive your written request for it at our Administrative Office but not before
the policy anniversary.
We reserve the right to make a transfer charge up to $25.00 for each transfer of
amounts among your investment options. The transfer charge, if any, is deducted
from the amounts transferred from the investment funds of our SA and the GIA
based on the proportion that the amount transferred from each investment fund
and the GIA bears to the total amount being transferred. A transfer from the
Money Market Fund on the Allocation Date (if applicable) will not incur a
transfer charge. If you ask us to transfer the entire amount of your value in
the investment funds of our SA to our GIA, we will not make a charge for that
transfer.
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THE VALUE OF YOUR POLICY ACCOUNT
The amount in your Policy Account at any time is equal to the sum of the amounts
you then have in our GIA and the investment funds of our SA under this policy.
YOUR VALUE IN OUR GIA. The amount you have in our GIA at any time is equal to
the amounts allocated and transferred to it, plus the interest credited to it,
minus amounts deducted, transferred and withdrawn from it.
We will credit the amount in our unloaned GIA with interest rates we determine.
We will determine such interest rates annually in advance for unloaned amounts
in our GIA. The interest rates we determine each year will apply to the policy
year that follows the date of determination. Any change in the interest rates we
determine will be as described in "Changes in Policy Cost Factors" on Page 16.
Such interest rates will not be less than 4%. Interest accrues and is credited
on unloaned amounts in the GIA daily. However, we will credit interest on the
initial net premium from the Register Date, if it is later than the date of
receipt, provided that the initial premium is at least equal to the minimum
initial premium shown on page 3 of the policy.
96-300-9 Page 10
<PAGE>
We credit interest on the loaned portion of our GIA daily. The interest rate we
credit to the loaned portion of our GIA will be determined at the beginning of
each calendar year 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. In no event will we credit less than 4% a year.
YOUR VALUE IN THE INVESTMENT FUNDS OF OUR SA. The amount you have in an
investment fund of our SA under this policy at any time is equal to the number
of units this policy then has in that fund multiplied by the fund's unit value
at that time.
Amounts allocated, transferred or added to an investment fund of our SA are used
to purchase units of that fund; units are redeemed when amounts are deducted,
loaned, transferred or withdrawn. These transactions are called policy
transactions.
The number of units a policy has in an investment fund at any time is equal to
the number of units purchased minus the number of units redeemed in that fund to
that time. The number of units purchased or redeemed in a policy transaction is
equal to the dollar amount of the policy transaction divided by the fund's unit
value on the date of the policy transaction. Policy transactions may be made on
any day. The unit value that applies to a transaction made on a business day
will be the unit value for that day. The unit value that applies to a
transaction made on a non-business day will be the unit value for the next
business day.
We determine unit values for the investment funds of our SA 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. A business day immediately preceded by one
or more non-business calendar days will include those non-business days as part
of that business day. For example, a business day which falls on a Monday will
consist of that Monday and the immediately preceding Saturday and Sunday.
The unit value of an investment fund of our SA on any business day is equal to
the unit value for that fund on the immediately preceding business day
multiplied by the net investment factor for that fund on that business day.
The net investment factor for an investment fund of our SA on any business day
is (a) divided by (b), minus(c), where:
(a) is the net asset value of the shares in designated investment companies that
belong to the investment fund at the close of business on such business day
before any policy transactions are made on that day, plus the amount of any
dividend or capital gain distribution paid by the investment companies on that
day;
(b) is the value of the assets in that investment fund at the close of business
on the immediately preceding business day after all policy transactions were
made for that day; and
(c) is any charge for that day for taxes or amounts set aside as a reserve for
taxes.
The net asset value of an investment company's shares held in each investment
fund shall be the value reported to us by that investment company.
96-300-11 Page 11
<PAGE>
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THE CASH SURRENDER VALUE OF THIS POLICY
CASH SURRENDER VALUE. The Cash Surrender Value on any date is equal to the
amount in your Policy Account on that date.
NET CASH SURRENDER VALUE. The Net Cash Surrender Value is equal to the Cash
Surrender Value minus any policy loan and accrued loan interest. You may give up
this policy for its Net Cash Surrender Value at any time while the insured
person is living. You may do this by sending us a written request for it and
this policy to our Administrative Office. We will compute the Net Cash Surrender
Value as of the date we receive your request for it and this policy at our
Administrative Office. All insurance coverage under this policy ends on such
date.
PARTIAL NET CASH SURRENDER VALUE WITHDRAWAL. After the first policy year and
while the insured person is living, you may ask for a partial Net Cash Surrender
Value withdrawal by written request to our Administrative Office. Your request
will be subject to our approval based on our rules in effect when we receive
your request. The amount withdrawn from the Policy account is equal to the
amount requested plus an expense charge equal to the lesser of $25.00 and 2% of
the amount withdrawn. We have the right to decline a request for a partial Net
Cash Surrender Value withdrawal. A partial withdrawal will result in a reduction
in the Cash Surrender Value and in you Policy Account equal to the amount
withdrawn plus the expense charge as well as a reduction in your death benefit.
If the death benefit is Option A, the withdrawal may also result in a decrease
in the face amount.
You may tell us how much of each partial withdrawal is to come from your
unloaned value in our GIA and from your values in each of the investment funds
of our SA. If you do not tell us or we cannot make the withdrawal based on your
directions, we will make the withdrawal and expense charge deduction based on
the proportion that your unloaned value in our GIA and your values in the
investment funds of our SA bear to the total unloaned value in your Policy
Account.
Such withdrawal and resulting reduction in the death benefit, the Cash Surrender
Value and your Policy Account will take effect on the date we receive your
written request at our Administrative Office. We will send you a new Policy
Information section if a withdrawal results in a reduction in the Face Amount of
Insurance. It will become a part of this policy. We may require you to return
this policy to our Administrative Office to make a change.
- --------------------------------------------------------------------------------
HOW A LOAN CAN BE MADE
POLICY LOANS. You can take a loan on this policy while it has a loan value. This
policy will be the only security for the loan. Any amount on loan is part of
your Policy Account (see Page 11). We refer to this as the loaned portion of
your Policy Account.
LOAN VALUE. The value on any date is 90% of the Cash Surrender Value on that
date.
The amount of the loan may not be more than the loan value. If you request an
increase to an existing loan, the additional amount requested will be added to
the amount of the existing loan and accrued loan interest.
96-300-11 Page 12
<PAGE>
Your request for a policy loan must be in writing to our Administrative Office.
You may tell us how much of the requested loan is to be allocated to your
unloaned value in our GIA and your value in each investment fund of our SA. Such
values will be determined as of the date we receive your request. If you do not
tell us, or if we cannot allocate the loan on the basis of your direction, we
will allocate it based on the proportion that your unloaned value in our GIA and
your values in the investment funds of our SA bear to the total unloaned value
in your Policy Account.
The loaned portion of your Policy Account will be maintained as a part of our
GIA. Thus, when a loaned amount is allocated to an investment fund of our SA, we
will redeem units of that investment fund sufficient in value to cover the
amount of the loan so allocated and transfer that amount to our GIA.
LOAN INTEREST. Interest on a loan accrues daily at an adjustable loan interest
rate. We will determine the rate at the beginning of each calendar year, subject
to the following paragraphs. It will apply to any new or outstanding loan under
the policy during the policy year next following the date of determination.
The maximum loan interest rate for a calendar year shall be the greater of: (1)
the "Published Monthly Average," as defined below, for the calendar month that
ends two months before the date of determination; or (2) 5%. "Published Monthly
Average" means the Monthly Average Corporates yield shown in Moody's Corporate
Bond Yield Averages published by Moody's Investors Service, Inc., or any
successor thereto. If such averages are no longer published, we will use such
other averages as may be established by regulation by the insurance supervisory
official of the jurisdiction in which this policy is delivered. In no event will
the loan interest rate for a calendar year be greater than the maximum rate
permitted by applicable law. We reserve the right to establish a rate lower than
the maximum.
No change in the rate shall be less than 1/2 of 1% a year. We may increase the
rate whenever the maximum rate as determined by clause (1) of the preceding
paragraph exceeds the rate being charged by 1/2 of 1% or more. We will reduce
the rate to or below the maximum rate as determined by clause (1) of the
preceding paragraph if such maximum is lower than the rate being charged by 1/2
of 1% or more.
We will notify you of the initial loan interest rate when you make a loan. We
will also give you advance written notice of any increase in the interest rate
of any outstanding loan.
Loan interest is due on each policy anniversary. If the interest is not paid
when due, it will be added to your outstanding loan and will then be treated as
part of the loaned amount and bear interest at the loan rate. The difference
between the loan interest due and the interest credited on the loaned portion of
the GIA is the net unpaid loan interest. The net unpaid loan interest will be
allocated based on the proportion that your unloaned value in our GIA and your
values in the investment funds of our SA bear to the total unloaned value in
your Policy Account. When the net unpaid loan interest is allocated to one or
more investment funds of our SA, we will redeem units of those investment funds
sufficient in value to cover the amount of interest so allocated and transfer
that amount to our GIA.
LOAN REPAYMENT. You may repay all or part of a policy loan at any time while the
insured person is alive and this policy is in force.
Repayments will first be allocated to our GIA until you have repaid any loaned
amounts that were allocated to our GIA. You may tell us how to allocate payments
above that amount among our GIA and the investment funds of our SA. If you do
not tell us, we will make the allocation based on the proportion that your
unloaned value in our GIA and your values in the investment funds of our SA bear
to the total unloaned value in your Policy Account.
Failure to repay a policy loan or to pay loan interest will not terminate this
policy unless at the beginning of a policy month the Net Cash Surrender Value is
less than the total monthly deduction then due. In that case, the Grace Period
provision will apply (see Page 7).
A policy loan will have a permanent effect on your benefits under this policy
even if it is repaid.
96-300-13 Page 13
<PAGE>
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OUR SEPARATE ACCOUNT(S) (SA)
We established and we maintain our SA under the laws of New York State. Realized
and unrealized gains and losses from the assets of our SA are credited or
charged against it without regard to our other income, gains, or losses. Assets
are put in our SA to support this policy and other variable life insurance
policies. Assets may be put in our SA for other purposes, but not to support
contracts or policies other than variable contracts.
The assets of our SA are our property. The portion of its assets equal to the
reserves and other policy liabilities with respect to our SA will not be
chargeable with liabilities arising out of any other business we conduct. We may
transfer assets of an investment fund in excess of the reserves and other
liabilities with respect to that fund to another investment fund or to our
General Account.
INVESTMENT FUNDS. Our SA consists of investment funds. Each fund may invest its
assets in a separate class of shares of a designated investment company or
companies or make direct investments in securities. The investment funds of our
SA that you chose for your initial allocations are shown on the application for
this policy, a copy of which is attached to this policy. We may from time to
time make other investment funds available to you or we may create a new SA. We
will provide you with written notice of all material details including
investment objectives and all charges.
We have the right to change or add designated investment companies. We have the
right to add or remove investment funds. We have the right to withdraw assets of
a class of policies to which this policy belongs from an investment fund and put
them in another investment fund. We also have the right to combine any two or
more investment funds. The term investment fund in this policy shall then refer
to any other investment fund in which the assets of a class of policies to which
this policy belongs were placed.
We have the right to:
1. register or deregister any SA available under this policy under the
Investment Company Act of 1940;
2. run any SA available under this policy under the direction of a committee,
and discharge such committee at any time;
3. restrict or eliminate any voting rights of policy owners, or other persons
who have voting rights as to any SA available under this policy; and
4. operate any SA available under this policy or one or more of its investment
funds by making direct investments or in any other form. If we do so, we may
invest the assets of such SA or one or more of the investment funds in any
legal investments. We will rely upon our own or outside counsel for advice
in this regard. Also, unless otherwise required by law or regulation, an
investment adviser or any investment policy may not be changed without our
consent. If required by law or regulation, the investment policy of an
investment fund of any SA available under this policy will not be changed by
us unless approved by the Superintendent of Insurance of New York State or
deemed approved in accordance with such law or regulation. If so required,
the process for getting such approval is on file with the insurance
supervisory official of the jurisdiction in which this policy is delivered.
If any of these changes result in a material change in the underlying
investments of an investment fund of our SA, we will notify you of such change,
as required by law. If you have value in that investment fund, if you wish, we
will transfer it at your written direction from that fund (without charge) to
another fund of our SA or to our GIA, and you may then change your premium and
deduction allocation percentages.
96-300-13 Page 14
<PAGE>
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OUR ANNUAL REPORT TO YOU
For each policy year we will send you a report for this policy that shows the
current death benefit, the value you have in our GIA and the value you have in
each investment fund of any SA available under this policy, the Cash Surrender
Value and any policy loan with the current loan interest rate. It will also show
the premiums paid and any other information as may be required by the insurance
supervisory official of the jurisdiction in which this policy is delivered.
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HOW BENEFITS ARE PAID
You can have the Insurance Benefit, your Net Cash Surrender Value withdrawals or
your Policy Account payable on the Final Policy Date paid immediately in one
sum. Or, you can choose another form of payment for all or part of them. If you
do not arrange for a specific choice before the insured person dies, the
beneficiary will have this right when the insured person dies. If you do make an
arrangement, however, the beneficiary cannot change it after the insured person
dies.
Payments under the following options will not be affected by the investment
experience of any investment fund of our SA after proceeds are applied under
such options.
The options are:
1. DEPOSIT: The sum will be left on deposit for a period mutually agreed upon.
We will pay interest at the end of every month, every 3 months, every 6
months or every 12 months, as chosen.
2. INSTALLMENT PAYMENTS: There are two ways that we pay installments:
A. FIXED PERIOD: We will pay the sum in equal installments for a specified
number of years (not more than 30). The installments will be at least
those shown in the Table of Guaranteed Payments on Page 18.
B. FIXED AMOUNT: We will pay the sum in installments as mutually agreed
upon until the original sum, together with interest on the unpaid
balance, is used up.
3. MONTHLY LIFE INCOME: We will pay the sum as a monthly income for life. The
amount of the monthly payment will be at least that shown in the Table of
Guaranteed Payments on Page 18. You may choose any one of three ways to
receive monthly life income. We will guarantee payments for at least 10
years (called "10 years Certain"); at least 20 years (called "20 Years
Certain"); or until the payments we make equal the original sum (called
"Refund Certain").
4. OTHER: We will apply the sum under any other option requested that we make
available at the time of payment.
The payee may name and change a successor payee for any amount we would
otherwise pay to the payee's estate.
Any arrangements involving more than one of the options, or a payee who is not a
natural person (for example, a corporation) or who is a fiduciary, must have our
approval. Also, details of all arrangements will be subject to our rules at the
time the arrangement takes effect. These include rules on: the minimum amount we
will apply under an option and minimum amounts for installment payments;
withdrawal or commutation rights; naming payees and successor payees; and
proving age and survival.
Payment choices (or any later changes) will be made and will take effect in the
same way as a change of beneficiary. Amounts applied under these options will
not be subject to the claims of creditors or to legal process, to the extent
permitted by law.
96-300-15 Page 15
<PAGE>
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OTHER IMPORTANT INFORMATION
YOUR CONTRACT WITH US. This policy is issued in consideration of payment of the
initial premium payment shown in the Policy Information section.
This policy, and the attached copy of the initial application and all subsequent
applications to change this policy, and all additional Policy Information
sections added to this policy, make up the entire contract. The rights conferred
by this policy are in addition to those provided by applicable Federal and State
laws and regulations.
Only our Chairman of the Board, our President or one of our Vice Presidents can
modify this contract or waive any of our rights or requirements under it. The
person making these changes must put them in writing and sign them.
POLICY CHANGES -- APPLICABLE TAX LAW. For you and the beneficiary to receive the
tax treatment accorded to life insurance under Federal law, this policy must
qualify initially and continue to qualify as life insurance under the Code or
successor law. Therefore, we have reserved earlier in this policy the right to
decline to accept premium payments, change death benefit options, change the
Face Amount of Insurance, or to make partial withdrawals, that would cause this
policy to fail to qualify as life insurance under applicable tax law as
interpreted by us. Further, we reserve the right to make changes in this policy
or its riders (for example, in the percentages on Page 6) or to require
additional premium payments or to make distributions from this policy or to
change the Face Amount of Insurance to the extent we deem it necessary to
continue to qualify this policy as life insurance. Any such changes will apply
uniformly to all policies that are affected. You will be given advance written
notice of such changes.
CHANGES IN POLICY COST FACTORS. Changes in policy cost factors (interest rates
we credit, cost of insurance deductions, expense charges and mortality and
expense risk charges) will be by class and based upon changes in future
expectations for such elements as: investment earnings, mortality, persistency,
expenses and taxes. Any change in policy cost factors will be determined in
accordance with procedures and standards on file, if required, with the
insurance supervisory official of the jurisdiction in which this policy is
delivered.
WHEN THE POLICY IS INCONTESTABLE. We have the right to contest the validity of
this policy based on material misstatements made in the initial application for
this policy. We also have the right to contest the validity of any policy change
or restoration based on material misstatements made in any application for that
change or restoration. However, we will not contest the validity of this policy
after it has been in effect during the lifetime of the insured person for two
years from the date of issue shown in the Policy Information section. We will
not contest any policy change that requires evidence of insurability, or any
restoration of this policy, after the change or restoration has been in effect
for two years during the insured person's lifetime.
No statement shall be used to contest a claim unless contained in an
application.
All statements made in an application are representations and not warranties.
See any additional benefit riders for modifications of this provision that apply
to them.
WHAT IF AGE OR SEX HAS BEEN MISSTATED? If the insured person's age or sex has
been misstated on any application, the death benefit and any benefits provided
by riders to this policy shall be those which would be purchased by the most
recent deduction for the cost of insurance, and the cost of any benefits
provided by riders, at the correct age and sex.
96-300-15 Page 16
<PAGE>
HOW THE SUICIDE EXCLUSION AFFECTS BENEFITS. If the Insured person commits
suicide (while sane or insane) within two years after the Date of Issue shown in
the Policy Information section, our liability will be limited to the payment of
a single sum. This sum will be equal to the premiums paid, minus any loan and
accrued loan interest and minus any partial withdrawal of the Net Cash Surrender
Value. If the insured person commits suicide (while sane or insane) within two
years after the effective date of a change that you asked for that increases the
death benefit, then our liability as to the increase in amount will be limited
to the payment of a single sum equal to any monthly cost of insurance deductions
made for such increase.
HOW WE MEASURE POLICY PERIODS AND ANNIVERSARIES. We measure policy years, policy
months, and policy anniversaries from the Register Date shown in the Policy
Information section. Each policy month begins on the same day in each calendar
month as the day of the month in the Register Date.
HOW, WHEN AND WHAT WE MAY DEFER. We may not be able to obtain the value of the
assets of the investment funds of our SA if: (1) the New York Stock Exchange is
closed; or (2) the Securities and Exchange Commission requires trading to be
restricted or declares an emergency. During such times, as to amounts allocated
to the investment funds of our SA, we may defer:
1. Determination and payment of Net Cash Surrender Value withdrawals;
2. Determination and payment of any death benefit in excess of the Face Amount
of Insurance;
3. Payment of loans;
4. Determination of the unit values of the investment divisions of our SA; and
5. Any requested transfer or the transfer on the Allocation Date.
As to amounts allocated to our GIA, we may defer payment of any Net Cash
Surrender Value withdrawal or loan amount for up to six months after we receive
a request for it. We will allow interest, at a rate of at least 3% a year, on
any Net Cash Surrender Value payment derived from our GIA that we defer for 30
days or more.
THE BASIS WE USE FOR COMPUTATION. We provide Cash Surrender Values that are at
least equal to those required by law. If required to do so, we have filed with
the insurance supervisory official of the jurisdiction in which this policy is
delivered a detailed statement of our method of computing such values. We
compute reserves under this policy by the Commissioners Reserve Valuation
Method.
We base minimum cash surrender values and reserves on the Commissioners 1980
Standard Ordinary Male and Female, Smoker and Non-Smoker, Mortality Tables. We
also use these tables as the basis for determining maximum insurance costs,
taking account of sex, attained age, underwriting class and Tobacco User status
of the insured person. We use an effective annual interest rate of 4%.
POLICY ILLUSTRATIONS. Upon request we will give you an illustration of policy
values based upon both guaranteed and current cost factor assumptions and
assumed rates of return. However, if you ask us to do this more than once in any
policy year, we reserve the right to charge you a fee for this service.
96-300-17 Page 17
<PAGE>
TABLE OF GUARANTEED PAYMENTS
(MINIMUM AMOUNT FOR EACH $1,000 APPLIED)
OPTION 2A
FIXED PERIOD INSTALLMENTS
-------------------------
Number
of Years' Monthly Annual
Installments Installment Installment
------------ ----------- -----------
1 $84.28 $1,000.00
2 42.66 506.17
3 28.79 341.60
4 21.86 259.33
5 17.70 210.00
6 14.93 177.12
7 12.95 153.65
8 11.47 136.07
9 10.32 122.40
10 9.39 111.47
11 8.64 102.54
12 8.02 95.11
13 7.49 88.83
14 7.03 83.45
15 6.64 78.80
16 6.30 74.73
17 6.00 71.15
18 5.73 67.97
19 5.49 65.13
20 5.27 62.58
21 5.08 60.28
22 4.90 58.19
23 4.74 56.29
24 4.60 54.55
25 4.46 52.95
26 4.34 51.48
27 4.22 50.12
28 4.12 48.87
29 4.02 47.70
30 3.93 46.61
If installments are paid every 3 months, they will be 25.23% of the annual
installments. If they are paid every 6 months, they will be 50.31% of the annual
installments.
OPTION 3
MONTHLY LIFE INCOME
-------------------
10 Years Certain 20 Years Certain Refund Certain
---------------- ---------------- --------------
AGE Male Female Male Female Male Female
---- ------ ---- ------ ---- ------
50 $3.48 $3.19 $3.42 $3.17 $3.37 $3.14
51 3.54 3.23 3.47 3.21 3.42 3.17
52 3.59 3.28 3.51 3.25 3.46 3.21
53 3.65 3.32 3.56 3.29 3.51 3.25
54 3.70 3.37 3.61 3.33 3.56 3.29
55 3.77 3.42 3.66 3.37 3.61 3.34
56 3.83 3.47 3.72 3.42 3.67 3.38
57 3.90 3.52 3.77 3.47 3.72 3.43
58 3.97 3.58 3.83 3.52 3.78 3.48
59 4.04 3.64 3.88 3.57 3.84 3.53
60 4.12 3.70 3.94 3.62 3.90 3.58
61 4.20 3.76 4.00 3.68 3.97 3.64
62 4.29 3.83 4.06 3.74 4.04 3.69
63 4.38 3.90 4.12 3.79 4.11 3.75
64 4.48 3.98 4.18 3.85 4.19 3.82
65 4.58 4.06 4.25 3.92 4.26 3.88
66 4.68 4.14 4.31 3.98 4.35 3.95
67 4.79 4.23 4.37 4.04 4.43 4.02
68 4.90 4.32 4.43 4.11 4.52 4.10
69 5.02 4.42 4.50 4.18 4.62 4.18
70 5.14 4.52 4.56 4.25 4.71 4.26
71 5.26 4.63 4.62 4.31 4.82 4.35
72 5.39 4.75 4.67 4.38 4.92 4.44
73 5.52 4.87 4.73 4.45 5.03 4.53
74 5.66 4.99 4.78 4.51 5.14 4.63
75 5.80 5.12 4.83 4.58 5.27 4.74
76 5.95 5.26 4.88 4.64 5.39 4.84
77 6.10 5.40 4.93 4.70 5.53 4.96
78 6.25 5.55 4.97 4.75 5.66 5.08
79 6.40 5.70 5.01 4.80 5.80 5.20
80 6.56 5.85 5.04 4.86 5.96 5.33
81 6.72 6.01 5.08 4.90 6.11 5.45
82 6.88 6.18 5.11 4.95 6.27 5.60
83 7.04 6.34 5.13 4.99 6.43 5.73
84 7.20 6.51 5.16 5.03 6.62 5.89
85 & over 7.36 6.67 5.18 5.07 6.81 6.04
Amounts for Monthly Life Income are based on age nearest birthday when income
starts. Amounts for ages not shown will be furnished on request.
96-300-17 Page 18
<PAGE>
THE EQUITABLE
LIFE ASSURANCE SOCIETY OF THE UNITED STATES
A Stock Life Insurance Company
Home Office: 787 Seventh Avenue, New York, New York 10019-6018
Flexible Premium Variable Life Insurance Policy. Insurance payable
upon death before Final Policy Date. Policy Account less outstanding
loans and accrued interest is payable on Final Policy Date.
Adjustable Death Benefit. Premiums may be paid while insured person
is living and before the Final Policy Date. Premiums must be
sufficient to keep the policy in force. Values provided by this
policy are based on declared interest rates, and on the investment
experience of the investment funds of a separate account which in
turn depends on the investment performance of the securities held by
such investment fund. They are not guaranteed as to dollar amount.
Investment options are described on Page 9. This is a
non-participating policy.
No. 96-300
NAME CHANGE ENDORSEMENT
In this endorsement, "your" means the Owner of the policy at the time an Owner's
right is exercised.
- --------------------------------------------------------------------------------
EFFECTIVE DATE: JANUARY 1, 1997
This endorsement is made part of your policy as of its Effective Date. It should
be attached to and kept with your policy.
Effective January 1, 1997, Equitable Variable Life Insurance Company merged into
The Equitable Life Assurance Society of the United States.
The Equitable Life Assurance Society of the United States is now responsible for
all the liabilities and obligations of Equitable Variable Life Insurance Company
under this policy. Wherever the name Equitable Variable Life Insurance Company
appears in this policy, the name The Equitable Life Assurance Society of the
United States is hereby substituted. In all other respects, the terms and
provisions of this policy remain unchanged and in full force and effect.
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
/s/ Pauline Sherman /s/ James M. Benson
Pauline Sherman, James M. Benson,
Vice President & Secretary President & Chief Executive Officer
S.97-1
- --------------------------------------------------------------------------------
SUPPLEMENTAL TERM INSURANCE
RIDER ON THE INSURED
In this rider, "we," "our" and "us" mean
Equitable Variable Life Insurance
Company. "You" means the owner of the
policy at the time an owner's right is
exercised.
- --------------------------------------------------------------------------------
THIS RIDER'S BENEFIT. We will pay to the Beneficiary the term insurance benefit
in effect under this rider at the insured person's death, when we receive proof
that the insured person died before this rider's Expiry Date shown on the policy
page 3.
The term insurance benefit is equal to the face amount of this rider shown on
page 3 of the policy. However, if the death benefit of the policy to which this
rider is attached is calculated to be a percentage of the amount in your Policy
Account, the term insurance benefit will instead be determined as follows: a)
for Death Benefit Option A, the term insurance benefit will equal the Target
Amount shown on the policy page 3 minus the base policy death benefit; or b) for
Death Benefit Option B, the term insurance benefit will equal the Target Amount
shown on the policy page 3 plus the Policy Account minus the base policy death
benefit. This will not be less than zero in either case.
After the second policy year while this rider is in force, you may ask us to
decrease the Target Amount of insurance but not to less than the minimum
combination of base policy face amount plus rider face amount for which we would
then issue this policy and this rider. Any such reduction in the Target Amount
of insurance may not be less than $10,000. A requested decrease in Target
Amount, or a partial withdrawal that would result in a decrease in Target
Amount, will be allocated between the base policy and the rider in proportion to
their respective face amounts at issue. However, we will not reduce the base
policy face amount below the minimum amount for which we would then issue the
policy. The decrease will take effect at the beginning of the policy month that
coincides with or next follows the date we approve your request.
Death benefit option changes under the policy may result in an increase or
decrease in the Target Amount of insurance. Such increases and decreases are
made so that the sum of the death benefits from the policy and this rider are
the same immediately before and after the change. However, we reserve the right
to decline to make such change if it would result in less than the minimum
combination of base policy face amount plus rider face amount for which we would
then issue this policy and this rider.
THIS RIDER'S COST. While this rider is in effect, its charge will be a part of
the monthly deduction from the Policy Account. The monthly cost is the sum of
our current monthly cost of insurance rate at the beginning of the policy month
plus any extra charge per $1000 of base policy net amount at risk shown in the
Policy Information section, times the term insurance benefit at the beginning of
the policy month divided by $1000. The monthly rate for this benefit for each
$1,000 of term insurance benefit in effect under this rider will be determined
by us from time to time. The rate is based on the insured person's sex, issue
age, tobacco user status, underwriting classification, and the policy year. It
will never be more than the rate shown in the Table of Guaranteed Maximum Rates
for Supplemental Term Insurance on Page 4 -- Continued of this policy.
NONCONVERTIBILITY. This rider may not be converted.
WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect:
1. On and after its Expiry Date;
2. If the policy is terminated; or
3. If the rider face amount is reduced to zero due to a policy change.
HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its
benefit is subject to all the terms of this rider and the policy. However, if
this rider is issued the provisions of the policy are modified as follows:
1. The Death Benefit Guarantee provision will not apply; and
2. The calculations described in steps 1-4 of the Grace Period provision will
not be performed.
Equitable Variable Life Insurance Company
A B C D A B C D
Pauline Sherman, Joseph J. Melone
Vice President & Secretary Chairman & Chief Executive Officer
R96-100 Supplemental Term Insurance Rider On the Insured
SUPPLEMENTAL TERM INSURANCE
RIDER ON THE INSURED
In this rider, "we", "our" and "us" mean The Equitable Life Assurance Society of
the United States. "You" means the owner of the policy at the time an owner's
right is exercised.
- --------------------------------------------------------------------------------
THIS RIDER'S BENEFIT. We will pay to the Beneficiary the term insurance benefit
in effect under this rider at the insured person's death, when we receive proof
that the insured person died before this rider's Expiry Date shown on the policy
page 3.
The term insurance benefit is equal to the face amount of this rider shown on
page 3 of the policy. However, if the death benefit of the policy to which this
rider is attached is calculated to be a percentage of the amount in your Policy
Account, the term insurance benefit will instead be determined as follows: a)
for Death Benefit Option A, the term insurance benefit will equal the Target
Amount shown on the policy page 3 minus the base policy death benefit; or b) for
Death Benefit Option B, the term insurance benefit will equal the Target Amount
shown on the policy page 3 plus the Policy Account minus the base policy death
benefit. This will not be less than zero in either case.
After the second policy year while this rider is in force, you may ask us to
decrease the Target Amount of insurance but not to less than the minimum
combination of base policy face amount plus rider face amount for which we would
then issue this policy and this rider. Any such reduction in the Target Amount
of insurance may not be less than $10,000. A requested decrease in Target
Amount, or a partial withdrawal that would result in a decrease in Target
Amount, will be allocated between the base policy and the rider in proportion to
their respective face amounts at issue. However, we will not reduce the base
policy face amount below the minimum amount for which we would then issue the
policy. The decrease will take effect at the beginning of the policy month that
coincides with or next follows the date we approve your request.
Death benefit option changes under the policy may result in an increase or
decrease in the Target Amount of insurance. Such increases and decreases are
made so that the sum of the death benefits from the policy and this rider are
the same immediately before and after the change. However, we reserve the right
to decline to make such change if it would result in less than the minimum
combination of base policy face amount plus rider face amount for which we would
then issue this policy and this rider.
THIS RIDER'S COST. While this rider is in effect, its charge will be a part of
the monthly deduction from the Policy Account. The monthly cost is the sum of
our current monthly cost of insurance rate at the beginning of the policy month
plus any extra charge per $1,000 of base policy net amount at risk shown in the
Policy Information section, times the term insurance benefit at the beginning of
the policy month divided by $1,000. The monthly rate for this benefit for each
$1,000 of term insurance benefit in effect under this rider will be determined
by us from time to time. The rate is based on the insured person's sex, issue,
age, tobacco user status, underwriting classification, and the policy year. It
will never be more than the rate shown in the Table of Guaranteed Maximum Rates
for Supplemental Term Insurance on Page 4 -- Continued of the policy.
NONCONVERTIBILITY. This rider may not be converted.
WHEN THIS RIDER WILL TERMINATE. This rider will not be in effect:
1. On and after its Expiry Date;
2. If the policy is terminated; or
3. If the rider face amount is reduced to zero due to a policy change.
HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its
benefit is subject to all the terms of this rider and the policy. However, if
this rider is issued the provisions of the policy are modified as follows:
1. The Death Benefit Guarantee provision will not apply; and
2. The calculations described in steps 1-4 of the Grace Period provision will
not be performed.
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
/s/ Pauline Sherman /s/ James M. Benson
Pauline Sherman, Vice President James M. Benson, President & Chief
& Secretary Executive Officer
R96-100 Supplemental Term Insurance Rider On the Insured
SUBSTITUTION OF
INSURED
RIDER
In this rider, "we", "our" and "us" mean Equitable Variable Life Insurance
Company. "You" means the Owner of the policy at the time an Owner's right is
exercised.
- -------------------------------------------------------------------------------
After the second policy year you may substitute coverage on the life of a new
insured person for coverage on the life of the original insured person, subject
to conditions we determine. The conditions include but are not limited to the
following:
1. We must be satisfied that the new insured person is insurable for the amount
of insurance applied for.
2. The new insured person must join in the request for substitution and the
owner of the policy must have an insurable interest in the new insured
person. If the policy is assigned, the assignee must consent to the
substitution of coverage.
3. The substitution may be made as of the beginning of any policy month if the
new insured person is not then over age 65.
4. The new insured person's date of birth must not be later than the Register
Date of the policy.
5. This policy must be in effect on the date of substitution with all monthly
deductions from the Policy Account having been made, and with no such
deductions or premiums then being waived nor amounts credited to the Policy
Account by a disability rider.
6. Within 31 days before the date of substitution, we must receive: (a) written
request for the substitution on our application form; (b) evidence of the
new insured person's insurability satisfactory to us; and (c) any extra sum
we may require.
7. Insurance on the original insured person will cease when insurance on the
new insured person takes effect.
8. Any additional benefit riders in effect under the policy will terminate at
the time of substitution of insureds. You may apply for any of them as to
the new insured person. The issue of such riders will require our consent
and evidence of insurability satisfactory to us.
9. In our determination the substitution must not affect the qualification of
this policy as life insurance under the Internal Revenue Code or successor
legislation, as interpreted by us.
EFFECTS OF SUBSTITUTION. Premiums for the policy will be based on our rules in
effect on its Register Date for the insurance age of the new insured person on
that date. The Register Date for the policy will not be affected by the
substitution of insureds. The face amount of insurance and the death benefit
option in the policy will be the same as in effect immediately before the
substitution, unless either (i) you ask for a change or (ii) a change is
required in order to continue the qualification of the policy as life insurance
under the Internal Revenue Code or successor legislation.
We reserve the right to charge an administrative fee of $100 for the
substitution. This fee will be deducted from the policy account.
The substitution of a new insured person for the original insured person shall
not preclude additional later substitutions of insureds, in which case reference
to the "original insured person" shall include such substituted insureds as the
context requires.
The time periods in the Incontestability and Suicide Exclusion provisions of
this policy will begin on the date of substitution.
HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its
benefits are subject to all the terms of this rider and the policy.
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
/s/ Molly K. Heines /s/ Joseph J. Melone
Molly K. Heines, Joseph J. Melone,
Vice President & Secretary Chairman & Chief Executive Officer
R94-212 Substitution of Insured Rider
SUBSTITUTION OF
INSURED
RIDER
In this rider, "we", "our" and "us" mean The Equitable Life Assurance Society of
the United States. "You" means the Owner of the policy at the time an Owner's
right is exercised.
- -------------------------------------------------------------------------------
After the second policy year you may substitute coverage on the life of a new
insured person for coverage on the life of the original insured person, subject
to conditions we determine. These conditions include but are not limited to the
following:
1. We must be satisfied that the new insured person is insurable for the amount
of insurance applied for.
2. The new insured person must join in the request for substitution and the
owner of the policy must have an insurable interest in the new insured
person. If the policy is assigned, the assignee must consent to the
substitution of coverage.
3. The substitution may be made as of the beginning of any policy month if the
new insured person is not then over age 65.
4. The new insured person's date of birth must not be later than the Register
Date of the policy.
5. This policy must be in effect on the date of substitution with all monthly
deductions from the Policy Account having been made, and with no such
deductions or premiums then being waived nor amounts credited to the Policy
Account by a disability rider.
6. Within 31 days before the date of substitution, we must receive: (a) written
request for the substitution on our application form; (b) evidence of the
new insured person's insurability satisfactory to us; and (c) any extra sum
we may require.
7. Insurance on the original insured person will cease when insurance on the
new insured person takes effect.
8. Any additional benefit riders in effect under the policy will terminate at
the time of substitution of insureds. You may apply for any of them as to
the new insured person. The issue of such riders will require our consent
and evidence of insurability satisfactory to us.
9. In our determination the substitution must not affect the qualification of
this policy as life insurance under the Internal Revenue Code or successor
legislation, as interpreted by us.
EFFECTS OF SUBSTITUTION. Premiums for the policy will be based on our rules in
effect on its Register Date for the insurance age of the new insured person on
that date. The Register Date for the policy will not be affected by the
substitution of insureds. The face amount of insurance and the death benefit
option in the policy will be the same as in effect immediately before the
substitution, unless either (i) you ask for a change or (ii) a change is
required in order to continue the qualification of the policy as life insurance
under the Internal Revenue Code or successor legislation.
We reserve the right to charge an administrative fee of $100 for the
substitution. This fee will be deducted from the policy account.
The substitution of a new insured person for the original insured person shall
not preclude additional later substitutions of insureds, in which case reference
to the "original insured person" shall include such substituted insureds as the
context requires.
The time periods in the Incontestability and Suicide Exclusion provisions of the
policy will begin on the date of substitution.
HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its
benefits are subject to all the terms of this rider and the policy.
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
/s/ Pauline Sherman /s/ James M. Benson
Pauline Sherman, James M. Benson,
Vice President & Secretary President & Chief Executive Officer
R94-212 Substitution of Insured Rider
ACCELERATED DEATH BENEFIT RIDER
DISCLOSURE. THE RECEIPT OF THE ACCELERATED DEATH BENEFIT AMOUNT MAY BE TAXABLE.
YOU SHOULD SEEK ASSISTANCE FROM YOUR PERSONAL TAX ADVISOR PRIOR TO ELECTING THE
BENEFIT.
In this rider "we", "our" and "us" mean Equitable Variable Life Insurance
Company. "You" means the Owner of the policy at the time an Owner's right is
exercised. "This Policy" means the policy to which this rider is attached.
POLICY NUMBER:
- --------------------------------------------------------------------------------
THIS RIDER'S BENEFIT. We will pay an accelerated death benefit in the amount
requested by the Owner, if the Insured is terminally ill, subject to the
provisions of this rider. We will pay an accelerated death benefit under this
policy only once and in one lump sum.
The maximum accelerated death benefit you may receive is the lesser of:
1. 75% of the death benefit payable under this policy, less any policy loan
and loan interest, and
2. $500,000.
The maximum aggregate amount of Accelerated Death Benefit payments that will be
paid under all policies issued by us on the life of the Insured is $500,000.
For purposes of this benefit, the death benefit does not include any accidental
death benefits, non-convertible term riders or convertible term riders not in
their conversion period or any benefits payable because of the death of any
person other than the Insured.
There is no premium or cost of insurance charge for this rider.
We reserve the right to deduct a processing charge of up to $250.00 per policy
from the accelerated death benefit payment.
We reserve the right to set a minimum of $5,000 on the amount you may receive
under this rider.
To be eligible for this benefit you must provide satisfactory evidence to us
that the Insured's life expectancy is six months or less. This evidence must
include, but is not limited to, certification by a physician licensed to
practice medicine in the United States or Canada and who is acting within the
scope of such license. A physician does not include the Owner, the Insured or a
member of either's family.
HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its
benefits are subject to all the terms of this rider and the policy. This rider
has no cash or loan value. This rider is non-participating.
INTEREST. Interest will be charged on the amount of the Accelerated Death
Benefit and on any unpaid premium we advance after the payment of an Accelerated
Death Benefit. The interest rate at the time the Accelerated Death Benefit
payment is made will not exceed the greater of the following on such date:
1. the yield on a 90-day treasury bill; or
2. the maximum adjustable policy loan interest rate permitted in the state
in which this policy is delivered.
EFFECT OF ACCELERATED DEATH BENEFIT PAYMENT ON THE POLICY. The Accelerated Death
Benefit payment, plus any accrued interest will be treated as a lien against the
policy values. The amount of the lien will be pro-rated against the policy's net
cash surrender value, if any, and the net amount at risk. (The net amount at
risk is defined as the death benefit of the policy minus the cash surrender
value, if any.)
For variable life policies, the portion of the cash surrender value that is on
lien and is allocated to investment divisions of the Separate Account will be
transferred to and maintained as a part of the unloaned Guaranteed Investment
Division (GID). You may tell us how much of the accelerated payment is to be
transferred from each investment division. Units will be redeemed from each
investment division sufficient to cover the amount that is on lien and
transferred to the unloaned portion of the GID. If you do not tell us how to
allocate the payment, we will allocate it based on our rules then in effect. For
variable life policies that do not have a GID, the portion of the cash surrender
value that is on lien will be transferred to and maintained in the Money Market
Division of our Separate Account. Such transfers will occur as of the date we
approve an Accelerated Death Benefit payment. The amount payable at death under
the policy will be reduced by the full amount of the lien and any other
indebtedness outstanding under the policy. The Owner's access to the policy's
cash surrender value will be limited to the excess of the policy's cash
surrender value over the amount of the lien secured against the cash surrender
value and any other outstanding policy loans and loan interest.
R94-102 Accelerated Death Benefit Rider
<PAGE>
If premiums are required to be paid under the policy, they will continue to be
due after the payment of the accelerated payment. If any premium is not paid
when due, the amount of the unpaid premium will be added to the lien.
If the policy is a flexible premium life policy, and the net cash surrender
value is not large enough to cover a monthly deduction, Equitable Variable will
advance a premium sufficient enough to keep the policy in force for up to six
months following the date we approve an Accelerated Death Benefit payment. This
premium advance will be added to the lien.
If a Disability Premium Waiver Rider is in effect under the policy, this
policy's premiums or monthly deductions will be waived as of the date we approve
an Accelerated Death Benefit payment.
RIDER LIMITATIONS. Your right to be paid under the Accelerated Death Benefit
Rider is subject to the following conditions:
1. The policy must be in force other than as extended term insurance.
2. For term insurance policies, there must be at least one year left before
the final term expiry date.
3. For adjustable life policies (Equitable Life Account), if policy is term
insurance or paid-up extended term insurance, there must be at least one
year left before the final term expiry date.
4. You must make a claim in writing in a form that is satisfactory to us.
5. If the policy is collaterally assigned, except to us as security for a
policy loan or an Accelerated Death Benefit lien, we must receive a full
release of this assignment for the election of this benefit.
6. An Accelerated Death Benefit payment must be approved in writing by any
irrevocable beneficiary.
7. For joint last to die policies, a claim may be made under the rider only
after the death of the first of the Insureds to die.
8. You may not be eligible for the Accelerated Death Benefit if we are
notified that:
a) you are required by law to elect this rider's benefit in order to
meet the claims of creditors, whether in bankruptcy or otherwise; or
b) you are required by a government agency to elect this rider's
benefit in order to apply for, obtain, or keep a government benefit
or entitlement.
9. You may request only one Accelerated Death Benefit Amount to be paid per
policy.
10. We may require examination of the Insured by our medical representatives
at our expense as part of any proof to establish eligibility for
benefits under this rider.
WHEN THIS RIDER WILL TERMINATE. You may terminate this rider by asking us in
writing in a form satisfactory to us and by sending the rider to our
Administrative Office. The effective date of the termination will be the
beginning of the policy month which coincides with or next follows the date we
receive your request. Once this rider has been terminated, another Accelerated
Death Benefit Rider cannot be attached to the policy.
This rider will terminate when the policy terminates. If at any time the amount
of the lien equals the total death benefit the policy will terminate.
Termination will occur 31 days after we have mailed notice to the last known
address of the Owner, unless the full amount of the lien is repaid within 31
days of the notice.
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
/s/ Molly K. Heines /s/ Joseph J. Melone
Molly K. Heines Joseph J. Melone
Vice President & Secretary Chairman & Chief Executive Officer
R94-102 Accelerated Death Benefit Rider
ACCELERATED DEATH BENEFIT RIDER
DISCLOSURE. THE RECEIPT OF THE ACCELERATED In this rider "we", "our" and
DEATH BENEFIT AMOUNT MAY BE TAXABLE. YOU "us" mean The Equitable Life
SHOULD SEEK ASSISTANCE FROM YOUR PERSONAL Assurance Society of the United
TAX ADVISOR PRIOR TO ELECTING THE BENEFIT. States. "You" means the Owner
of the policy at the time an
Owner's right is exercised.
"This Policy" means the policy
to which this rider is attached.
POLICY NUMER:
- --------------------------------------------------------------------------------
THIS RIDER'S BENEFIT. We will pay an accelerated death benefit in the amount
requested by the Owner, if the Insured is terminally ill, subject to the
provisions of this rider. We will pay an accelerated death benefit under this
policy only once and in one lump sum.
The maximum accelerated death benefit you may receive is the lesser of:
1. 75% of the death benefit payable under this policy, less any policy
loan and loan interest, and
2. $500,000.
The maximum aggregate amount of Accelerated Death Benefits payments that will be
paid under all policies issued by us on the life of the Insured is $500,000.
For purposes of this benefit, the death benefit does not include any accidental
death benefits, non-convertible term riders or convertible term riders not in
their conversion period or any benefits payable because of the death of any
person other than the Insured.
There is no premium or cost of insurance charge for this rider.
We reserve the right to deduct a processing charge of up to $250.00 per policy
from the accelerated death benefit payment.
We reserve the right to set a minimum of $5,000 on the amount you may receive
under this rider.
To be eligible for this benefit you must provide satisfactory evidence to us
that the Insured's life expectancy is six months or less. This evidence must
include, but is not limited to, certification by a physician licensed to
practice medicine in the United States or Canada and who is acting within the
scope of such license. A physician does not include the Owner, the Insured or a
member of either's family.
HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its
benefits are subject to all the terms of this rider and the policy. This rider
has no cash or loan value. This rider is non-participating.
INTEREST. Interest will be charged on the amount of the Accelerated Death
Benefit and on any unpaid premium we advance after the payment of an Accelerated
Death Benefit. The interest rate at the time the Accelerated Death Benefit
payment is made will not exceed the greater of the following on such date:
1. the yield on a 90-day treasury bill; or
2. the maximum adjustable policy loan interest rate permitted in the
state in which this policy is delivered.
EFFECT OF ACCELERATED DEATH BENEFIT PAYMENT ON THE POLICY. The Accelerated Death
Benefit payment, plus any accrued interest will be treated as a lien against the
policy values. The amount of the lien will be pro-rated against the policy's net
cash surrender value, if any, and the net amount at risk. (The net amount at
risk is defined as the death benefit of the policy minus the cash surrender
value, if any.)
For variable life policies, the portion of the cash surrender value that is on
lien and is allocated to investment divisions of the Separate Account will be
transferred to and maintained as a part of the unloaned Guaranteed Investment
Division (GID). You may tell us how much of the accelerated payment is to be
transferred from each investment division. Units will be redeemed from each
investment division sufficient to cover the amount that is on lien and
transferred to the unloaned portion of the GID. If you do not tell us how to
allocate the payment, we will allocate it based on our rules then in effect. For
variable life policies that do not have a GID, the portion of the cash surrender
value that is on lien will be transferred to and maintained in the Money Market
Division of our Separate Account. Such transfers will occur as of the date we
approve an Accelerated Death Benefit payment. The amount payable at death under
the policy will be reduced by the full amount of the lien and any other
indebtedness outstanding under the policy. The Owner's access to the policy's
cash surrender value will be limited to the excess of the policy's cash
surrender value over the amount of the lien secured against the cash surrender
value and any other outstanding policy loans and loan interest.
R94-102 Accelerated Death Benefit Rider
<PAGE>
If premiums are required to be paid under the policy, they will continue to be
due after the payment of the accelerated payment. If any premium is not paid
when due, the amount of the unpaid premium will be added to the lien.
If the policy is a flexible premium life policy, and the net cash surrender
value is not large enough to cover a monthly deduction, Equitable Life will
advance a premium sufficient enough to keep the policy in force for up to six
months following the date we approve an Accelerated Death Benefit payment. This
premium advance will be added to the lien.
If a Disability Premium Waiver Rider is in effect under the policy, this
policy's premiums or monthly deductions will be waived as of the date we approve
an Accelerated Death Benefit payment.
RIDER LIMITATIONS. Your right to be paid under the Accelerated Death Benefit
Rider is subject to the following conditions:
1. The policy must be in force other than as extended term insurance.
2. For term insurance policies, there must be at least one year left
before the final term expiry date.
3. For adjustable life policies (Equitable Life Account), if policy is
term insurance or paid-up extended term insurance, there must be at
least one year left before the final term expiry date.
4. You must make a claim in writing in a form that is satisfactory to us.
5. If the policy is collaterally assigned, except to us as security for
a policy loan or an Accelerated Death Benefit lien, we must receive a
full release of this assignment for the election of this benefit.
6. An Accelerated Death Benefit payment must be approved in writing by
any irrevocable beneficiary.
7. For joint last to die policies, a claim may be made under the rider
only after the death of the first of the Insureds to die.
8. You may not be eligible for the Accelerated Death Benefit if we are
notified that:
a) you are required by law to elect this rider's benefit in order to
meet the claims of creditors, whether in bankruptcy or otherwise;
or
b) you are required by a government agency to elect this rider's
benefit in order to apply for, obtain, or keep a government
benefit or entitlement.
9. You may request only one Accelerated Death Benefit Amount to be paid
per policy.
10. We may require examination of the Insured by our medical
representatives at our expense as part of any proof to establish
eligibility for benefits under this rider.
WHEN THIS RIDER WILL TERMINATE. You may terminate this rider by asking us in
writing in a form satisfactory to us and by sending the rider to our
Administrative Office. The effective date of the termination will be the
beginning of the policy month which coincides with or next follows the date we
receive your request. Once this rider has been terminated, another Accelerated
Death Benefit Rider cannot be attached to the policy.
This rider will terminate when the policy terminates. If at any time the amount
of the lien equals the total death benefit the policy will terminate.
Termination will occur 31 days after we have mailed notice to the last known
address of the Owner, unless the full amount of the lien is repaid within 31
days of the notice.
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
/s/ Pauline Sherman /s/ James M. Benson
--------------- ---------------
Pauline Sherman James M. Benson
Vice President & President & Chief
Secretary Executive Officer
R94-102 Accelerated Death Benefit Rider
RESTATED CHARTER
OF
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
Under
Sections 1206 and 7103
of the New York Insurance Law and
Section 807
of the New York Business Corporation Law
----------------------------------------
The undersigned, being the President and Secretary, respectively, of
The Equitable Life Assurance Society of the United States (the "Corporation"), a
New York corporation, hereby certify as follows:
1. The name of the Corporation is The Equitable Life Assurance Society
of the United States.
2. The Charter of the Corporation was filed in the office of the
Superintendent of Insurance of the State of New York on May 10, 1859.
3. The Charter of the Corporation, as restated and amended prior to the
date hereof (the "Charter"), is hereby further amended, as authorized by
Sections 1206 and 7103 of the New York Insurance Law and Section 807 of the New
York Business Corporation Law, in connection with the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of September 19, 1996, by and between
the Corporation and Equitable Variable Life Insurance Company ("EVLICO"), to (i)
revise the provision of the Charter relating to the definition of "Life
Insurance" to be in accordance with Section 1113 (a) (1) of the New York
Insurance Law and (ii) delete the third sentence in paragraph (a) of Article VI
relating to the Board of Directors of the Corporation.
4. The text of the Charter, as amended by the filing of this Restated
Charter, is hereby amended and restated to read in full as follows:
<PAGE>
RESTATED CHARTER
OF
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
ARTICLE I
The name of the corporation shall continue to be The Equitable Life
Assurance Society of the United States.
ARTICLE II
The principal office of the corporation shall be located in the City of
New York, County of New York, State of New York.
ARTICLE III
(a) The business to be transacted by the corporation shall be the kinds
of insurance business specified in Paragraphs 1, 2 and 3 of Subsection (a) of
Section 1113 of the Insurance Law of the State of New York, as follows:
(1) "Life insurance": every insurance upon the lives of human
beings, and every insurance appertaining thereto, including the
granting of endowment benefits, additional benefits in the event of
death by accident, additional benefits to safeguard the contract from
lapse, accelerated payments of part or all of the death benefit or a
special surrender value upon diagnosis (A) of terminal illness defined
as a life expectancy of twelve months or less, or (B) of a medical
condition requiring extraordinary medical care or treatment regardless
of life expectancy, or provide a special surrender value, upon total
and permanent disability of the insured, and optional modes of
settlement of proceeds. "Life insurance" also includes additional
benefits to safeguard the contract against lapse in the event of
unemployment of the insured. Amounts paid the insurer for life
insurance and proceeds applied under optional modes of settlement or
under dividend options may be allocated by the insurer
-2-
<PAGE>
to one or more separate accounts pursuant to section four thousand two
hundred forty of the Insurance Law of the State of New York;
(2) "Annuities": all agreements to make periodical payments
for a period certain or where the making or continuance of all or some
of a series of such payments, or the amount of any such payment,
depends upon the continuance of human life, except payments made under
the authority of paragraph (1) above. Amounts paid the insurer to
provide annuities and proceeds applied under optional modes of
settlement or under dividend options may be allocated by the insurer to
one or more separate accounts pursuant to section four thousand two
hundred forty of the Insurance Law of the State of New York;
(3) "Accident and health insurance": (i) insurance against
death or personal injury by accident or by any specified kind or kinds
of accident and insurance against sickness, ailment or bodily injury,
including insurance providing disability benefits pursuant to article
nine of the workers' compensation law, except as specified in item (ii)
hereof; and (ii) non-cancellable disability insurance, meaning
insurance against disability resulting from sickness, ailment or bodily
injury (but excluding insurance solely against accidental injury) under
any contract which does not give the insurer the option to cancel or
otherwise terminate the contract at or after one year from its
effective date or renewal date;
and any amendments to such paragraphs or provisions in substitution therefor
which may be hereafter adopted; such other kind or kinds of business now or
hereafter authorized by the laws of the State of New York to stock life
insurance companies; and such other kind or kinds of business to the extent
necessarily or properly incidental to the kind or kinds of insurance business
which the corporation is authorized to do.
(b) The corporation shall also have all other rights, powers, and
privileges now or hereafter authorized or granted by the Insurance Law of the
State of New York or any other law or laws of the State of New York to stock
life insurance companies having power to do the kind or kinds of business
hereinabove referred to and any and all other rights, powers, and privileges of
a corporation now or hereafter granted by the laws of the State of New York and
not prohibited to such stock life insurance companies.
-3-
<PAGE>
ARTICLE IV
The business of the corporation shall be managed under the direction of
the Board of Directors.
ARTICLE V
(a) The Board of Directors shall consist of not less than 13 (except
for vacancies temporarily unfilled) nor more than 36 Directors, as may be
determined from time to time by a vote of a majority of the entire Board of
Directors. No decrease in the number of Directors shall shorten the term of any
incumbent Director.
(b) The Board of Directors shall have the power to adopt from time to
time such By-Laws, rules and regulations for the governance of the officers,
employees and agents and for the management of the business and affairs of the
corporation, not inconsistent with this Charter and the laws of the State of New
York, as may be expedient, and to amend or repeal such by-laws, rules and
regulations, except as provided in the By-Laws.
(c) Any or all of the Directors may be removed at any time, either
for or without cause, by vote of the shareholders.
(d) No Director shall be personally liable to the corporation or any of
its shareholders for damages for any breach of duty as a Director; provided,
however, that the foregoing provision shall not eliminate or limit (i) the
liability of a Director if a judgment or other final adjudication adverse to him
or her establishes that his or her acts or omissions were in bad faith or
involved intentional misconduct or that he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally entitled,
or were acts or omissions which (a) he or she knew or reasonably should have
known violated the Insurance Law of the State of New York or (b) violated a
specific standard of care imposed on Directors directly, and not by reference,
by a provision of the Insurance Law of the State of New York (or any regulations
promulgated thereunder) or (c) constituted a knowing violation of any other law;
or (ii) the liability of a Director for any act or omission prior to September
21, 1989.
-4-
<PAGE>
ARTICLE VI
(a) The Directors of the corporation shall be elected at each annual
meeting of shareholders of the corporation in the manner prescribed by law. The
annual meeting of shareholders shall be held at such place, within or without
the State of New York, and at such time as may be fixed by or under the By-Laws.
At each annual meeting of shareholders, directors shall be elected to hold
office for a term expiring at the next annual meeting of shareholders.
(b) Newly created directorships resulting from an increase in the
number of Directors and vacancies occurring in the Board of Directors shall be
filled by vote of the shareholders.
(c) Each Director shall be at least twenty-one years of age, and at all
times a majority of the Directors shall be citizens and residents of the United
States, and not less than three of the Directors shall be residents of the State
of New York.
(d) The Board of Directors shall elect such officers as are provided
for in the By-Laws at the first meeting of the Board of Directors following each
annual meeting of the shareholders. In the event of the failure to elect
officers at such meeting, officers may be elected at any regular or special
meeting of the Board of Directors. A vacancy in any office may be filled by the
Board of Directors at any regular or special meeting.
ARTICLE VII
The duration of the corporate existence of the corporation shall be
perpetual.
ARTICLE VIII
The amount of the capital of the corporation shall be $2,500,000,
and shall consist of 2,000,000 Common Shares, par value $1.25 per share.
-5-
<PAGE>
5. The Merger Agreement and the foregoing amendments and restatement of
the Charter were duly authorized, adopted and approved at a meeting duly called
and held on September 19, 1996 by the board of directors of the Corporation,
followed by the written consent of the sole shareholder of the Corporation, and
the Merger Agreement was duly authorized, adopted and approved by the unanimous
written consent dated September 19, 1996 of the board of directors of EVLICO
followed by the written consent of the sole shareholder of EVLICO.
IN WITNESS WHEREOF, the undersigned have executed this Restated Charter
on the 19th day of September, 1996.
/s/ James M. Benson
--------------------------
James M. Benson
President
/s/ Pauline Sherman
--------------------------
Pauline Sherman
Secretary
-6-
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 19th day of September, 1996, before me personally came
James M. Benson, to me personally known to me to be one of the persons who
executed the foregoing instrument, and he duly acknowledged to me that he
executed the same.
/s/ Edra F Bloom
--------------------------
Notary Public
EDRA F. BLOOM
Notary Public, State of New York
No. 31-4962102
Qualified in New York County
Commission Expires February 12th, 1998
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On this 19th day of September, 1996, before me personally came Pauline
Sherman, to me personally known to me to be one of the persons who executed the
foregoing instrument, and she duly acknowledged to me that she executed the
same.
/s/ Edra F Bloom
--------------------------
Notary Public
EDRA F. BLOOM
Notary Public, State of New York
No. 31-4962102
Qualified in New York County
Commission Expires February 12th, 1998
44606-1.DOC
-7-
BY-LAWS
OF
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
ARTICLE I
---------
SHAREHOLDERS
------------
Section 1.1. Annual Meetings. The annual meeting of the shareholders of
the Company for the election of Directors and for the transaction of such other
business as properly may come before such meeting shall be held at the principal
office of the Company on the third Wednesday in the month of May at 3:00 P.M. or
at such other hour as may be fixed from time to time by resolution of the Board
of Directors and set forth in the notice or waiver of notice of the meeting.
[Business Corporation Law Sec. 602 (a), (b)]*
Section 1.2. Notice of Meetings; Waiver. The Secretary or any Assistant
Secretary shall cause written notice of the place, date and hour of each meeting
of the shareholders, and, in the case of a special meeting, the purpose or
purposes for which such meeting is called and by or at whose direction such
notice is being issued, to be given, personally or by first class mail, not
fewer than ten nor more than fifty days before the date of the meeting to each
shareholder of record entitled to vote at such meeting.
No notice of any meeting of shareholders need be given to any
shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting or who attends the meeting, in person or by
proxy, without protesting prior to its conclusion the lack of notice of such
meeting. [Business Corporation Law Sec. 605, 606]
Section 1.3. Organization; Procedure. At every meeting of shareholders
the presiding officer shall be the Chairman of the Board or, in the event of his
or her absence or disability, the President or, in his or her absence, any
officer of the Company designated by the shareholders. The order of business and
all other matters of procedure at every meeting of shareholders may be
determined by such presiding officer. The Secretary, or in the event of his or
her absence or disability, an Assistant Secretary or, in his or her absence, an
appointee of the presiding officer shall act as Secretary of the meeting.
- ------------------------------------
* Citations are to the Business Corporation Law and Insurance Law of the
State of New York, as in effect on [date of adoption], and are inserted
for reference only, and do not constitute a part of the By-Laws.
1
<PAGE>
Section 1.4. Action Without a Meeting. Any action required or permitted
to be taken by shareholders may be taken without a meeting on written consent
signed by the holders of all the outstanding shares entitled to vote on such
action. [Business Corporation Law Sec. 615]
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. Regular Meetings. Regular meetings of the Board of
Directors shall be held at the principal office of the Company on the third
Thursday of each month, except January and August, unless a change in place or
date is ordered by the Board of Directors. The first regular meeting of the
Board of Directors following the annual meeting of the shareholders of the
Company is designated as the Annual Meeting. [Business Corporation Law Sec. 710]
Section 2.2. Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board, the President,
or two directors. [Business Corporation Law Sec. 710]
Section 2.3. Independent Directors; Quorum. Not less than one-third of
the Board of Directors shall be persons who are not officers or employees of the
Company or of any entity controlling, controlled by, or under common control
with the Company and who are not beneficial owners of a controlling interest in
the voting stock of the Company or of any such entity.
A majority of the entire Board of Directors, including at least one
Director who is not an officer or employee of the Company or of any entity
controlling, controlled by, or under common control with the Company and who is
not a beneficial owner of a controlling interest in the voting stock of the
Company or of any such entity, shall constitute a quorum for the transaction of
business at any regular or special meeting of the Board of Directors, except as
otherwise prescribed by these By-Laws. Except as otherwise prescribed by law,
the Charter of the Company, or these By-Laws, the vote of a majority of the
Directors present at the time of the vote, if a quorum is present at such time,
shall be the act of the Board of Directors. A majority of the Directors present,
whether or not a quorum is present, may adjourn any meeting from time to time
and from place to place. As used in these By-Laws "entire Board of Directors"
means the total number of directors which the Company would have if there were
no vacancies. [Business Corporation Law Sec. 707, 708; Insurance Law Sec. 1202]
Section 2.4. Notice of Meetings. Notice of a regular meeting of the
Board of Directors need not be given. Notice of a change in the time or place of
a regular meeting of the Board of Directors shall be given to each Director at
least ten days in advance thereof in writing and by telephone or telecopy.
Notice of each special meeting of the Board of Directors shall be given to each
Director at least two days in advance thereof in
2
<PAGE>
writing and by telephone or telecopy, and shall state in general terms the
purpose or purposes of the meeting. Any such notice for a regular or special
meeting not specifically required by this Section 2.4 to be given by telephone
or telecopy shall be deemed given to a director when sent by mail, telegram,
cablegram or radiogram addressed to such director at his or her address
furnished to the Secretary. Notice of an adjourned regular or special meeting of
the Board of Directors shall be given if and as determined by a majority of the
directors present at the time of the adjournment, whether or not a quorum is
present. [Business Corporation Law Sec. 711]
Section 2.5. Newly Created Directorships; Vacancies. Any newly created
directorships resulting from an increase in the number of Directors and
vacancies occurring in the Board of Directors for any reasons (including
vacancies resulting from the removal of a Director without cause) shall be
filled by the shareholders of the Company. [Business Corporation Law Sec. 705;
Insurance Law Sec. 4211]
Section 2.6. Presiding Officer. In the absence or inability to act of
the Chairman of the Board at any regular or special meeting of the Board of
Directors, any Vice-Chairman of the Board, or the President, as designated by
the chief executive officer, shall preside at such meeting. In the absence or
inability to act of all of such officers, the Board of Directors shall select
from among their number present a presiding officer.
Section 2.7. Telephone Participation in Meetings; Action by Consent
Without Meeting. Any Director may participate in a meeting of the Board or any
committee thereof by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time, and such participation shall constitute presence in
person at such meeting; provided that one meeting of the Board each year shall
be held without the use of such conference telephone or similar communication
equipment. When time is of the essence, but not in lieu of a regularly scheduled
meeting of the Board of Directors, any action required or permitted to be taken
by the Board or any committee thereof may be taken without a meeting if all
members of the Board or such committee, as the case may be, consent in writing
to the adoption of a resolution authorizing the action and such written consents
and resolution are filed with the minutes of the Board or such committee, as the
case may be. [Business Corporation Law Sec. 708].
ARTICLE III
COMMITTEES
Section 3.1. Committees. (a) The Board of Directors, by resolution
adopted by a majority of the entire Board of Directors, may establish from among
its members an Executive Committee of the Board composed of five or more
Directors. Not less than one-third of the members of such committee shall be
persons who are not officers or employees of the Company or of any entity
controlling, controlled by, or under common
3
<PAGE>
control with the Company and who are not beneficial owners of a controlling
interest in the voting stock of the Company or of any such entity.
(b) The Board of Directors, by resolution adopted by a majority of the
entire Board of Directors, shall establish from among its members one or more
committees with authority to discharge the responsibilities enumerated in this
subsection (b). Each such committee shall be composed of five or more Directors
and shall be comprised solely of Directors who are not officers or employees of
the Company or of any entity controlling, controlled by, or under common control
with the Company and who are not beneficial owners of a controlling interest in
the voting stock of the Company or of any such entity. Such committee or
committees shall have responsibility for:
(i) Recommending to the Board of Directors candidates for
nomination for election by the shareholders to the Board of
Directors;
(ii) Evaluating the performance of officers deemed by any such
committee to be principal officers of the Company and
recommending their selection and compensation;
(iii) Recommending the selection of independent certified public
accountants;
(iv) Reviewing the scope and results of the independent audit and
of any internal audit; and
(v) Reviewing the Company's financial condition.
(c) The Board of Directors, by resolution adopted from time to time by
a majority of the entire Board of Directors, may establish from among its
members one or more additional committees of the Board, each composed of five or
more Directors. Not less than one-third of the members of each such committee
shall be persons who are not officers or employees of the Company or of any
entity controlling, controlled by, or under common control with the Company and
who are not beneficial owners of a controlling interest in the voting stock of
the Company or of any such entity. [Business Corporation Law Sec. 712; Insurance
Law Sec. 1202]
Section 3.2. Authority of Committees. Each committee shall have all the
authority of the Board of Directors, to the extent permitted by law and provided
in the resolution creating such committee, provided, however, that no committee
shall have the authority of the Board of Directors contained in Sections 1.1,
1.3, 2.1, 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.8, 4.1, 4.2, 4.3, 4.4. 4.5, 4.6, 5.1,
5.2, 7.1, 7.3, 7.4, 7.5 or 8.1 or these By-Laws, nor shall any committee have
authority to amend or repeal any resolution of the Board of Directors. [Business
Corporation Law Sec. 712]
4
<PAGE>
Section 3.3. Quorum and Manner of Acting. A majority of the total
membership that a committee would have if there were no vacancies (including at
least one Director who is not an officer or employee of the Company or of any
entity controlling, controlled by, or under common control with the Company and
who is not a beneficial owner of a controlling interest in the voting stock of
the Company or of any such entity) shall constitute a quorum for the transaction
of business. The vote of a majority of the members present at the time of the
vote, if a quorum is present at such time, shall be the act of such committee.
Except as otherwise prescribed by these By-Laws or by the Board of Directors,
each committee may elect a chairman from among its members, fix the times and
dates of its meeting, and adopt other rules of procedure.
Section 3.4. Removal of Members. Any member (and any alternate member)
of a committee may be removed by vote of a majority of the entire Board of
Directors.
Section 3.5. Vacancies. Any vacancy occurring in any committee for any
reason may be filled by vote of a majority of the entire Board of Directors.
Section 3.6. Subcommittees. Any committee may appoint one or more
subcommittees from its members. Any such subcommittee may be charged with the
duty of considering and reporting to the appointing committee on any matter
within the responsibility of the committee appointing such subcommittee but
cannot act in place of the appointing committee.
Section 3.7. Alternate Members of Committees. The Board of Directors
may designate, by resolution adopted by a majority of the entire Board of
Directors, one or more directors as alternate members of any committee who may
replace any absent member or members at a meeting of such committee. [Business
Corporation Law Sec. 712]
Section 3.8. Attendance of Other Directors. Except as otherwise
prescribed by the Board of Directors, members of the Board of Directors may
attend any meeting of any committee.
ARTICLE IV
OFFICERS
Section 4.1. Chairman of the Board. The Board of Directors may at a
regular or special meeting elect from among their number a Chairman of the Board
who shall hold office, at the pleasure of the Board of Directors, until the next
Annual Meeting.
The Chairman of the Board shall preside at all meetings of the Board of
Directors and also shall exercise such powers and perform such duties as may be
delegated or assigned to or required of him or her by these By-Laws or by or
pursuant to authorization of the Board of Directors.
5
<PAGE>
Section 4.2. Vice-Chairman of the Board. The Board of Directors may at
a regular or special meeting elect from among their number one or more
Vice-Chairmen of the Board who shall hold office, at the pleasure of the Board
of Directors, until the next Annual Meeting.
The Vice-Chairman of the Board shall exercise such powers and perform
such duties as may be delegated or assigned to or required of them by these
By-Laws or by or pursuant to authorization of the Board of Directors or by the
Chairman of the Board.
Section 4.3. President. The Board of Directors shall at a regular or
special meeting elect from among their number a President who shall hold office,
at the pleasure of the Board of Directors, until the next Annual Meeting and
until the election of his or her successor.
The President shall exercise such powers and perform such duties as may
be delegated or assigned to or required of him or her by these By-Laws or by or
pursuant to authorization of the Board of Directors or (if the President is not
the chief executive officer) by the chief executive officer. The President and
Secretary may not be the same person.
Section 4.4. Chief Executive Officer. The Chairman of the Board or the
President shall be the chief executive officer of the Company as the Board of
Directors from time to time shall determine, and the Board of Directors from
time to time may determine who shall act as chief executive officer in the
absence or inability to act of the then incumbent.
Subject to the control of the Board of Directors, and to the extent not
otherwise prescribed by these By-Laws, the chief executive officer shall have
plenary power over all departments, officers, employees, and agents of the
Company, and shall be responsible for the general management and direction of
all the business and affairs of the Company.
Section 4.5. Secretary. The Board of Directors shall at a regular or
special meeting elect a Secretary who shall hold office, at the pleasure of the
Board of Directors, until the next Annual Meeting and until the election of his
or her successor.
The Secretary shall issue notices of the meeting of the shareholders
and the Board of Directors and its committees, shall keep the minutes of the
meetings of the shareholders and the Board of Directors and its committees and
shall have custody of the Company's corporate seal and records. The Secretary
shall exercise such powers and perform such other duties as relate to the office
of the Secretary, and also such powers and duties as may be delegated or
assigned to or required of him or her by or pursuant to authorization of the
Board of Directors or by the Chairman of the Board or (if the Chairman of the
Board is not the chief executive officer) the chief executive officer.
Section 4.6. Other Offices. The Board of Directors may elect such other
officers as may be deemed necessary for the conduct of the business of the
Company. Each such
6
<PAGE>
officer elected by the Board of Directors shall exercise such powers and perform
such duties as may be delegated or assigned to or required of him or her by the
Board of Directors of the chief executive officer, and shall hold office until
the next Annual Meeting, but at any time may be suspended by the chief executive
officer or by the Board of Directors, or removed by the Board of Directors.
[Business Corporation Law Sec. 715, 716]
ARTICLE V
CAPITAL STOCK
Section 5.1. Transfers of Stock; Registered Shareholders. (a) Shares of
stock of the Company shall be transferable only upon the books of the Company
kept for such purpose upon surrender to the Company or its transfer agent or
agents of a certificate (unless such shares shall be uncertificated shares)
representing shares, duly endorsed or accompanied by appropriate evidence of
succession, assignment or authority to transfer. Within a reasonable time after
the transfer of uncertificated shares, the Company shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates.
(b) Except as otherwise prescribed by law, the Board of Directors may
make such rules, regulations and conditions as it may deem expedient concerning
the subscription for, issue, transfer and registration of, shares of stock.
Except as otherwise prescribed by law, the Company, prior to due presentment for
registration of transfer, may treat the registered owner of shares as the person
exclusively entitled to vote, to receive notification, and otherwise to exercise
all the rights and powers of an owner. [Business Corporation Law Sec.508(d),
(f); Insurance Law Sec. 4203]
Section 5.2. Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents and one or more registrars, and may require
all certificates representing shares to bear the signature of any such transfer
agents or registrars. The same person may act as transfer agent and registrar
for the Company.
ARTICLE VI
EXECUTION OF INSTRUMENTS
Section 6.1. Execution of Instruments. (a) Any one of the following,
namely, the Chairman of the Board, any Vice-Chairman of the Board, the
President, any Vice-President (including a Deputy or Assistant Vice-President or
any other Vice-President designated by a number or a word or words added before
or after the title Vice-President to indicate his or her rank or
responsibilities), the Secretary, or the Treasurer, or any officer, employee or
agent designated by or pursuant to authorization of the Board of Directors or
any committee created under these By-Laws, shall have power in the ordinary
course of business to enter into contracts or execute instruments on behalf of
the
7
<PAGE>
Company (other than checks, drafts and other orders drawn on funds of the
Company deposited in its name in banks) and to affix the corporate seal. If any
such instrument is to be executed on behalf of the Company by more than one
person, any two or more of the foregoing or any one or more of the foregoing
with an Assistant Secretary or an Assistant Treasurer shall have power to
execute such instrument and affix the corporate seal.
(b) The signature of any officer may be in facsimile on any such
instrument if it shall also bear the actual signature, or personally inscribed
initials, of an officer, employee or agent empowered by or pursuant to the first
sentence of this Section to execute such instrument, provided that the Board of
Directors or a committee thereof may authorize the issuance of insurance
contracts and annuity contracts on behalf of the Company bearing the facsimile
signature of an officer without the actual signature or personally inscribed
initials of any person.
(c) All checks, drafts and other orders drawn on funds of the Company
deposited in its name in banks shall be signed only pursuant to authorization of
and in accordance with rules prescribed from time to time by the Board of
Directors or a committee thereof , which rules may permit the use of facsimile
signatures.
Section 6.2. Facsimile Signatures of Former Officers. If any officer
whose facsimile signature has been placed upon any instrument shall have ceased
to be such officer before such instrument is issued, it may be issued with the
same effect as if he or she had been such officer at the time of its issue.
Section 6.3. Meaning of Term "Instruments". As used in this Article VI,
the term "instruments" includes, but is not limited to, contracts and
agreements, checks, drafts and other orders for the payment of money, transfers
of bonds, stocks, notes and other securities, and powers of attorney, deeds,
leases, releases of mortgages, satisfactions and all other instruments entitled
to be recorded in any jurisdiction.
ARTICLE VII
GENERAL
Section 7.1. Reports of Committees. Reports of any committee charged
with responsibility for supervising or making investments shall be submitted at
the next meeting of the Board of Directors. Reports of other committees of the
Board of Directors shall be submitted at a regular meeting of the Board of
Directors as soon as practicable, unless otherwise directed by the Board of
Directors.
Section 7.2. Financial Statements and Reports, etc. At the meeting of
the Board of Directors falling on the third Thursday of February, the Annual
Statement and audited financial statements of the Company for the preceding
year, together with an opinion with respect to such audited financial statements
by such independent certified public accountants as may have been selected by
the Board of Directors, shall be submitted.
8
<PAGE>
Interim reports on the financial condition of the Company shall be submitted at
a regular meeting of the Board of Directors as soon as practicable following the
end of each of the first three quarterly financial periods in each year. All
such financial statements and interim reports shall be filed with the records of
the Board of Directors and a note of such submission shall be spread upon the
minutes.
Section 7.3. Independent Certified Public Accountants. The books and
accounts of the Company shall be audited throughout each year by such
independent certified public accountants as shall be selected by the Board of
Directors.
Section 7.4. Directors' Fees. The Directors shall be paid such fees for
their services in any capacity as may have been authorized by the Board of
Directors. No Director who is a salaried officer of the Company shall receive
any fees for serving as a Director of the Company. [Business Corporation Law
Sec. 713(e)]
Section 7.5. Indemnification of Directors, Officers and Employees. (a)
To the extent permitted by the law of the State of New York and subject to all
applicable requirements thereof:
(i) any person made or threatened to be made a party to any
action or proceeding, whether civil or criminal, by
reason of the fact that he or she, or his or her testator
or intestate, is or was a director, officer or employee
of the Company shall be indemnified by the Company;
(ii) any person made or threatened to be made a party to any
action or proceeding , whether civil or criminal, by
reason of the fact that he or she, or his or her testator
or intestate serves or served any other organization in
any capacity at the request of the Company may be
indemnified by the Company; and
(iii) the related expenses of any such person in any of said
categories may be advanced by the Company.
(b) To the extent permitted by the law of the State of New York, the
Company may provide for further indemnification or advancement of expenses by
resolution of shareholders of the Company or the Board of Directors, by
amendment of these By-Laws, or by agreement. [Business Corporation Law Sec.
721-726; Insurance Law Sec. 1216]
Section 7.6. Waiver of Notice. Notice of any meeting of the Board of
Directors or any committee thereof shall not be required to be given to any
Director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior to or at its
commencement, the lack of notice to him. [Business Corporation Law Sec. 711(c)]
9
<PAGE>
Section 7.7. Company. The term "Company" in these By-Laws means The
Equitable Life Assurance Society of the United States.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Section 8.1. Amendment of By-Laws. Subject to Section 1210 of the
Insurance Law of the State of New York, these By-Laws (other than Sections 1.4,
2.2, 2.3, 2.4, 2.5, 3.1, 3.2 and 8.1 (the "Governance By-Laws") and all By-Laws
adopted by vote of the shareholders of the Company) may be amended or repealed
and new By-Laws, consistent with the Governance By-Laws and with all By-Laws
adopted by the shareholders of the Company, may be adopted at a regular or
special meeting of the Board of Directors, provided that a notice, given not
less than ten days before the meeting in writing and by telephone or telecopy,
shall set forth the amendment or repeal or new By-Laws proposed to be acted upon
at such meeting. [Business Corporation Law Sec. 601; Insurance Law Sec. 1210]
10
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF
THE UNITED STATES
BY-LAWS
As Amended July 22, 1992
11
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF
THE UNITED STATES
Table of Contents
-----------------
ARTICLE I SHAREHOLDERS 1
Section 1.1 Annual Meetings 1
Section 1.2 Notice of Meetings; Waiver 1
Section 1.3 Organization; Procedure 1
Section 1.4 Action Without a Meeting 2
ARTICLE II BOARD OF DIRECTORS 2
Section 2.1 Regular Meetings 2
Section 2.2 Special Meetings 2
Section 2.3 Independent Directors; Quorum 2
Section 2.4 Notice of Meetings 2
Section 2.5 Newly Created Directorships; Vacancies 3
Section 2.6 Presiding Officer 3
Section 2.7 Telephone Participation in Meetings; Action by
Consent Without Meeting 3
ARTICLE III COMMITTEES 3
Section 3.1 Committees 3
Section 3.2 Authority of Committees 4
Section 3.3 Quorum and Manner of Acting 5
Section 3.4 Removal of Members 5
Section 3.5 Vacancies 5
Section 3.6 Subcommittees 5
Section 3.7 Alternate Members of Committees 5
Section 3.8 Attendance of Other Directors 5
ARTICLE IV OFFICERS 5
Section 4.1 Chairman of the Board 5
Section 4.2 Vice-Chairman of the Board 6
Section 4.3 President 6
Section 4.4 Chief Executive Officer 6
Section 4.5 Secretary 6
Section 4.6 Other Officers 6
i
<PAGE>
ARTICLE V CAPITAL STOCK 7
Section 5.1 Transfers of Stock;
Registered Shareholders 7
Section 5.2 Transfer Agent and Registrar 7
ARTICLE VI EXECUTION OF INSTRUMENTS 7
Section 6.1 Execution of Instruments 7
Section 6.2 Facsimile Signature of
Former Officers 8
Section 6.3 Meaning of Term "Instruments" 8
ARTICLE VII GENERAL 8
Section 7.1 Reports of Committees 8
Section 7.2 Financial Statements
and Reports, etc. 8
Section 7.3 Independent Certified
Public Accountants 9
Section 7.4 Directors' Fees 9
Section 7.5 Indemnification of Directors,
Officers and Employees 9
Section 7.6 Waiver of Notice 9
Section 7.7 Company 10
ARTICLE VIII AMENDMENT OF BY-LAWS 10
Section 8.1 Amendment of By-laws 10
ii
DISTRIBUTION AND SERVICING AGREEMENT
This DISTRIBUTION AND SERVICING AGREEMENT, dated as of May 1, 1994, is
made by and among Equico Securities, Inc. ("Equico"), The Equitable Life
Assurance Society of the United States ("Equitable") and Equitable Variable Life
Insurance Company ("Equitable Variable"), as follows:
WHEREAS, pursuant to a Distribution Agreement, dated as of May 1, 1994,
Equico is the principal underwriter of The Hudson River Trust ("Trust"), a
series mutual fund registered under the Investment Company Act of 1940 ("1940
Act") whose shareholders are separate accounts of Equitable and Equitable
Variable and of other insurance companies;
WHEREAS, both Equitable and Equitable Variable issue variable insurance
contracts ("Variable Contracts") whose net premiums or considerations are
allocated in whole or in part to the respective separate accounts of Equitable
and Equitable Variable for investment in the Trust, for direct investment or for
investment in other funding media ("Separate Accounts");
WHEREAS, units of interest in the Separate Accounts are registered
under the Securities Act of 1933 ("1933 Act") to the extent such registration is
required;
WHEREAS, Equitable and Equitable Variable are each broker-dealers
registered under the Securities Exchange Act of 1934, as amended ("1934 Act"),
and each is a member of the National Association of Securities Dealers, Inc.
("NASD");
<PAGE>
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WHEREAS, the Variable Contracts (including all Variable Contracts
issued by Equitable Variable) are offered and sold by members of Equitable's
agency force, or by insurance brokers under contract with Equitable, who are
also registered representatives of Equico and of Equitable ("Agents");
WHEREAS, Equitable and Equitable Variable each desire to engage Equico,
a wholly-owned subsidiary of Equitable which is a registered broker-dealer under
the 1934 Act and a member of the NASD, to assume the responsibilities set forth
in this Agreement with respect to the distribution of the Variable Contracts,
including in particular the responsibility for compliance with broker-dealer
requirements under federal and any applicable state or foreign securities laws
and the NASD Rules of Fair Practice ("NASD Rules") with respect to the offering
of the Variable Contracts, and Equico desires to assume such responsibilities;
WHEREAS, Equico desires to utilize Equitable's services and personnel
in carrying out certain of its responsibilities under this Agreement, and
Equitable is willing to furnish the same on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
-3-
ARTICLE I
Distribution Responsibility for the Variable Contracts
Sec. 1.1 Equitable and Equitable Variable authorize Equico to act, and
Equico agrees to serve, as broker-dealer in connection with the distribution of
their respective Variable Contracts to the extent provided in this
Agreement. Equico shall be fully responsible for carrying out all
compliance and supervisory obligations in connection with the distribution of
the Variable Contracts, as required by the NASD Rules and by federal and any
applicable state or foreign securities laws. Equitable shall be fully
responsible for compensating the Agents for their sales of Variable Contracts,
as provided in Section 1.4.
Sec. 1.2 Without limiting the generality of Section 1.1, Equico agrees
that it shall be fully responsible for:
(A) Requiring that each person who is authorized to offer and
sell the Variable Contracts is duly registered as a representative of Equico and
is appropriately licensed, registered or otherwise qualified to offer and sell
the Variable Contracts under the federal securities laws and any applicable
securities laws of each state or other jurisdiction in which the Variable
Contracts offered by such person may be lawfully sold;
(B) Training, supervising and directing the Agents for
purposes of complying on a continuous basis with the NASD Rules and with federal
and state securities laws applicable in connection with the offer and sale of
the Variable Contracts. In this connection, Equico shall:
<PAGE>
-4-
(i) Establish and implement reasonable written procedures
which provide for diligent supervision of sales practices of the Agents;
(ii) Require that Agents shall recommend the purchase of
Variable Contracts only upon reasonable grounds to believe that the purchase is
suitable for each prospective purchaser, and verify their compliance with such
requirement;
(iii) Provide a sufficient number of registered principals
and an adequate compliance staff to carry out the responsibilities set forth
herein; and
(iv) Impose disciplinary measures on the Agents.
(C) Oversight of the securities activities of all persons
engaged directly or indirectly in operations of Equico, Equitable and Equitable
Variable related to the offer or sale of the Variable Products, each of whom
shall be considered a "person associated" with Equico, as defined in Section
3(a)(18) of the 1934 Act. Equico shall have full responsibility for each such
person with regard to his or her training, supervision and control, as
contemplated by Section 15 of the 1934 Act, and, in that connection, shall have
the authority to require that disciplinary action be taken with respect to such
persons.
Sec. 1.3 Equico represents that it is a broker-dealer duly registered
under the 1934 Act and is a member in good standing of the NASD and, to the
extent necessary to perform the activities contemplated hereunder, is duly
registered, or otherwise qualified, under the securities laws of every state or
other jurisdiction in
<PAGE>
-5-
which the Variable Contracts are available for sale, and Equico agrees to
maintain such status. Consistent with its designation as distributor of the
Variable Contracts, as provided in Section 1.1 of this Agreement, Equico
acknowledges that it may be deemed to be an "underwriter" or a "principal
underwriter" of the Separate Accounts under the federal securities laws.
Sec. 1.4 Equitable shall have exclusive responsibility for the payment
of commissions or other fees in accordance with the applicable agreements
between each Agent and Equitable relating to the Variable Contracts. All
compensation paid by Equitable to the Agents with respect to sales of the
Variable Contracts shall be paid by Equitable on its own behalf or on behalf of
Equitable Variable (with respect to sales of Variable Contracts issued by
Equitable Variable), and shall be reflected on the books and records of
Equitable and, to the extent related to Variable Contracts issued by Equitable
Variable, on the books and records of Equitable Variable. The responsibility of
Equitable shall include the performance of all activities necessary in order
that the payment of compensation hereunder complies with all applicable federal
securities laws and state securities and insurance laws. Equitable and Equitable
Variable retain the ultimate right to determine the rates of commission and
other fees to be paid to the Agents in connection with their respective Variable
Contracts. Nothing contained in this Agreement shall obligate Equico to pay any
commissions or other fees to Agents or to reimburse any Agents for expenses
incurred by them, nor shall Equico have any responsibility for the adequacy or
accuracy of any amount paid to an Agent in connection with the sale of the
Variable Contracts. Equico shall have no right or interest whatsoever in any
commissions or other fees payable to Agents by Equitable or by Equitable
Variable.
<PAGE>
-6-
Sec. 1.5 Equitable represents that it is a broker-dealer duly
registered under the 1934 Act and is a member in good standing of the NASD. If
Equitable shall determine, in its sole judgment, that such status is not
required for the purpose of properly discharging its responsibility under
Section 1.4 of this Agreement,
Equitable may terminate its status as a registered broker-dealer without notice
to the other parties hereto.
Sec. 1.6 Equitable Variable agrees to cooperate fully with Equico and
with Equitable in the proper discharge of the responsibilities allocated to them
under this Article I. While undertaking to provide such cooperation and to
perform various activities on its own behalf hereunder, Equitable Variable
assumes no duties or responsibilities under this Agreement in its capacity as a
registered broker-dealer and, accordingly, shall be under no obligation to
maintain such status.
Sec. 1.7 Equico, Equitable and Equitable Variable shall each cause to
be maintained and preserved such accounts, books and other documents as are
required by the 1934 Act and 1940 Act and any other applicable laws and
regulations. In particular, without limiting the foregoing, Equico shall cause
all the books and records in connection with the offer and sale of the Variable
Contracts to be maintained and preserved in conformity with the requirements of
Rules 17a-3 and 17a-4 under the 1934 Act, to the extent that such requirements
are applicable to the Variable Contracts. The payment of premiums, purchase
payments, commissions and other fees and payments in connection with the
Variable Contracts shall be reflected on the books and records of Equitable and
of Equitable Variable, as provided in Section 1.4 hereof and as may otherwise be
<PAGE>
-7-
required under applicable NASD regulations and federal and applicable state
securities laws requirements.
Sec. 1.8 Equico, Equitable and Equitable Variable shall each submit to
all regulators and administrative bodies having jurisdiction over the sales of
the Variable Contracts, present or future, any information, reports, or other
material that any such body by reason of this Agreement may request or require
pursuant to applicable laws or regulations. In particular, without limiting the
foregoing, Equitable and Equitable Variable agree that any books and records
which they maintain pursuant to Section 1.5 of this Agreement which are required
to be maintained under Rule 17a-3 or 17a-4 of the 1934 Act shall be subject to
inspection by the SEC in accordance with Section 17(a) of the 1934 Act.
Sec. 1.9 Equico and Equitable each agree and understand that all
documents, reports, records, books, files and other materials required under
applicable NASD regulations and federal and state securities laws relative to
the sale of Variable Contracts shall be the property of Equico, with the
exception of those books and records maintained by Equitable pursuant to Section
1.4 which relate to sales compensation and shall be the joint property of
Equitable and Equico. If, however, such documents, reports, records, books,
files and other materials which are the property of Equico are required by
applicable regulation or law to be maintained also by Equitable or by Equitable
Variable, such material shall be the joint property of Equico, Equitable or
Equitable Variable. All other documents, reports, records, books, files and
other materials maintained relative to this Agreement shall be the property of
Equitable or of Equitable Variable, depending upon the identity of the issuer of
the Variable Contracts involved. Upon the
<PAGE>
-8-
termination of this Agreement, all such material shall be returned to the
applicable party.
Sec. 1.10 Equico, Equitable and Equitable Variable from time to time
during the term of this Agreement, shall allocate among themselves, subject to a
right of further delegation, the administrative responsibility for maintaining
and preserving the books, records and accounts kept in connection with the
Variable Contracts; provided, however, in the case of books, records and
accounts kept pursuant to a requirement of applicable law or regulation, the
ultimate responsibility for maintaining and preserving such books, records and
accounts shall be that of the party which is required to maintain or preserve
such books, records and accounts under the applicable law or regulation, and
such books, records and accounts shall be maintained and preserved under the
supervision of that party. Equico, Equitable and Equitable Variable shall cause
each other to be furnished with such reports as each may reasonably request for
the purpose of meeting its respective reporting and recordkeeping requirements
under such regulations and laws and under the insurance laws of the State of New
York and any other applicable states or jurisdictions.
ARTICLE II
Procedures for Sale of Variable Contracts
Sec. 2.1 Equitable and Equitable Variable each represent and warrant
that units of interest of their respective Separate Accounts offered under the
Variable Contracts are registered under the 1933 Act to the extent such
registration is required, that the Separate Accounts are registered under the
1940 Act unless
<PAGE>
-9-
exempt from such registration, and that the Variable Contracts are qualified to
be sold under the insurance laws and any applicable securities laws of all
states and other jurisdictions in which the Variable Contracts are authorized
for sale. Equitable and Equitable Variable each further represent and warrant
that each of them is a life insurance company duly organized under the laws of
the State of New York and in good standing and authorized to conduct business
under the laws of each state in which the Variable Contracts are offered and
sold.
Sec. 2.2 Equico will require that the Agents use only the effective
prospectuses, statements of additional information ("SAIs") and other authorized
materials in soliciting and selling the Variable Contracts. Equico is not
authorized to give any information or to make any representations concerning the
Variable Contracts other than those contained in the current prospectus or SAI
therefor filed with the SEC or in such materials as may be authorized by
Equitable or by Equitable Variable.
Sec. 2.3 All applications for Variable Contracts shall be made on
application forms supplied by Equitable or by Equitable Variable, as
appropriate, and all payments collected by Equico shall be remitted by Equico
promptly in full, together with such application or enrollment forms and any
other required documentation, directly to Equitable or to Equitable Variable, as
appropriate, at the address indicated on such application or to such other
address as Equitable or Equitable Variable may, from time to time, designate in
writing. Equico shall review all such applications for suitability. Checks or
money orders in payment on any Variable Contract shall be drawn to the order of
"The Equitable Life Assurance Society of the United States" or "Equitable
Variable Life Insurance Company", as appropriate. All applications for Variable
Contracts shall be subject to
<PAGE>
-10-
acceptance or rejection by Equitable or by Equitable Variable at their
respective discretion.
Sec. 2.4 All money payable in connection with any of the Variable
Contracts, whether as premiums, purchase payments or otherwise, and whether paid
by, or on behalf of any applicant or contractowner, is the property of Equitable
or of Equitable Variable and shall be transmitted promptly in accordance with
the administrative procedures of Equitable and Equitable Variable without any
deduction or offset for any reason, including by example but not limitation, any
deduction or offset for compensation claimed by Equico or payable to the Agents.
No cash payments shall be accepted by Equico in connection with the Variable
Contracts.
Sec. 2.5 Equitable and Equitable Variable shall be responsible for
payment of the costs of printing the prospectuses, SAIs and sales material used
in connection with the solicitation of applications for the Variable Contracts
and to allocate such costs between themselves. Equitable and Equitable Variable
shall provide to Equico copies of such prospectuses, SAIs and sales material in
such number as Equico shall reasonably request. Equitable and Equitable Variable
shall make available to Equico copies of all financial statements and other
documents that Equico shall reasonably request for use in connection with the
distribution of the Variable Contracts.
Sec. 2.6 Notwithstanding anything in this Agreement to the contrary,
Equico may enter into sales agreements with independent broker-dealers for the
sale of the Variable Contracts, subject to the prior written approval of
Equitable and of Equitable Variable of each such sales agreement and the terms
thereof. All such
<PAGE>
-11-
sales agreements entered into by Equico shall provide that each independent
broker-dealer will assume full responsibility for continued compliance by itself
and its associated persons with the NASD Rules and applicable federal and state
securities and insurance laws. All associated persons of such independent
broker-dealer soliciting applications for the Variable Contracts shall be duly
and appropriately licensed or appointed for the sale of the Variable Contracts
under the NASD Rules and federal and state securities and insurance laws in
which such person shall offer or sell the Variable Contracts.
Sec. 2.7 Equitable shall apply for and maintain the proper insurance
licenses for each of the Agents selling the Variable Contracts in all states or
jurisdictions in which the Variable Contracts are offered for sale by such
Agent. Equitable and Equitable Variable reserve the right to refuse to appoint
any proposed agent, or independent broker-dealer, and to terminate an Agent or
independent broker-dealer once appointed. Equitable and Equitable Variable shall
promptly notify Equico of each such termination. Equitable agrees to be
responsible for all licensing or other fees required under pertinent state
insurance laws to properly authorize Agents for the sale of the Variable
Contracts; however, the foregoing shall not limit Equitable's right to collect
such amount from any person or entity other than Equico.
Sec. 2.8 The parties hereto recognize that any person selling the
Variable Contracts as contemplated by this Agreement shall be acting as an
insurance agent of Equitable or of Equitable Variable or as an insurance broker,
and that the rights of Equico to supervise such persons shall be limited to the
extent specifically described herein or required under applicable federal or
state securities laws or NASD regulations. Such persons shall not be considered
employees of Equico and
<PAGE>
-12-
shall be considered agents of Equico only as and to the extent required by such
laws and regulations. Further, it is intended by the parties hereto that such
persons are and shall continue to be considered to have a common law independent
contractor relationship with Equitable and Equitable Variable and not to be
common law employees of Equitable or of Equitable Variable, unless any contract
between Equitable and any person selling the Variable Contracts specifically
provides otherwise.
Sec. 2.9 Consistent with the responsibility of Equico to discharge all
compliance and supervisory obligations relating to the distribution of the
Variable Contracts as provided in this Agreement and consistent with the
authority given to Equico hereunder, Equitable and Equitable Variable shall
retain the ultimate right of control over, and responsibility for, the issuance,
servicing and marketing of their respective Variable Contracts. In that
connection, Equitable and Equitable Variable shall review and approve all
advertising concerning the Variable Contracts issued by each of them; however,
Equico shall be responsible for filing such materials, as required, with the
NASD and with state securities regulators and for obtaining such approvals as
may be necessary.
Sec. 2.10 Unless otherwise agreed in writing by Equitable or by
Equitable Variable, neither Equico nor any Agent nor any independent
broker-dealer shall have an interest in any surrender charges, deductions or
other fees payable to Equitable or to Equitable Variable.
<PAGE>
-13-
ARTICLE III
Services and Personnel Provided by Equitable
Sec. 3.1 Equitable agrees to furnish compliance and related support
services, including personnel, to assist Equico in the performance of the
services which Equico is required to provide hereunder. In furnishing such
services, all personnel of Equitable shall be subject at all times to the
supervision and control of Equico.
ARTICLE IV
Compensation and Expenses
Sec. 4.1 Equico shall be compensated, not less frequently than
quarterly, by Equitable and by Equitable Variable for its services under this
Agreement in an aggregate annual amount which shall be equal to the actual
expenses incurred by Equico to provide compliance and related support services,
plus a percentage of such expenses which shall approximate the annual rate of
profit earned by Equico from its performance of comparable services for
unaffiliated clients.
Sec. 4.2 Equico shall pay the costs and expenses, direct and indirect,
incurred by Equitable in furnishing services and personnel, pursuant to Article
III of this Agreement. In determining the basis for the apportionment of
expenses, specific identification or estimates based on time, company assets,
square footage or any other mutually agreeable method providing for a fair and
reasonable allocation of cost may be used, provided such method is in conformity
with the requirements of Section 1712 of the New York Insurance Law and New York
Insurance
<PAGE>
-14-
Department Regulation No. 33. The charge to Equico for such apportioned expenses
shall be at cost as described in this Section 4.2.
Sec. 4.3 Within 45 days after the end of each calendar quarter, and
more often if desired, Equitable shall submit to Equico a statement of
apportioned expenses showing the basis for such apportionment; and settlement
shall be made within 15 days thereafter. The statement of apportioned expenses
shall set forth in reasonable detail the nature of the expenses being
apportioned and other relevant information to support the charge.
Sec. 4.4 To enable Equitable to compensate Agents for the sale of
Variable Contracts issued by Equitable Variable, Equitable Variable shall
furnish Equitable with a schedule of the commissions and other fees payable with
respect to each form of Variable Contract issued by it, together with a list of
rules and procedures applicable to the payment of such compensation. Equitable
Variable agrees to reimburse Equitable for commissions and service fees (not in
excess of the amounts specified by Equitable Variable) paid to the Agents for
the sale of its Variable Contracts pursuant to Section 1.4 of this Agreement.
ARTICLE V
Term of Agreement
Sec. 5.1 Subject to termination as herein provided, this Agreement
shall remain in full force and effect for a two-year period commencing on the
date first above written, and this Agreement shall continue in full force and
effect from year to year thereafter, until terminated as herein provided.
<PAGE>
-15-
Sec. 5.2 This Agreement may be terminated by any party hereto on not
less than 60 days' prior written notice to the other parties or by an agreement
in writing signed by all of the parties hereto, except that data processing
services may not be terminated on less than 180 days' prior written notice, if
requested by Equico in writing promptly following its receipt of written notice
of termination of this Agreement. This Agreement shall automatically be
terminated in the event of its assignment.
Sec. 5.3 Upon termination of this Agreement, all authorizations,
rights, and obligations shall cease except the obligations to settle accounts
hereunder, including the settlement of monies due in connection with Variable
Contracts in effect at the time of termination or issued pursuant to
applications received by Equitable or by Equitable Variable prior to
termination.
ARTICLE VI
Miscellaneous
Sec. 6.1 Should an irreconcilable difference of opinion arise between
or among the parties to this Agreement as to the interpretation of any matter
respecting this Agreement, it is hereby mutually agreed that such differences
shall be submitted to arbitration as the sole remedy available to the parties.
Such arbitration shall be in accordance with the rules of the American
Arbitration Association, the arbitrators shall have extensive experience in the
insurance industry, and the arbitration shall take place in New York, New York.
<PAGE>
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Sec. 6.2 For purposes of this Agreement, the term "Variable Contracts"
shall not include any variable insurance contract issued by Equitable which is
not offered and sold by employees or agents of Equitable.
Sec. 6.3 This Agreement replaces the Sales Agreement, dated December
23, 1985, as amended, between Equitable Variable and Equitable, which shall
terminate on the effective date hereof.
Sec. 6.4 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule, or otherwise, the remainder of this
Agreement shall not be affected thereby.
Sec. 6.5 This Agreement constitutes the entire agreement between the
parties hereto and may not be modified except in a written instrument executed
by all parties hereto.
Sec. 6.6 This Agreement shall be subject to the provisions of the 1934
Act and, to the extent applicable, the 1940 Act and the rules, regulations and
rulings thereunder and of the NASD, from time to time in effect, including such
exemptions from the 1940 Act as the SEC may grant, and the terms hereof shall be
interpreted and construed in accordance therewith.
Sec. 6.7 This Agreement shall be interpreted in accordance with the
laws of the State of New York.
<PAGE>
-17-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials thereunto duly authorized, as of the day
and year first above written.
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: /s/Joseph J. Melone
-------------------
Joseph J. Melone
Chairman and
Chief Executive Officer
EQUITABLE VARIABLE LIFE
INSURANCE COMPANY
By: /s/Samuel B. Shlesinger
-----------------------
Samuel B. Shlesinger
Senior Vice President
EQUICO SECURITIES, INC.
By: /s/Richard V. Silver
--------------------
Richard V. Silver
President and
Chief Operating Officer
5292/430_1.DOC
SCHEDULE OF COMMISSIONS
-----------------------
Corporate Incentive Life(SM) (Policy Form 96-300)
<TABLE>
<CAPTION>
Premiums Up to 1st Premiums Up to Next 6
Policy Year target premium target premiums Addt'l Premiums
- ----------- -------------- --------------- ---------------
<S> <C> <C> <C>
1 15% Base/2% rider 7.5% base/2% rider 3% base/2% rider
2 15%/2% 7.5%/2%(1) 3%/2%(2)
3-10 N/A 7.5%/2%(1) 3%/2%(2)
11+ N/A N/A 3%/2%(3)
<FN>
Notes:
(1) The 7.5% commission rate on the base policy is comprised of 5.5% renewal
commission and 2% Transferable Service Fee (TSF). The 2% commission rate on
the term rider is comprised of 2% TSF.
(2) The 3% commission rate on the base policy is comprised of 1% renewal
commission and 2% TSF. The 2% commission rate on the term rider is comprised
of 2% TSF.
(3) The 3% base policy commission rate is comprised of 1% Service Fee Boost
(SFB) for agents who qualify, and 2% TSF. The 2% commission on the term
rider is comprised of 2% TSF.
</FN>
</TABLE>
AGREEMENT AND PLAN OF MERGER OF
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
WITH AND INTO THE EQUITABLE LIFE
ASSURANCE SOCIETY OF THE UNITED STATES
--------------------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement and Plan of
Merger"), dated as of September 19, 1996, is by and between The Equitable Life
Assurance Society of the United States, a New York corporation having its
principal place of business at 787 Seventh Avenue, New York, New York 10019
("Equitable Life"), and Equitable Variable Life Insurance Company, a New York
corporation having its principal place of business at 787 Seventh Avenue, New
York, New York 10019 ("EVLICO") (the foregoing corporations hereinafter
sometimes referred to as the "Constituent Companies").
WHEREAS, Equitable Life and EVLICO are corporations duly organized and
validly existing under the laws of the State of New York and duly licensed as
stock life insurance companies under the New York Insurance Law (the "Insurance
Law");
WHEREAS, EVLICO has authorized capital stock consisting of 5 million
shares of Common Stock (the "EVLICO Common Stock"), $1.00 par value, of which at
the date hereof 1.5 million shares are issued and outstanding and owned by
Equitable Life and are the only shares of stock of EVLICO entitled to vote on
this Agreement and Plan of Merger;
WHEREAS, Equitable Life has authorized capital stock consisting of 2
million shares of Common Stock (the "Equitable Common Stock"), $1.25 par value,
all of which shares on the date hereof are issued and outstanding and owned by
The Equitable Companies Incorporated, a Delaware corporation having its
principal place of business at 787 Seventh Avenue, New York, New York, 10019.
The issued and outstanding shares of Equitable Common Stock are the only shares
of stock of Equitable Life entitled to vote on this Agreement and Plan of
Merger; and
WHEREAS, the Boards of Directors of Equitable Life and EVLICO deem it
advisable and in the best interest of the policyholders and contract holders of
their respective companies to effect the merger (the "Merger") of EVLICO and
Equitable Life with and into Equitable Life as the surviving company, and the
Board of Directors and sole stockholder, respectively, of each of Equitable Life
and EVLICO have duly approved and adopted this Agreement and Plan of Merger.
<PAGE>
-2-
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, it is hereby agreed by and between
the parties hereto that EVLICO shall be merged with and into Equitable Life
pursuant to Article 71 of the Insurance Law and in accordance with this
Agreement and Plan of Merger.
ARTICLE 1
---------
Surviving Company
-----------------
Section 1.1 The Surviving Company. The surviving company of the Merger
(the "Surviving Company") shall be Equitable Life.
Section 1.2 Charter. The proposed Restated Charter of the Surviving
Company is annexed hereto as Exhibit A.
Section 1.3 By-Laws. The By-Laws of Equitable Life in effect at the
Effective Time of the Merger (as hereinafter defined) shall be the By-Laws of
the Surviving Company.
ARTICLE 2
---------
Terms and Conditions of the Merger and Mode of Carrying the Merger into Effect
- ------------------------------------------------------------------------------
Section 2.1 General. Subject to and upon the terms and conditions of
this Agreement and Plan of Merger, upon the Effective Time of the Merger, EVLICO
shall be merged with and into Equitable Life and Equitable Life shall continue
as the Surviving Company as permitted and provided by Section 7102 of the
Insurance Law. All of the EVLICO Common Stock issued and outstanding immediately
prior to the Effective Time of the Merger shall, at the Effective Time of the
Merger, be cancelled. All of the Equitable Common Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall remain unchanged.
Section 2.2 Consents, Approvals, Etc. to be Obtained by the Parties to
the Merger. Equitable Life and EVLICO shall each obtain all necessary consents
and approvals of, permits from, and assurances of no objection to the Merger or
other rulings from, the appropriate governmental authorities, including the
following:
(a) approval by the New York Insurance Department to consummate
the Merger pursuant to Section 7105 of the Insurance Law; and
(b) approval by the New York Insurance Department of one or more
plans of operation of Equitable Life separate accounts which
will continue the operations of EVLICO separate
<PAGE>
-3-
accounts in operation at the Effective Time of the Merger as
separate accounts of Equitable Life.
Section 2.3 Effective Time of the Merger. This Agreement and Plan of
Merger shall be duly executed and attested and a certified copy thereof,
together with certificates of its adoption as provided for in the Insurance Law
and certificates as to fees, commissions or other compensations or valuable
considerations paid or to be paid in connection with the Merger, shall be
submitted for approval to the Superintendent of Insurance of the State of New
York (the "Superintendent"). Following the receipt of such approval from the
Superintendent and the fulfillment of the conditions set forth herein, a
certified copy of this Agreement and Plan of Merger, with evidence of the
approval of the Superintendent endorsed thereon, shall be filed in the office of
the Clerk of the County of New York, where the principal office of each of
Equitable Life and EVLICO is located. Subject to the foregoing, the Merger shall
become effective at 12:01 a.m. on January 1, 1997 (the "Effective Time of the
Merger").
ARTICLE 3
---------
Other Provisions with Respect to the Merger
-------------------------------------------
Section 3.1. Effect of the Merger. At the Effective Time of the Merger,
the separate existence of EVLICO shall cease and, in accordance with the
provisions of this Agreement and Plan of Merger, EVLICO shall be merged with and
into Equitable Life, and Equitable Life shall survive the Merger and shall
continue in existence and shall possess all the rights, privileges, immunities,
powers and purposes of each of the Constituent Companies. All the rights,
franchises and interests in and to every species of property, real, personal,
and mixed, including things in action, causes of action and every other asset of
the Constituent Companies, shall vest in the Surviving Company without further
act or deed, except that if the Surviving Company shall at any time deem it
desirable that any further assignment or assurance shall be given to fully
accomplish the purposes of the Merger, the directors and officers of EVLICO
shall do all things necessary, including the execution of any and all relevant
documents, to carry out the intent and purposes of this Agreement and Plan of
Merger. No liability or obligation due or to become due, or claim or demand for
any cause existing against either Constituent Company, or any policyholder,
shareholder, officer, or director thereof, shall be released or impaired by the
Merger. No action or proceeding, civil or criminal, then pending by or against
either Constituent Company, or any policyholder, shareholder, officer, or
director thereof, shall be abated or discontinued by the Merger, but may be
enforced, prosecuted, settled or compromised as if the Merger had not occurred,
or Equitable Life, as the Surviving Company, may be substituted in place of
EVLICO by order of the court in which the action or proceeding may be pending.
From and after the Effective Time of the Merger, Equitable Life shall be liable
in place of EVLICO for all the liabilities and obligations of EVLICO, including
liabilities under policies and contracts issued by EVLICO.
<PAGE>
-4-
Section 3.2. Abandonment of the Merger. If, at any time prior to the
Effective Time of the Merger, events or circumstances occur which, in the
opinion of a majority of the Board of Directors of either of the Constituent
Companies, render it inadvisable to consummate the Merger, this Agreement and
Plan of Merger shall not become effective even though previously approved and
adopted by the Board of Directors and sole shareholder, respectively, of each of
Equitable Life and EVLICO.
Section 3.3. Expenses of the Merger. Equitable Life shall pay all the
expenses of carrying this Agreement and Plan of Merger into effect and of
accomplishing the Merger.
Section 3.4. Counterparts. For the convenience of the parties and to
facilitate approval of this Agreement and Plan of Merger, any number of
counterparts hereof may be executed, and each such executed counterpart shall be
deemed to be an original instrument.
Section 3.5. Governing Law. This Agreement and Plan of Merger has been
executed in and shall be governed by and construed under the laws of the State
of New York.
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been duly
executed and delivered by the duly authorized officers of Equitable Life and
EVLICO on the date first above written.
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
[Seal]
Attest:
/s/ Pauline Sherman /s/ James M. Benson
- -------------------------- By:------------------------------------
Secretary President and Chief Executive Officer
EQUITABLE VARIABLE LIFE
INSURANCE COMPANY
[Seal]
Attest:
/s/ Pauline Sherman /s/ James M. Benson
- -------------------------- By:------------------------------------
Secretary President and Chief Executive Officer
28903
<PAGE>
Exhibit A
RESTATED CHARTER
OF
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
ARTICLE I
The name of the corporation shall continue to be The Equitable Life
Assurance Society of the United States.
ARTICLE II
The principal office of the corporation shall be located in the City of
New York, County of New York, State of New York.
ARTICLE III
(a) The business to be transacted by the corporation shall be the kinds
of insurance business specified in Paragraphs 1, 2 and 3 of Subsection (a) of
Section 1113 of the Insurance Law of the State of New York, as follows:
(1) "Life insurance": every insurance upon the lives of human
beings, and every insurance appertaining thereto, including the
granting of endowment benefits, additional benefits in the event of
death by accident, additional benefits to safeguard the contract from
lapse, accelerated payments of part or all of the death benefit or a
special surrender value upon diagnosis (A) of terminal illness defined
as a life expectancy of twelve months or less, or (B) of a medical
condition requiring extraordinary medical care or treatment regardless
of life expectancy, or provide a special surrender value, upon total
and permanent disability of the insured, and optional modes of
settlement of proceeds. "Life insurance" also includes additional
benefits to safeguard the contract against lapse in the event of
unemployment of the insured. Amounts paid the insurer for life
insurance and proceeds applied under optional modes of settlement or
under dividend options may be allocated by the insurer
<PAGE>
to one or more separate accounts pursuant to section four thousand two
hundred forty of the Insurance Law of the State of New York;
(2) "Annuities": all agreements to make periodical payments
for a period certain or where the making or continuance of all or some
of a series of such payments, or the amount of any such payment,
depends upon the continuance of human life, except payments made under
the authority of paragraph (1) above. Amounts paid the insurer to
provide annuities and proceeds applied under optional modes of
settlement or under dividend options may be allocated by the insurer to
one or more separate accounts pursuant to section four thousand two
hundred forty of the Insurance Law of the State of New York;
(3) "Accident and health insurance": (i) insurance against
death or personal injury by accident or by any specified kind or kinds
of accident and insurance against sickness, ailment or bodily injury,
including insurance providing disability benefits pursuant to article
nine of the workers' compensation law, except as specified in item (ii)
hereof; and (ii) non-cancellable disability insurance, meaning
insurance against disability resulting from sickness, ailment or bodily
injury (but excluding insurance solely against accidental injury) under
any contract which does not give the insurer the option to cancel or
otherwise terminate the contract at or after one year from its
effective date or renewal date;
and any amendments to such paragraphs or provisions in substitution therefor
which may be hereafter adopted; such other kind or kinds of business now or
hereafter authorized by the laws of the State of New York to stock life
insurance companies; and such other kind or kinds of business to the extent
necessarily or properly incidental to the kind or kinds of insurance business
which the corporation is authorized to do.
(b) The corporation shall also have all other rights, powers, and
privileges now or hereafter authorized or granted by the Insurance Law of the
State of New York or any other law or laws of the State of New York to stock
life insurance companies having power to do the kind or kinds of business
hereinabove referred to and any and all other rights, powers, and privileges of
a corporation now or hereafter granted by the laws of the State of New York and
not prohibited to such stock life insurance companies.
-2-
<PAGE>
ARTICLE IV
The business of the corporation shall be managed under the direction of
the Board of Directors.
ARTICLE V
(a) The Board of Directors shall consist of not less than 13 (except
for vacancies temporarily unfilled) nor more than 36 Directors, as may be
determined from time to time by a vote of a majority of the entire Board of
Directors. No decrease in the number of Directors shall shorten the term of any
incumbent Director.
(b) The Board of Directors shall have the power to adopt from time to
time such By-Laws, rules and regulations for the governance of the officers,
employees and agents and for the management of the business and affairs of the
corporation, not inconsistent with this Charter and the laws of the State of New
York, as may be expedient, and to amend or repeal such by-laws, rules and
regulations, except as provided in the By-Laws.
(c) Any or all of the Directors may be removed at any time, either for
or without cause, by vote of the shareholders.
(d) No Director shall be personally liable to the corporation or any of
its shareholders for damages for any breach of duty as a Director; provided,
however, that the foregoing provision shall not eliminate or limit (i) the
liability of a Director if a judgment or other final adjudication adverse to him
or her establishes that his or her acts or omissions were in bad faith or
involved intentional misconduct or that he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally entitled,
or were acts or omissions which (a) he or she knew or reasonably should have
known violated the Insurance Law of the State of New York or (b) violated a
specific standard of care imposed on Directors directly, and not by reference,
by a provision of the Insurance Law of the State of New York (or any regulations
promulgated thereunder) or (c) constituted a knowing violation of any other law;
or (ii) the liability of a Director for any act or omission prior to September
21, 1989.
-3-
<PAGE>
ARTICLE VI
(a) The Directors of the corporation shall be elected at each annual
meeting of shareholders of the corporation in the manner prescribed by law. The
annual meeting of shareholders shall be held at such place, within or without
the State of New York, and at such time as may be fixed by or under the By-Laws.
At each annual meeting of shareholders, directors shall be elected to hold
office for a term expiring at the next annual meeting of shareholders.
(b) Newly created directorships resulting from an increase in the
number of Directors and vacancies occurring in the Board of Directors shall be
filled by vote of the shareholders.
(c) Each Director shall be at least twenty-one years of age, and at all
times a majority of the Directors shall be citizens and residents of the United
States, and not less than three of the Directors shall be residents of the State
of New York.
(d) The Board of Directors shall elect such officers as are provided
for in the By-Laws at the first meeting of the Board of Directors following each
annual meeting of the shareholders. In the event of the failure to elect
officers at such meeting, officers may be elected at any regular or special
meeting of the Board of Directors. A vacancy in any office may be filled by the
Board of Directors at any regular or special meeting.
ARTICLE VII
The duration of the corporate existence of the corporation shall be
perpetual.
ARTICLE VIII
The amount of the capital of the corporation shall be $2,500,000, and
shall consist of 2,000,000 Common Shares, par value $1.25 per share.
44859-1.DOC
-4-
PART 1: APPLICATION FOR LIFE INSURANCE TO:
EQUITABLE VARIABLE LIFE INSURANCE COMPANY (Equitable Variable)
Home Office: 787 Seventh Avenue, New York, NY 10019
- --------------------------------------------------------------------------------
1. PROPOSED INSURED (Print Name as it is to appear on the policy)
Please print in ink.
- --------------------------------------------------------------------------------
A. Title: |_| Mr. |_| Mrs. |_| Ms. |_| Miss |_| Other Title|_|_|_|_|
B. Name:
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
C. Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_|
D. Age Nearest Birthday |_|_|
E. Sex |_| M |_| F F. Place of Birth: ______________________________________
G. Soc. Sec. No. |_|_|_|_|_|_|_|_|_|
H. Previous/Other Name(If Applicable) __________________________________________
I. U.S. Citizen? |_| Yes |_| No If No, Country ______________________________
J. Current Occupation(s): (1) Title: ___________________________________________
(2) Duties: __________________________________________
(3) How Long? ____________
If less than 1 year at current occupation, give previous in Special
Instructions.
K. Residence/Care of: |C|/|O|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Years There? |_|_|
Current No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Apt/Suite/Bldg. #: |_|_|_|_|_|
City: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_|
Previous No. & Street: _____________________________________________________
City: ___________________ State: ______ Zip +4 Code: ____________
(If less than 2 years at current)
L. Tel.: (1) Home |_|_|_| |_|_|_| |_|_|_|_|
(2) Business |_|_|_| |_|_|_| |_|_|_|_|
M. Currently employed? |_| Yes |_| No |_| Retired
N. Employer Name: ______________________________________________________________
O. Years Employed: ____________
P. Employer Address:
No. & Street: _______________________________________________________________
City: _____________________________ State: ______ Zip +4 Code: ____________
- --------------------------------------------------------------------------------
2. APPLICANT (If not Proposed Insured)
- --------------------------------------------------------------------------------
A. Name:
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
B. Relationship to Proposed Insured ____________________________________________
C. Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| D. Sex |_| M |_| F
E. Place of Birth: ____________________
F. Current Occupation(s): (1) Title ____________________________________________
(2) Duties: __________________________________________
If less than 1 year at current occupation, give previous in Special
Instructions.
G. Address: Same as-- |_| Question 1.k. Residence or |_| Question 1.p. Business
Other:
Residence: No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Apt/Suite/Bldg.: |_|_|_|_|_|
City: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_|
Business: No. & Street: ______________________________________________________
City: ____________________ State: ______ Zip +4 Code: ____________
- --------------------------------------------------------------------------------
3. POLICYOWNER
- --------------------------------------------------------------------------------
A. THE OWNER IS: (1) |_| Proposed Insured (2) |_| Applicant
(3) |_| OTHER: (A) |_| Individual (B) |_| Corporation (C) |_| Partnership
(D) |_| Trust Dated Mo. |_|_| Day |_|_| Yr. |_|_|_|_|
(E) |_| Qualified Plan
(F) Name of Person
First |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle |_|_|_|_|_|_|_|_|_|_|_|_|
Last |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of firm or plan |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
(G) If an individual, indicate: |_| Mr. |_| Mrs. |_| Miss
|_| Other Title |_|_|_|_| (H) Relationship to Insured __________________
B. Owner's Mailing Address: Same as-- |_| Current Residence (1.k.) or
|_| Applicant's Residence (2.g.)
Other:
Care of: |C|/|O|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Apt/Suite/Bldg.: |_|_|_|_|_|
City: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_|
C. Answer if Policyowner is not Proposed Insured:
(1) Soc. Sec. or Tax I.D. Number |_|_|_|_|_|_|_|_|_|
(2) DATE OF BIRTH: |_| Same as 2.c. or Mo. |_|_| Day |_|_| Yr. |_|_|_|_|
(3) TEL.: |_|_|_| |_|_|_| |_|_|_|_|
D. SUCCESSOR OWNER (if desired)
Give full name: _____________________________________________________________
and Relationship to Insured: ________________________________________________
If the Owner or Successor Owner is other than the Proposed Insured, and if all
persons so designated die before the Proposed Insured, the Owner will be the
estate of the last such person to die, except where the Proposed Insured is a
child. In cases where the Proposed Insured is a child and the Applicant is to be
the Owner or Successor Owner and the Applicant dies before the insured child,
the child will be the Owner unless otherwise designated. In such designation,
include Owner's full name and relationship to the child, and the Owner's social
security or tax number.
- --------------------------------------------------------------------------------
4. BENEFICIARY FOR INSURANCE ON PROPOSED INSURED.
Include Full Name and Relationship to Proposed Insured.
- --------------------------------------------------------------------------------
A. Primary Beneficiary(ies):
(1) Name(s):________________________________ Relationship: __________________
(2) Name(s):________________________________ Relationship: __________________
B. Contingent Beneficiary(ies):
(1) Name(s):________________________________ Relationship: __________________
(2) Name(s):________________________________ Relationship: __________________
NOTE: Unless otherwise requested, the contingent beneficiary will be the
surviving children of the Insured in equal shares. If none survive, payment will
be made to the Insured's estate. The Beneficiary(ies) under any Term Insurance
Rider on any Additional Insured or on a Child will be as stated in those riders,
unless otherwise designated in Special Instructions. In any such designation,
give full name and relationship of beneficiary(ies) to the Insured.
EV4-200Y CAT #125751 NO. A217511 1
<PAGE>
5. PLAN DESCRIPTION AND PREMIUM PAYMENT METHOD
- --------------------------------------------------------------------------------
A. Plan ________________________________________________________________________
B. Initial Face Amount $________________________________________________________
C. If Modified Premium VLI (Complete only if more than Scheduled Premium. If
Billed Premium specified is less than Scheduled Premium, we automatically
bill the Scheduled Premium.)
Billed Premium $_____________________________________________________________
D. If Flexible Premium VLI: (a.) Initial Premium Payment $______________________
(b.) Planned Periodic Payments $_____________________________________________
E. Death Benefit Option: |_| Option A
|_| Option B (B-Plus for Flex. Prem.-IL 2000)
F. Premium Mode: |_| Annual |_| Semi-Annual |_| Quarterly
|_| System-Matic (Complete S-M form)
G. |_| Salary Allotment (1) Unit Name _______________
(2) Register Date ___/___/___
(3) Unit/Sub Unit No. |_|_|_|_|_|_|_|_|_| (4) Payroll No. __________________
(5) Allotor's Name ______________________ (6) Allotor's No. ________________
(if other than Proposed Insured)
H. |_| Military Allotment: Branch __________________ Register Date: ___________
I. INITIAL ALLOCATIONS TO INVESTMENT OPTIONS*
<TABLE>
<CAPTION>
For Premiums For Deductions
(WHOLE PERCENTAGES ONLY)
<S> <C> <C>
(1) Guaranteed Interest (1)________% (1)________%
(2) Money Market (2)________% (2)________%
(3) Intermediate Gov't. Securities (3)________% (3)________%
(4) Short-Term World Income (4)________% (4)________%
(5) High Yield (5)________% (5)________%
(6) Balanced (6)________% (6)________%
(7) Common Stock (7)________% (7)________%
(8) Global (8)________% (8)________%
(9) Aggressive Stock (9)________% (9)________%
(10) Asset Allocation Series:
a. Conservative Investors (10a.)______% (10a.)______%
b. Growth Investors (10b.)______% (10b.)______%
(11) __________________________________ (11)________% (11)________%
(12) __________________________________ (12)________% (12)________%
100% 100%
<FN>
*Except for initial allocations to Guaranteed Interest, your Policy Account will
be allocated according to these percentages on the first business day 20 days
after the date of issue of your policy. Before that time, all Policy Account
allocations (except to Guaranteed Interest) will be to the Money Market
Division. Consult prospectus for investment option information.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
6. OPTIONAL BENEFITS
- --------------------------------------------------------------------------------
A. |_| Accidental Death Benefit* (specify amount) $_____________________________
B. |_| Disability Premium Waiver* (Modified Premium VLI only)
C. |_| Disability - Waiver Monthly Deductions* (Flex Prem-IL 2000 only)
*JUVENILE LIMITATIONS: If applied for, the Accidental Death Benefit is payable
only if the Child dies as a result of an accident after the Child's first
birthday; the Disability Waiver Benefits are effective only if the Child
becomes totally disabled on or after the Child's 5th birthday.
D. |_| Designated Insured Option (Flex Prem/IL 2000 only)**
E. Other _______________________________________________________________________
SURVIVORSHIP VLI RIDERS
F. |_| Option to Split Upon Divorce
G. |_| Estate Protector
TERM RIDERS
H. |_| Renewable Term:
(1) On Insured $____________ (2) On Add'l Insured** $____________ (Available
on Modified Premium VLI only)
I. |_| Children's Term** $____________ Units ____________
**If coverage is elected be sure to complete applicable parts of Question 8, and
answer Questions 10 through 16 with respect to the Additional, Designated
Insured(s) and/or Children for Term Insurance Rider.
- --------------------------------------------------------------------------------
7. COMPLETE FOR PROPOSED ADDITIONAL OR DESIGNATED INSURED(S), CHILDREN'S TERM
RIDER OR JUVENILE INSURANCE Also answer Questions 10 through 16 with respect to
Proposed Additional or Designated Insured(s) and/or Children under Children's
Term Rider
- --------------------------------------------------------------------------------
A. Title: |_| Mr. |_| Mrs. |_|Ms. |_| Miss |_| Other Title |_|_|_|_|
B. Proposed Add'l Insured:
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| Age Nearest Birthday |_|_|
Sex |_| M |_| F Place of Birth: _______________
Soc. Sec. No. |_|_|_|_|_|_|_|_|_|
Previous/Other Name (If Applicable) ____________________________________________
Relationship of Owner to Add'l Insured: ________________________________________
State of Residence: __________
Current Occupation(s): (1) Title: ______________________________________________
(2) Duties: ___________________________________________ (3) How Long? __________
If less than 1 year at current occupation, give previous in Special
Instructions.
C. Proposed Designated Insured (to add others, submit form 180-333D or
successor):
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| Age Nearest Birthday |_|_|
Sex |_| M |_| F Place of Birth: _______________
Soc. Sec. No. |_|_|_|_|_|_|_|_|_|
Previous/Other Name (If Applicable) ____________________________________________
Relationship of Owner to Add'l Insured: ________________________________________
State of Residence: __________
Current Occupation(s): (1) Title: ______________________________________________
(2) Duties: ___________________________________________ (3) How Long? __________
If less than 1 year at current occupation, give previous in Special
Instructions.
D. Children for Term Insurance Rider (Use Special Instructions if more space
is needed.)*
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F
Relationship to Owner: _________________________________________________________
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F
Relationship to Owner: _________________________________________________________
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F
Relationship to Owner: _________________________________________________________
*NOTE: To be eligible, children (including stepchildren and legally adopted
children) must not have reached their 18th birthday. Coverage does not begin
until a child is 15 days old.
E. For Juvenile Insurance (Ages 0-14): (1) Will there be more life insurance in
effect on this Child than on any other child in the family? |_| Yes |_| No
If "Yes", explain ___________________________________________________________
(2) Total Life Insurance in effect on Applicant: $ __________________________
- --------------------------------------------------------------------------------
8. OPAI. COMPLETE IF EXERCISING OPTION TO PURCHASE ADDITIONAL INSURANCE
- --------------------------------------------------------------------------------
A. (1) |_| Regular; (2) |_| Birth or Adoption; Child's Name __________________;
Date of Birth or Adoption ____/____/____; (3) |_| Alternate
B. Existing original policy no. ___________________
C. Option Date ____/____/____
D. Option Amount $_________________________________
E. If applying for Disability Premium Waiver, is Proposed Insured now totally
disabled as defined in the Disability Premium Waiver Provision of the
original policy indicated above in b.? |_| Yes |_| No
This application is made under a provision in the existing policy indicated in
8.b. above, permitting the purchase of additional individual life insurance (the
"Option Provision"). If this application is made within the time allowed and in
accordance with the other terms in the Option Provision, including timely
payment of the full first premium for the additional insurance, then the
additional insurance shall take effect upon the terms of the policy the Insurer
would issue. Otherwise, the additional insurance shall not take effect. (Answer
Questions 10 through 16 only if evidence of insurability is required in
connection with an optional benefit or any excess of the insurance amount
applied for over the insurance amount permitted by the Option Provision.)
EV4-200Y 2
<PAGE>
9. SUITABILITY (All VLI Plans)
- --------------------------------------------------------------------------------
A. Have you, the Proposed Insured or the Owner, if other than the Proposed
Insured, received:
(1) a prospectus for the policy(ies) applied for? |_| Yes |_| No
Date of prospectus ____/____/____.
Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____.
(2) a prospectus for the Hudson River Trust? |_| Yes |_| No
Date of prospectus ____/____/____.
Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____.
(3) a prospectus for the designated investment company(ies) ________________?
|_| Yes |_| No
Date of prospectus ____/____/____.
Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____.
B. Do you understand that (i) policy values reflect certain deductions and
charges and may increase or decrease depending on credited interest for
Guaranteed Interest Division and/or the investment experience of Separate
Account Divisions and (ii) the cash value may be subject to a surrender
charge, if any, upon policy surrender, lapse or face amount reduction?
|_| Yes |_| No
C. With this in mind, is (are) the policy(ies) in accord with your insurance and
long-term investment objectives and anticipated financial needs?
|_| Yes |_| No
- --------------------------------------------------------------------------------
OTHER INFORMATION For any "Yes" response, provide full details.
- --------------------------------------------------------------------------------
HAS ANY PERSON PROPOSED FOR INSURANCE:
10. A. Ever had a driver's license suspended or revoked, or within the last 3
years been convicted of 2 or more moving violations or driving under the
influence of alcohol or drugs? |_| Yes |_| No (If "Yes", include dates,
types of violation, and reason for suspension or revocation.)
B. Any plans to travel or reside outside the United States?
|_| Yes |_| No
C. Any other life insurance now in effect or application now pending?
|_| Yes |_| No
(Give companies and amounts and policy numbers if Equitable.)
D. Been disabled for 2 or more weeks within the last 2 years?
|_| Yes |_| No
11. A. In the last year flown other than as a passenger or plan to do so?
|_| Yes |_| No
If "Yes", enter total flying time at present _________ hours;
last 12 mos. _________ hours; next 12 mos. _________ est. hours.
(Complete Aviation Supplement for crop dusting; pilot instruction; or
commercial, competitive, helicopter, military, stunt or test flying.)
B. Engaged within the last year or any plan to engage in motor racing on
land or water, underwater diving, skydiving, ballooning, hang gliding,
parachuting or flying ultra-light aircraft? (If "Yes", complete
Avocation Supplement.) |_| Yes |_| No
C. Ever had an application for life or health insurance that was declined,
required an extra premium or other modification? |_| Yes |_| No
(If "Yes", state companies and provide full details.)
D. Replaced or changed any existing insurance or annuity (or any plan to do
so) assuming the insurance applied for will be issued? |_| Yes |_| No
(If "Yes", state companies, plans and amounts.)
- --------------------------------------------------------------------------------
ANSWER QUESTIONS 12-16 ONLY IF NON-MEDICAL
- --------------------------------------------------------------------------------
12. A. Proposed Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs.
B. Additional Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs.
C. Designated Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs.
HAS ANY PERSON PROPOSED FOR INSURANCE:
13. A. Ever had or been treated for heart trouble, stroke, high blood pressure,
chest pain, diabetes, tumor, cancer, respiratory or neurological
disorder? |_| Yes |_| No
B. In the last 5 years, consulted a physician, or been examined or treated
at a hospital or other medical facility? |_| Yes |_| No (Include medical
check-ups in the last 2 years. Do not include colds, minor injuries or
normal pregnancy.)
14. In the last 12 months: A. Smoked cigarettes? |_| Yes |_| No
B. Used any other form of tobacco? |_| Yes |_| No
15. In the last 10 years:
A. Used, except as legally prescribed by a physician, tranquilizers;
barbiturates or other sedatives; marijuana, cocaine, hallucinogens or
other mood-altering drugs; heroin, methadone or other narcotics;
amphetamines or other stimulants; or any other illegal or controlled
substances? |_| Yes |_| No
B. Received counseling or treatment regarding the use of alcohol or drugs
including attendance at meetings or membership in any self-help group or
program such as Alcoholics Anonymous or Narcotics Anonymous?
|_| Yes |_| No
16. In the last 10 years, been:
A. Diagnosed by a member of the medical profession as having Acquired Immune
Deficiency Syndrome (AIDS) or AIDS-Related Complex (ARC)?
|_| Yes |_| No
B. Treated by a member of the medical profession for AIDS or ARC?
|_| Yes |_| No
- --------------------------------------------------------------------------------
17. DETAILS/SPECIAL INSTRUCTIONS/ADDITIONAL INFORMATION For each "Yes" answer
give Question Number, name of person(s) affected, and full details. For 13-16
include conditions, dates, durations, treatment and results, and names and
addresses of physicians and medical facilities.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DETAILS
QUES. NO. NAME OF PERSON (Attach additional sheets if more space needed)
- --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
EV4-200Y 3
<PAGE>
- --------------------------------------------------------------------------------
18. COMPLETE IF MONEY IS PAID OR AN APPROVED PAYMENT AUTHORIZATION IS SIGNED
BEFORE THE POLICY IS DELIVERED: Have the undersigned read and do they agree to
the conditions of Equitable Variable's Temporary Insurance Agreement, including:
(i) the requirement that all of the conditions in that Agreement must be met
before any temporary insurance takes effect, and (ii) the $500,000 insurance
amount limitation? |_| Yes |_| No (If "No," or if any Person Proposed for
Insurance has been diagnosed or treated for Acquired Immune Deficiency Syndrome
(AIDS) or AIDS-Related Complex (ARC) by a member of the medical profession
within the last 10 years or had cancer, a stroke, or a heart attack within the
last year, a premium may not be paid nor an approved payment authorization
signed before the policy is delivered.)
|_| AMOUNT PAID: $_________. (Draw checks to the order of Equitable Variable.)
|_| APPROVED PAYMENT AUTHORIZATION SIGNED.
19. SOCIAL SECURITY OR TAX I.D. NUMBER CERTIFICATION. I, the proposed
policyowner, by my signature below, certify under penalties of perjury that (i)
the number shown in question 3.c.(1) or 1.g. of this form is my correct taxpayer
identification number, and (ii) I |_| am |_| am not subject to a backup
withholding order issued by the Internal Revenue Service. I understand that
failure to furnish the correct information may subject me to Federal backup
withholding.
- --------------------------------------------------------------------------------
AGREEMENT. Each signer of this application agrees that:
(1). The statements and answers in all parts of this application are true and
complete to the best of my (our) knowledge and belief. Equitable Variable
may rely on them in acting on this application.
(2). Equitable Variable's Temporary Insurance Agreement states the conditions
that must be met before any insurance takes effect if money is paid or an
approved payment authorization is signed, before the policy is delivered.
Temporary Insurance is not provided for a policy or benefit applied for
under the terms of a guaranteed insurability option or a conversion
privilege.
(3). Except as stated in the Temporary Insurance Agreement, no insurance shall
take effect on this application: (a) until a policy is delivered and the
full initial premium for it is paid, or an approved payment authorization
is signed, while the person(s) proposed for insurance is (are) living; (b)
before any Register Date specified in this application; and (c) unless to
the best of my (our) knowledge and belief the statements and answers in all
parts of this application continue to be true and complete, without
material change, as of the time such premium is paid or an approved payment
authorization is signed.
(4). No agent or medical examiner has authority to modify this Agreement or the
Temporary Insurance Agreement, nor to waive any of Equitable Variable's
rights or requirements. Equitable Variable shall not be bound by any
information unless it is stated in Application Part 1 or Part 2.
(5). POLICY VALUES INCREASE OR DECREASE DEPENDING ON CREDITED INTEREST FOR THE
GUARANTEED INTEREST DIVISION AND/OR INVESTMENT EXPERIENCE OF THE SEPARATE
ACCOUNT DIVISIONS AND REFLECT CERTAIN DEDUCTIONS AND CHARGES. THE DEATH
BENEFIT MAY BE FIXED OR VARIABLE UNDER SPECIFIED CONDITIONS, AS DESCRIBED
IN THE POLICY.
- --------------------------------------------------------------------------------
VLI Notice: Available on request are illustrations of benefits,
including death benefits, policy values and cash surrender values.
- --------------------------------------------------------------------------------
ACKNOWLEDGEMENT AND AUTHORIZATIONS
UNDERWRITING PRACTICES. I (We) have received a statement of the underwriting
practices of Equitable Variable which describes how and why Equitable Variable
obtains information on my insurability, to whom such information may be reported
and how I may obtain it. The statement also contains the notice required by the
Fair Credit Reporting Act.
AUTHORIZATIONS.
TO OBTAIN MEDICAL INFORMATION. I (we) authorize any physician, hospital, medical
practitioner or other facility, insurance company, and the Medical Information
Bureau to release to Equitable Variable and its legal representative any and all
information they may have about any diagnosis, treatment and prognosis regarding
my physical or mental condition.
TO OBTAIN NON-MEDICAL INFORMATION. I (we) authorize any employer, business
associate, government unit, financial institution, Consumer Reporting Agency,
and the Medical Information Bureau to release to Equitable Variable and its
legal representative any information they may have about my occupation,
avocations, finances, driving record, character and general reputation. I (we)
authorize Equitable Variable to obtain investigative consumer reports, as
appropriate.
TO USE AND DISCLOSE INFORMATION. I (we) understand that the information that I
(we) authorize Equitable Variable to obtain will be used by Equitable Variable
to help determine my insurability or my eligibility for benefits under an
existing policy. I (we) authorize Equitable Variable to release information
about my insurability to its reinsurers, contractors and affiliates, my (our)
Equitable Variable Agent, and to the Medical Information Bureau, all as
described in the statement of Equitable Variable's underwriting practices or to
other persons or businesses performing business or legal services in connection
with my application or claim of eligibility for benefits, or as may be otherwise
lawfully required, or as I (we) may further authorize. I (we) understand that I
(we) have the right to learn the contents of any report of information
(generally, through my physician, in the case of medical information).
COPY OF AUTHORIZATIONS. I (we) have a right to ask for and receive a true copy
of this Acknowledgement and Authorizations signed by me (us). I (we) agree that
a reproduced copy will be as valid as the original.
DURATION. I (we) agree that these authorizations will be valid for 12 months
from the date shown below.
- --------------------------------------------------------------------------------
Laws in your state may make it a crime to fill out an insurance
or annuity application with information you know is false
or to leave out material facts.
- --------------------------------------------------------------------------------
Dated at City __________________________________________________________________
State __________________________________________________________________________
on _____________________________________________________________________ 19 ____
X_______________________________________________________________________________
Signature of Proposed Insured or Applicant if Proposed Insured is a Child, Issue
Age 0-14.
X_______________________________________________________________________________
Signature of Proposed Additional Insured, if any.
X_______________________________________________________________________________
Signature of Applicant if not Proposed Insured or Owner.
X_______________________________________________________________________________
Signature of Owner if not Proposed Insured or Applicant. (If a corporation,
show firm's name and signature of authorized officer.)
________________________________________________________________________________
Signature of Agent (Registered Representative)
EV4-200Y 4
PART 1: APPLICATION FOR LIFE INSURANCE TO:
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (EQUITABLE)
Home Office: 787 Seventh Avenue, New York, NY 10019
- --------------------------------------------------------------------------------
1. PROPOSED INSURED (Print Name as it is to appear on the policy)
Please print in ink.
- --------------------------------------------------------------------------------
A. Title: |_| Mr. |_| Mrs. |_| Ms. |_| Miss |_| Other Title|_|_|_|_|
B. Name:
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
C. Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_|
D. Age Nearest Birthday |_|_|
E. Sex |_| M |_| F F. Place of Birth: ______________________________________
G. Soc. Sec. No. |_|_|_|_|_|_|_|_|_|
H. Previous/Other Name(If Applicable) __________________________________________
I. U.S. Citizen? |_| Yes |_| No If No, Country ______________________________
J. Current Occupation(s): (1) Title: ___________________________________________
(2) Duties: __________________________________________
(3) How Long? ____________
If less than 1 year at current occupation, give previous in Special
Instructions.
K. Residence/Care of: |C|/|O|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Years there? |_|_|
Current No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Apt/Suite/Bldg. #: |_|_|_|_|_|
City / Municipality: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
County / Parish: |_|_|_|_|_|_|_|_|_|_|_|_|
State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_|
Previous No. & Street: _____________________________________________________
City: ___________________ State: ______ Zip +4 Code: ____________
(If less than 2 years at current)
L. Tel.: (1) Home |_|_|_| |_|_|_| |_|_|_|_|
(2) Business |_|_|_| |_|_|_| |_|_|_|_|
M. Currently employed? |_| Yes |_| No |_| Retired
N. Employer Name: ______________________________________________________________
O. Years Employed: ____________
P. Employer Address:
No. & Street: _______________________________________________________________
City: _____________________________ State: ______ Zip +4 Code: ____________
- --------------------------------------------------------------------------------
2. APPLICANT (If not Proposed Insured)
- --------------------------------------------------------------------------------
A. Name:
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
B. Relationship to Proposed Insured ____________________________________________
C. Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| D. Sex |_| M |_| F
E. Place of Birth: ____________________
F. Current Occupation(s): (1) Title ____________________________________________
(2) Duties: __________________________________________
If less than 1 year at current occupation, give previous in Special
Instructions.
G. Address: Same as-- |_| Question 1.k.Residence or |_| Question 1.p. Business
Other:
Residence: No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Apt/Suite/Bldg.: |_|_|_|_|_|
City: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_|
Business: No. & Street: ______________________________________________________
City: ____________________ State: ______ Zip +4 Code: ____________
- --------------------------------------------------------------------------------
3. POLICYOWNER
- --------------------------------------------------------------------------------
A. THE OWNER IS: (1) |_| Proposed Insured (2) |_| Applicant
(3) |_| OTHER: (A) |_| Individual (B) |_| Corporation (C) |_| Partnership
(D) |_| Trust Dated Mo. |_|_| Day |_|_| Yr. |_|_|_|_|
(E) |_| Qualified Plan
(F) Name of Person
First |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle |_|_|_|_|_|_|_|_|_|_|_|_|
Last |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of firm or plan |_|_|_|_|_|_|_|_|_|_|_|_||_|_|_|_|_|_|_|_|_|_|_|_|
(G) If an individual, indicate: |_| Mr. |_| Mrs. |_| Miss
|_| Other Title |_|_|_|_| (H) Relationship to Insured __________________
B. Owner's Mailing Address: Same as-- |_| Current Residence (1.k.) or
|_| Applicant's Residence (2.g.)
Other:
Care of: |C|/|O|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
No. & Street: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Apt/Suite/Bldg.: |_|_|_|_|_|
City: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
State: |_|_| Zip +4 Code: |_|_|_|_|_|-|_|_|_|_|
C. Answer if Policyowner is not Proposed Insured:
(1) Soc. Sec. or Tax I.D. Number |_|_|_|_|_|_|_|_|_|
(2) DATE OF BIRTH: |_| Same as 2.c. or Mo. |_|_| Day |_|_| Yr. |_|_|_|_|
(3) TEL.: |_|_|_| |_|_|_| |_|_|_|_|
D. SUCCESSOR OWNER (if desired)
Give full name: _____________________________________________________________
and Relationship to Insured: ________________________________________________
If the Owner or Successor Owner is other than the Proposed Insured, and if all
persons so designated die before the Proposed Insured, the Owner will be the
estate of the last such person to die, except where the Proposed Insured is a
child. In cases where the Proposed Insured is a child and the Applicant is to be
the Owner or Successor Owner and the Applicant dies before the insured child,
the child will be the Owner unless otherwise designated. In such designation,
include Owner's full name and relationship to the child, and the Owner's social
security or tax number.
- --------------------------------------------------------------------------------
4. BENEFICIARY FOR INSURANCE ON PROPOSED INSURED.
Include Full Name and Relationship to Proposed Insured.
- --------------------------------------------------------------------------------
A. Primary Beneficiary(ies):
(1) Name(s):________________________________ Relationship: __________________
(2) Name(s):________________________________ Relationship: __________________
B. Contingent Beneficiary(ies):
(1) Name(s):________________________________ Relationship: __________________
(2) Name(s):________________________________ Relationship: __________________
NOTE: Unless otherwise requested, the contingent beneficiary will be the
surviving children of the Insured in equal shares. If none survive, payment will
be made to the Insured's estate. The Beneficiary(ies) under any Term Insurance
Rider on any Additional Insured or on a Child will be as stated in those riders,
unless otherwise designated in Special Instructions. In any such designation,
give full name and relationship of beneficiary(ies) to the Insured.
EV4-200Y ELAS CAT. #127055 NO. A021888 1
<PAGE>
5. PLAN DESCRIPTION AND PREMIUM PAYMENT METHOD
- --------------------------------------------------------------------------------
A. Plan ________________________________________________________________________
B. Initial Face Amount $________________________________________________________
C. If Modified Premium VLI (Complete only if more than Scheduled Premium. If
Billed Premium specified is less than Scheduled Premium, we automatically
bill the Scheduled Premium.)
Billed Premium $_____________________________________________________________
D. If Flexible Premium VLI: (a.) Initial Premium Payment $______________________
(b.) Planned Periodic Payments $_____________________________________________
E. Death Benefit Option: |_| Option A
|_| Option B (B-Plus for Flex. Prem.-IL 2000)
F. Premium Mode: |_| Annual |_| Semi-Annual |_| Quarterly
|_| System-Matic (Complete S-M form)
G. |_| Salary Allotment (1) Unit Name _______________
(2) Register Date ___/___/___
(3) Unit/Sub Unit No. |_|_|_|_|_|_|_|_|_| (4) Payroll No. __________________
(5) Allotor's Name ______________________ (6) Allotor's No. ________________
(if other than Proposed Insured)
H. |_| Military Allotment: Branch __________________ Register Date: ___________
I. INITIAL ALLOCATIONS TO INVESTMENT OPTIONS*
<TABLE>
<CAPTION>
For Premiums For Deductions
(WHOLE PERCENTAGES ONLY)
<S> <C> <C>
(1) Guaranteed Interest (1)________% (1)________%
(2) Money Market (2)________% (2)________%
(3) Intermediate Gov't. Securities (3)________% (3)________%
(4) Short-Term World Income (4)________% (4)________%
(5) High Yield (5)________% (5)________%
(6) Balanced (6)________% (6)________%
(7) Common Stock (7)________% (7)________%
(8) Global (8)________% (8)________%
(9) Aggressive Stock (9)________% (9)________%
(10) Asset Allocation Series:
a. Conservative Investors (10a.)______% (10a.)______%
b. Growth Investors (10b.)______% (10b.)______%
(11) __________________________________ (11)________% (11)________%
(12) __________________________________ (12)________% (12)________%
100% 100%
<FN>
*Except for initial allocations to Guaranteed Interest, your Policy Account will
be allocated according to these percentages on the first business day 20 days
after the date of issue of your policy. Before that time, all Policy Account
allocations (except to Guaranteed Interest) will be to the Money Market
Division. Consult prospectus for investment option information.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
6. OPTIONAL BENEFITS
- --------------------------------------------------------------------------------
A. |_| Accidental Death Benefit* (specify amount) $_____________________________
B. |_| Disability Premium Waiver* (Modified Premium VLI only)
C. |_| Disability - Waiver Monthly Deductions* (Flex Prem-IL 2000 only)
*JUVENILE LIMITATIONS: If applied for, the Accidental Death Benefit is payable
only if the Child dies as a result of an accident after the Child's first
birthday; the Disability Waiver Benefits are effective only if the Child
becomes totally disabled on or after the Child's 5th birthday.
D. |_| Designated Insured Option (Flex Prem/IL 2000 only)**
E. Other _______________________________________________________________________
SURVIVORSHIP VLI RIDERS
F. |_| Option to Split Upon Divorce
G. |_| Estate Protector
TERM RIDERS
H. |_| Renewable Term:
(1) On Insured $____________ (2) On Add'l Insured** $____________ (Available
on Modified Premium VLI only)
I. |_| Children's Term** $____________ Units ____________
**If coverage is elected be sure to complete applicable parts of Question 8, and
answer Questions 10 through 16 with respect to the Additional, Designated
Insured(s) and/or Children for Term Insurance Rider.
- --------------------------------------------------------------------------------
7. COMPLETE FOR PROPOSED ADDITIONAL OR DESIGNATED INSURED(S), CHILDREN'S TERM
RIDER OR JUVENILE INSURANCE Also answer Questions 10 through 16 with respect to
Proposed Additional or Designated Insured(s) and/or Children under Children's
Term Rider
- --------------------------------------------------------------------------------
A. Title: |_| Mr. |_| Mrs. |_|Ms. |_| Miss |_| Other Title |_|_|_|_|
B. Proposed Add'l Insured:
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| Age Nearest Birthday |_|_|
Sex |_| M |_| F Place of Birth: _______________
Soc. Sec. No. |_|_|_|_|_|_|_|_|_|
Previous/Other Name (If Applicable) ____________________________________________
Relationship of Owner to Add'l Insured: ________________________________________
State of Residence: __________
Current Occupation(s): (1) Title: ______________________________________________
(2) Duties: ___________________________________________ (3) How Long? __________
If less than 1 year at current occupation, give previous in Special
Instructions.
C. Proposed Designated Insured (to add others, submit form 180-333D or
successor):
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Date of Birth Mo. |_|_| Day |_|_| Yr. |_|_|_|_| Age Nearest Birthday |_|_|
Sex |_| M |_| F Place of Birth: _______________
Soc. Sec. No. |_|_|_|_|_|_|_|_|_|
Previous/Other Name (If Applicable) ____________________________________________
Relationship of Owner to Designated Insured: ___________________________________
State of Residence: __________
Current Occupation(s): (1) Title: ______________________________________________
(2) Duties: ___________________________________________ (3) How Long? __________
If less than 1 year at current occupation, give previous in Special
Instructions.
D. Children for Term Insurance Rider (Use Special Instructions if more space
is needed.)*
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F
Relationship to Owner: _________________________________________________________
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F
Relationship to Owner: _________________________________________________________
First: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| Middle: |_|_|_|_|_|_|_|_|_|_|_|_|_|
Last: |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Date of Birth Mo. |_|_| Day |_|_| Yr. Sex |_| M |_| F
Relationship to Owner: _________________________________________________________
*NOTE: To be eligible, children (including stepchildren and legally adopted
children) must not have reached their 18th birthday. Coverage does not begin
until a child is 15 days old.
E. For Juvenile Insurance (Ages 0-14): (1) Will there be more life insurance in
effect on this Child than on any other child in the family? |_| Yes |_| No
If "Yes", explain ___________________________________________________________
(2) Total Life Insurance in effect on Applicant: $ __________________________
- --------------------------------------------------------------------------------
8. OPAI. COMPLETE IF EXERCISING OPTION TO PURCHASE ADDITIONAL INSURANCE
- --------------------------------------------------------------------------------
A. (1) |_| Regular; (2) |_| Birth or Adoption; Child's Name __________________;
Date of Birth or Adoption ____/____/____; (3) |_| Alternate
B. Existing original policy no. ___________________
C. Option Date ____/____/____
D. Option Amount $_________________________________
E. If applying for Disability Premium Waiver, is Proposed Insured now totally
disabled as defined in the Disability Premium Waiver Provision of the
original policy indicated above in b.? |_| Yes |_| No
This application is made under a provision in the existing policy indicated in
8.b. above, permitting the purchase of additional individual life insurance (the
"Option Provision"). If this application is made within the time allowed and in
accordance with the other terms in the Option Provision, including timely
payment of the full first premium for the additional insurance, then the
additional insurance shall take effect upon the terms of the policy the Insurer
would issue. Otherwise, the additional insurance shall not take effect. (Answer
Questions 10 through 16 only if evidence of insurability is required in
connection with an optional benefit or any excess of the insurance amount
applied for over the insurance amount permitted by the Option Provision.)
EV4-200Y ELAS 2
<PAGE>
9. SUITABILITY (All VLI Plans)
- --------------------------------------------------------------------------------
A. Have you, the Proposed Insured or the Owner, if other than the Proposed
Insured, received:
(1) a prospectus for the policy(ies) applied for? |_| Yes |_| No
Date of prospectus ____/____/____.
Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____.
(2) a prospectus for the Hudson River Trust? |_| Yes |_| No
Date of prospectus ____/____/____.
Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____.
(3) a prospectus for the designated investment company(ies) ________________?
|_| Yes |_| No
Date of prospectus ____/____/____.
Date of any supplement(s) ____/____/____; ____/____/____; ____/____/____.
B. Do you understand that (i) policy values reflect certain deductions and
charges and may increase or decrease depending on credited interest for
Guaranteed Interest Division and/or the investment experience of Separate
Account Divisions and (ii) the cash value may be subject to a surrender
charge, if any, upon policy surrender, lapse or face amount reduction?
|_| Yes |_| No
C. With this in mind, is (are) the policy(ies) in accord with your insurance and
long-term investment objectives and anticipated financial needs?
|_| Yes |_| No
- --------------------------------------------------------------------------------
OTHER INFORMATION For any "Yes" response, provide full details.
- --------------------------------------------------------------------------------
HAS ANY PERSON PROPOSED FOR INSURANCE:
10. A. Ever had a driver's license suspended or revoked, or within the last 3
years been convicted of 2 or more moving violations or driving under the
influence of alcohol or drugs? |_| Yes |_| No (If "Yes", include dates,
types of violation, and reason for suspension or revocation.)
B. Any plans to travel or reside outside the United States?
|_| Yes |_| No
C. Any other life insurance now in effect or application now pending?
|_| Yes |_| No
(Give companies and amounts and policy numbers if Equitable.)
D. Been disabled for 2 or more weeks within the last 2 years?
|_| Yes |_| No
11. A. In the last year flown other than as a passenger or plan to do so?
|_| Yes |_| No
If "Yes", enter total flying time at present _________ hours;
last 12 mos. _________ hours; next 12 mos. _________ est. hours.
(Complete Aviation Supplement for crop dusting; pilot instruction; or
commercial, competitive, helicopter, military, stunt or test flying.)
B. Engaged within the last year or any plan to engage in motor racing on
land or water, underwater diving, skydiving, ballooning, hang gliding,
parachuting or flying ultra-light aircraft? (If "Yes", complete
Avocation Supplement.) |_| Yes |_| No
C. Ever had an application for life or health insurance that was declined,
required an extra premium or other modification? |_| Yes |_| No
(If "Yes", state companies and provide full details.)
D. Replaced or changed any existing insurance or annuity (or any plan to do
so) assuming the insurance applied for will be issued? |_| Yes |_| No
(If "Yes", state companies, plans and amounts.)
- --------------------------------------------------------------------------------
ANSWER QUESTIONS 12-16 ONLY IF NON-MEDICAL
- --------------------------------------------------------------------------------
12. A. Proposed Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs.
B. Additional Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs.
C. Designated Insured: Hgt. ____Ft. ____In.; Wgt. ____lbs.
HAS ANY PERSON PROPOSED FOR INSURANCE:
13. A. Ever had or been treated for heart trouble, stroke, high blood pressure,
chest pain, diabetes, tumor, cancer, respiratory or neurological
disorder? |_| Yes |_| No
B. In the last 5 years, consulted a physician, or been examined or treated
at a hospital or other medical facility? |_| Yes |_| No (Include medical
check-ups in the last 2 years. Do not include colds, minor injuries or
normal pregnancy.)
14. In the last 12 months: A. Smoked cigarettes? |_| Yes |_| No
B. Used any other form of tobacco? |_| Yes |_| No
15. In the last 10 years:
A. Used, except as legally prescribed by a physician, tranquilizers;
barbiturates or other sedatives; marijuana, cocaine, hallucinogens or
other mood-altering drugs; heroin, methadone or other narcotics;
amphetamines or other stimulants; or any other illegal or controlled
substances? |_| Yes |_| No
B. Received counseling or treatment regarding the use of alcohol or drugs
including attendance at meetings or membership in any self-help group or
program such as Alcoholics Anonymous or Narcotics Anonymous?
|_| Yes |_| No
16. In the last 10 years, been:
A. Diagnosed by a member of the medical profession as having Acquired Immune
Deficiency Syndrome (AIDS) or AIDS-Related Complex (ARC)?
|_| Yes |_| No
B. Treated by a member of the medical profession for AIDS or ARC?
|_| Yes |_| No
- --------------------------------------------------------------------------------
17. DETAILS/SPECIAL INSTRUCTIONS/ADDITIONAL INFORMATION For each "Yes" answer
give Question Number, name of person(s) affected, and full details. For 13-16
include conditions, dates, durations, treatment and results, and names and
addresses of physicians and medical facilities.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DETAILS
QUES. NO. NAME OF PERSON (Attach additional sheets if more space needed)
- --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
EV4-200Y ELAS 3
<PAGE>
- --------------------------------------------------------------------------------
18. COMPLETE IF MONEY IS PAID OR AN APPROVED PAYMENT AUTHORIZATION IS SIGNED
BEFORE THE POLICY IS DELIVERED: Have the undersigned read and do they agree to
the conditions of Equitable's Temporary Insurance Agreement, including:
(i) the requirement that all of the conditions in that Agreement must be met
before any temporary insurance takes effect, and (ii) the $500,000 insurance
amount limitation? |_| Yes |_| No (If "No," or if any Person Proposed for
Insurance has been diagnosed or treated for Acquired Immune Deficiency Syndrome
(AIDS) or AIDS-Related Complex (ARC) by a member of the medical profession
within the last 10 years or had cancer, a stroke, or a heart attack within the
last year, a premium may not be paid nor an approved payment authorization
signed before the policy is delivered.)
|_| AMOUNT PAID: $_________. (Draw checks to the order of Equitable.)
|_| APPROVED PAYMENT AUTHORIZATION SIGNED.
19. SOCIAL SECURITY OR TAX I.D. NUMBER CERTIFICATION. I, the proposed
policyowner, by my signature below, certify under penalties of perjury that (i)
the number shown in question 3.c.(1) or 1.g. of this form is my correct taxpayer
identification number, and (ii) I |_| am |_| am not subject to a backup
withholding order issued by the Internal Revenue Service. I understand that
failure to furnish the correct information may subject me to Federal backup
withholding.
- --------------------------------------------------------------------------------
AGREEMENT. Each signer of this application agrees that:
(1). The statements and answers in all parts of this application are true and
complete to the best of my (our) knowledge and belief. Equitable may rely
on them in acting on this application.
(2). Equitable's Temporary Insurance Agreement states the conditions that must
be met before any insurance takes effect if money is paid or an approved
payment authorization is signed, before the policy is delivered. Temporary
Insurance is not provided for a policy or benefit applied for under the
terms of a guaranteed insurability option or a conversion privilege.
(3). Except as stated in the Temporary Insurance Agreement, no insurance shall
take effect on this application: (a) until a policy is delivered and the
full initial premium for it is paid, or an approved payment authorization
is signed, while the person(s) proposed for insurance is (are) living; (b)
before any Register Date specified in this application; and (c) unless to
the best of my (our) knowledge and belief the statements and answers in all
parts of this application continue to be true and complete, without
material change, as of the time such premium is paid or an approved payment
authorization is signed.
(4). No agent or medical examiner has authority to modify this Agreement or the
Temporary Insurance Agreement, nor to waive any of Equitable's rights or
requirements. Equitable shall not be bound by any information unless it is
stated in Application Part 1 or Part 2.
(5). POLICY VALUES INCREASE OR DECREASE DEPENDING ON CREDITED INTEREST FOR THE
GUARANTEED INTEREST DIVISION AND/OR INVESTMENT EXPERIENCE OF THE SEPARATE
ACCOUNT DIVISIONS AND REFLECT CERTAIN DEDUCTIONS AND CHARGES. THE DEATH
BENEFIT MAY BE FIXED OR VARIABLE UNDER SPECIFIED CONDITIONS, AS DESCRIBED
IN THE POLICY.
- --------------------------------------------------------------------------------
VLI Notice: Available on request are illustrations of benefits,
including death benefits, policy values and cash surrender values.
- --------------------------------------------------------------------------------
ACKNOWLEDGEMENT AND AUTHORIZATIONS
UNDERWRITING PRACTICES. I (we) have received a statement of the underwriting
practices of Equitable which describes how and why Equitable obtains information
on my insurability, to whom such information may be reported and how I may
obtain it. The statement also contains the notice required by the Fair Credit
Reporting Act.
AUTHORIZATIONS.
TO OBTAIN MEDICAL INFORMATION. I (we) authorize any physician, hospital, medical
practitioner or other facility, insurance company, and the Medical Information
Bureau to release to Equitable and its legal representative any and all
information they may have about any diagnosis, treatment and prognosis regarding
my physical or mental condition.
TO OBTAIN NON-MEDICAL INFORMATION. I (we) authorize any employer, business
associate, government unit, financial institution, Consumer Reporting Agency,
and the Medical Information Bureau to release to Equitable and its legal
representative any information they may have about my occupation, avocations,
finances, driving record, character and general reputation. I (we) authorize
Equitable to obtain investigative consumer reports, as appropriate.
TO USE AND DISCLOSE INFORMATION. I (we) understand that the information that I
(we) authorize Equitable to obtain will be used by Equitable to help determine
my insurability or my eligibility for benefits under an existing policy. I (we)
authorize Equitable to release information about my insurability to its
reinsurers, contractors and affiliates, my (our) Equitable Agent, and to the
Medical Information Bureau, all as described in the statement of Equitable's
underwriting practices or to other persons or businesses performing business or
legal services in connection with my application or claim of eligibility for
benefits, or as may be otherwise lawfully required, or as I (we) may further
authorize. I (we) understand that I (we) have the right to learn the contents of
any report of information (generally, through my physician, in the case of
medical information).
COPY OF AUTHORIZATIONS. I (we) have a right to ask for and receive a true copy
of this Acknowledgement and Authorizations signed by me (us). I (we) agree that
a reproduced copy will be as valid as the original.
DURATION. I (we) agree that these authorizations will be valid for 12 months
from the date shown below.
- --------------------------------------------------------------------------------
Laws in your state may make it a crime to fill out an insurance
or annuity application with information you know is false
or to leave out material facts.
- --------------------------------------------------------------------------------
Dated at City __________________________________________________________________
State __________________________________________________________________________
on _____________________________________________________________________ 19 ____
X_______________________________________________________________________________
Signature of Proposed Insured or Applicant if Proposed Insured is a Child, Issue
Age 0-14.
X_______________________________________________________________________________
Signature of Proposed Additional Insured, if any.
X_______________________________________________________________________________
Signature of Applicant if not Proposed Insured or Owner.
X_______________________________________________________________________________
Signature of Owner if not Proposed Insured or Applicant. (If a corporation,
show firm's name and signature of authorized officer.)
________________________________________________________________________________
Signature of Agent (Registered Representative)
EV4-200Y ELAS 4
MARY P. BREEN
Vice President and
Associate General Counsel
(212) 554-3841
Fax: (212) 554-1266
December 9, 1996
The Equitable Life Assurance Society of the United States
787 Seventh Avenue
New York, NY 10019
Dear Sirs:
This opinion is furnished in connection with the filing of a Registration
Statement on Form S-6 ("Registration Statement") of Separate Account FP
("Separate Account FP") of The Equitable Life Assurance Society of the United
States ("Equitable"). The Registration Statement covers an indefinite number of
units of interest in Separate Account FP ("Units") funding IL COLI II (policy
form No. 96-300), individual flexible premium variable life insurance policies
("Policies"). Policies issued prior to January 1, 1997 were issued by Equitable
Variable Life Insurance Company, a wholly-owned subsidiary of Equitable, which
is expected to be merged with and into Equitable on January 1, 1997. Upon
consummation of the merger, Policies issued prior thereto will become
obligations of Equitable and Policies issued thereafter will be issued by
Equitable. This opinion assumes consummation of the merger and compliance with
regulatory requirements relating thereto. Net premiums received under the
Policies are allocated by Equitable to Separate Account FP to the extent
directed by owners of the Policies. Net premiums under other Equitable variable
life insurance policies will also be allocated to Separate Account FP.
The Policies are designed to provide life insurance protection and are to
be offered in the manner described in the Prospectus and the prospectus
supplement included in the Registration Statement. The Policies will be sold
only in jurisdictions authorizing such sales.
I have examined all such corporate records of Equitable and such other
documents and laws as I consider appropriate as a basis for the opinion
hereinafter expressed. On the basis of such examination, it is my opinion that:
1. Equitable is a corporation duly organized and validly existing under
the laws of the State of New York.
<PAGE>
2. Separate Account FP has been duly established by Equitable pursuant
to the laws of the State of New York, under which income, gains and losses,
whether or not realized, from assets allocated to Separate Account FP, are to
be, in accordance with the Policies, credited to or charged against Separate
Account FP without regard to other income, gains or losses of Equitable.
3. Assets allocated to Separate Account FP will be owned by Equitable;
Equitable will not be a trustee with respect thereto. The Policies provide that
the portion of the assets of Separate Account FP equal to the reserves and other
Policy liabilities with respect to Separate Account FP will not be chargeable
with liabilities arising out of any other business Equitable may conduct.
Equitable reserves the right to transfer assets of Separate Account FP in excess
of such reserves and other Policy liabilities to the general account of
Equitable.
4. Upon consummation of the merger, or upon issuance and sale of
Policies thereafter, as described above, the Policies (including any Units duly
credited thereunder) will be duly authorized and will constitute validly issued
and binding obligations of Equitable in accordance with their terms.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Mary P. Breen
-----------------
Mary P. Breen
45206-1
-2-
[Flexible Premium]
July 17, 1996
Equitable Variable Life Insurance Company
787 Seventh Avenue
New York, New York 10019
This opinion is furnished in connection with the Registration Statement on
Form S-6, File No. 333-00275 ("Registration Statement") of Separate Account FP
("Separate Account FP") of Equitable Variable Life Insurance Company ("Equitable
Variable") covering an indefinite number of units of interest in Separate
Account FP under IL COLI II(TM) (policy form no. 96-300), flexible premium
variable life insurance policies ("Policies"). Net premiums received under the
Policies may be allocated to Separate Account FP as described in the Prospectus
included in the Registration Statement.
I participated in the preparation of the Policies and I am familiar with
their provisions. I am also familiar with the description contained in the
prospectus. In my opinion:
1. The Illustrations of Cash Surrender Values Based on Historical
Investment Results in the Summary to the Prospectus and the
Illustrations of Policy Benefits in Part 4 of the Prospectus
(the "Illustrations") are consistent with the provisions of
the Policies. The assumptions upon which these Illustrations
are based, including the current cost of insurance and expense
charges, are stated in the Prospectus and are reasonable. The
Policies have not been designed so as to make the relationship
between premiums and benefits, as shown in the Illustrations,
appear disproportionately more favorable to prospective
purchasers of Policies for non-tobacco user preferred risk
males age 40 than to prospective purchasers of Policies for
males at other ages or in other underwriting classes or for
females. The particular Illustrations shown were not selected
for the purpose of making the relationship appear more
favorable.
<PAGE>
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to my name under the heading
"Accounting and Actuarial Experts" in the Prospectus.
Very truly yours,
/s/ Barbara Fraser
---------------
Barbara Fraser,
F.S.A., M.A.A.A.
Vice President
The Equitable Life Assurance
Society of the United States
34902-1
December 9, 1996
The Equitable Life Assurance Society of the United States
1290 Avenue of the Americas
New York, New York 10104
This consent is furnished in connection with the filing of the
Registration Statement on Form S-6 ("Registration Statement") of Separate
Account FP ("Separate Account FP") of The Equitable Life Assurance Society of
the United States ("Equitable") covering an indefinite number of units of
interest in Separate Account FP to be issued in connection with IL COLI II
(policy form no. 96-300), flexible premium variable life insurance policies
("Policies") which were originally offered and issued by Equitable Variable Life
Insurance Company ("Equitable Variable") pursuant to a prospectus dated July 24,
1996. Equitable Variable is to be merged into Equitable on January 1, 1997 and
on such date, Equitable will assume Equitable Variable's obligations under the
Policies and will continue to collect premiums thereunder.
I hereby consent to the filing of my opinion dated July 17, 1996 (the
"Opinion") (originally filed as an exhibit to Pre-Effective Amendment No. 1 to
Equitable Variable's Registration Statement on Form S-6, File No. 333-00275) as
an exhibit to Equitable's Registration Statement and to the reference to my name
under the heading "Accounting and Actuarial Experts" in the Prospectus. The
references to the "Prospectus" in the Opinion and in this consent are to the
prospectus dated July 24, 1996 filed in Equitable's Registration Statement, and
the Opinion speaks as of its date.
Very truly yours,
/s/ Barbara Fraser
-------------------------
Barbara Fraser,
F.S.A., M.A.A.A.
Vice President
The Equitable Life Assurance
Society of the United States
44941
December 9, 1996
The Equitable Life Assurance Society of the United States
1290 Avenue of the Americas
New York, New York 10104
This opinion is furnished in connection with the Registration Statement on
Form S-6 ("Registration Statement") of Separate Account FP ("Separate Account
FP") of The Equitable Life Assurance Society of the United States ("Equitable")
covering an indefinite number of units of interest in Separate Account FP under
IL COLI II (policy form no. 96-300), flexible premium variable life insurance
policies ("Policies"). Net premiums received under the Policies may be allocated
to Separate Account FP as described in the Prospectus included in the
Registration Statement.
I participated in the preparation of the Policies and I am familiar with
their provisions. I am also familiar with the description contained in the
prospectus. In my opinion:
1. The Illustrations of Cash Surrender Values Based on Historical
Investment Results in the Summary to the Prospectus and the
Illustrations of Policy Benefits in Part 4 of the Prospectus (the
"Illustrations") are consistent with the provisions of the Policies.
The assumptions upon which these Illustrations are based, including
the current cost of insurance and expense charges, are stated in the
Prospectus and are reasonable. The Policies have not been designed
so as to make the relationship between premiums and benefits, as
shown in the Illustrations, appear disproportionately more favorable
to prospective purchasers of Policies for non-tobacco user preferred
risk males age 40 than to prospective purchasers of Policies for
males at other ages or in other underwriting classes or for females.
The particular Illustrations shown were not selected for the purpose
of making the relationship appear more favorable.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to my name under the heading
"Accounting and Actuarial Experts" in the Prospectus.
Very truly yours,
/s/ Barbara Fraser
-------------------------
Barbara Fraser,
F.S.A., M.A.A.A.
Vice President
The Equitable Life Assurance
Society of the United States
45193
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Registration Statement on Form S-6 (the
"Registration Statement") of our report dated February 7, 1996, relating to the
consolidated financial statements of The Equitable Life Assurance Society of the
United States, and our report dated February 7, 1996, except as to Note 8 which
is as of September 19, 1996, relating to the financial statements of Equitable
Variable Life Insurance Company Separate Account FP and to the incorporation by
reference of our reports into each Prospectus and Prospectus Supplement which
constitute part of this Registration Statement. We also consent to the
references to us under the heading "Accounting and Actuarial Experts" in each
Prospectus and to the references to us under the heading "Financial Statements"
in each Prospectus Supplement.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
New York, New York
December 9, 1996
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ Claude Bebear
-----------------
1
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ James M. Benson
-------------------
2
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 30th day of September, 1996
/s/ Christopher J. Brockson
---------------------------
3
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 30th day of September, 1996
/s/ Francoise Colloc'h
----------------------
4
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 20th day of September, 1996
/s/ Henri de Castries
---------------------
5
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ Joseph L. Dionne
--------------------
6
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ William T. Esrey
--------------------
7
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ Jean-Rene Fourou
--------------------
8
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ Norman C. Francis
---------------------
9
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ Donald J. Greene
--------------------
10
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 18th day of September, 1996
/s/ John T. Hartley
-------------------
11
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 13th day of September, 1996
/s/ John H.F. Haskell, Jr.
--------------------------
12
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ W. Edwin Jarmain
--------------------
13
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ G. Donald Johnston, Jr.
---------------------------
14
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 30th day of September, 1996
/s/ Winthrop Knowlton
---------------------
15
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ Arthur L. Liman
-------------------
16
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ George T. Lowy
------------------
17
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ William T. McCaffrey
------------------------
18
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 12th day of September, 1996
/s/ Joseph J. Melone
--------------------
19
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ Didier Pineau-Valencienne
-----------------------------
20
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ George J. Sella Jr.
-----------------------
21
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 19th day of September, 1996
/s/ Dave H. Williams
--------------------
22
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Jonathan E. Gaines, Jerome S. Golden, James D.
Goodwin, Molly K. Heines, David J. Hughes, Naomi J. Weinstein, Charles Wilder,
and each of them (with full power to each of them to act alone), his or her true
and lawful attorney-in-fact and agent, with full power of substitution to each,
for him or her and on his or her behalf and in his or her name, place and stead,
to execute and file any of the documents referred to below relating to
registrations under the Securities Act of 1933, the Securities Exchange Act of
1934 and the Investment Company Act of 1940 with respect to any annuity
contracts or other agreements, or interests thereunder, providing for allocation
of amounts to Separate Accounts of the Company, and related units or interests
in Separate Accounts or providing for market value adjustments: registration
statements on any form or forms under the Securities Act of 1933, the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 and reports on any
form or forms under the Securities Exchange Act of 1934, and any and all
amendments and supplements thereto, with all exhibits and all instruments
necessary or appropriate in connection therewith, each of said attorneys-in-fact
and agents and his, her or their substitutes being empowered to act with or
without the others or other, and to have full power and authority to do or cause
to be done in the name and on behalf of the undersigned each and every act and
thing requisite and necessary or appropriate with respect thereto to be done in
and about the premises in order to effectuate the same, as fully to all intents
and purposes as the undersigned might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, may
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 17th day of November, 1994
/s/ J. M. de St. Paer
---------------------
23
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, James D. Goodwin, Pauline
Sherman, Michael F. McNelis, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 21st day of May, 1996
/s/ Stanley B. Tulin
--------------------
24
Exhibit 8
---------
Corporate Incentive Life
------------------------
Description of Equitable's Issuance,
Transfer and Redemption Procedures for Policies
Pursuant to Rule 6e-3(T)(b)(12)(iii)
under the Investment Company Act of 1940
December 1, 1995
Pursuant to Rule 6e-3(T)(b)(12)(iii) under the Investment Company Act of
1940 ("1940 Act"), this exhibit sets forth the issuance, transfer and redemption
procedures to be followed by Equitable Life Insurance Company ("Equitable") in
connection with the issuance of Corporate Incentive Life, a flexible premium
variable life insurance policy (the "policies").
Equitable believes its procedures meet the requirements of Rule
6e-3(T)(b)(12)(iii) and states the following:
1. Because of the insurance nature of Equitable's policies and due to the
requirements of state insurance laws, the procedures necessarily differ in
significant respects from procedures for mutual funds and contractual plans for
which the 1940 Act was designed.
2. Many of the procedures used by Equitable have been adopted from its
established procedures for its scheduled premium variable life insurance
policies, its other flexible premium variable life insurance policies and its
fixed benefit life insurance products.
3. In structuring its procedures to comply with Rule 6e-3(T), state
insurance laws and its established administrative procedures, Equitable has
attempted to comply with the intent of the 1940 Act, to the extent deemed
feasible.
4. In general, state insurance laws, like Rule 6e-3(T)(b)(12)(iii),
require that Equitable's procedures be reasonable, fair and not discriminatory.
5. Because of the nature of the insurance product, it is often difficult
to determine precisely when Equitable's procedures deviate from those required
under Sections 22(d), 22(e) or 27(c)(1) of the 1940 Act or Rule 22c-1
thereunder. Accordingly, set out below is a summary of the principal policy
provisions and procedures not otherwise described in the prospectus, which may
be deemed to constitute, either directly or indirectly, such a deviation. The
summary, while comprehensive, does not attempt to describe each and every
procedure or variation which might occur and does include certain procedural
steps which do not constitute deviations from the above-cited sections or rule.
Under the policies, a policyowner allocates net premiums to a Guaranteed
Interest Account, which is part of Equitable's General Account, and/or to one or
more investment funds of Equitable's Separate Account FP (the "Account"). Except
as otherwise noted, the procedures described below apply equally to each of the
Account's investment funds and, accordingly, are described in terms of the
Account.
<PAGE>
I. "Public Offering Price": Purchase and Related
Transactions -- Section 22(d) and Rule 22c-1
--------------------------------------------
This section outlines those principal policy provisions and administrative
procedures which might be deemed to constitute, either directly or indirectly, a
"purchase" transaction. Because of the insurance nature of the policies, the
procedures involved necessarily differ in certain significant respects from the
purchase procedures for mutual funds and contractual plans. The chief
differences involve the structure of the cost of insurance charges and the
insurance underwriting (i.e., evaluation of risk) process. There are also
certain policy provisions -- such as restoration and loan repayment -- which do
not result in the issuance of a policy but which require certain payments by the
policyowner and involve a transfer of assets supporting the policy reserve into
the Account.
a. Application and Initial Premium Processing
------------------------------------------
Upon receipt of a completed application and other required documentation
from a prospective policyowner, Equitable will follow certain insurance
underwriting (i.e., evaluation of risks) procedures designed to determine
whether the proposed insured is insurable. This process may involve such
verification procedures as medical examinations and may require that further
information be provided by the proposed policyowner and/or the proposed insured
before such a determination can be made. A policy cannot be issued, i.e.,
physically issued through Equitable's computer issue system, until this
underwriting procedure has been completed.
These processing procedures will not dilute any benefit payable to any
existing policyowner. Although a policy cannot be issued until after the
underwriting process has been completed, the proposed policyowner will receive
immediate insurance coverage on the proposed insured person once the proposed
policyowner has paid his full initial premium and assuming that the proposed
insured person proves to be insurable.
Equitable will require that the policy be delivered within a specific
delivery period to protect itself against anti-selection by the prospective
policyowner resulting from a deterioration of the health of the proposed
insured. Generally, the period will not exceed 30 days from the policy's Issue
Date.
Delivery may be delayed where, for example, the full initial premium has
not yet been paid, amendment is needed to the application for the policy or
where the agent has been unable to contact the prospective policyowner. Where a
policy is not delivered within 30 days, Equitable will consider reissuing the
policy with a new Register Date and Issue Date. However, if Equitable does not
receive the full initial premium within 60 days of the Issue Date, we will
consider the prospective policyowner to have withdrawn the application and we
will refund any premium paid. To obtain a policy, it would then be necessary for
the prospective policyowner to submit a new completed application and
satisfactory evidence of insurability of the proposed insured.
2
<PAGE>
b. Insurance Charges and Underwriting Standards
--------------------------------------------
Cost of insurance charges payable under the policies and any riders will
not be the same for all policyowners. The chief reason is that the principle of
pooling and distribution of mortality risks is based upon the assumption that
each policyowner pays a cost of insurance charge commensurate with the insured's
mortality risk which is actuarially determined based upon factors such as age,
sex, health and occupation and the particular benefit provided.
In the context of life insurance, uniform cost of insurance charges for
all insureds would discriminate unfairly in favor of those insureds representing
greater mortality risks to the disadvantage of those representing lesser risks.
Accordingly, although there will be a uniform "public offering price" for all
policyowners because premiums are flexible, there will be a different "price"
for each actuarial category of insureds because different cost of insurance
rates will apply . The "price" will also vary based on the net amount at risk.
The Policies will be offered and sold pursuant to our cost of insurance
charge schedules and our underwriting standards and in accordance with state
insurance laws. Such laws prohibit unfair discrimination among insureds of the
same class, but generally recognize that premiums must be based upon factors
such as age, sex, health and occupation. A table showing the maximum cost of
insurance charges will be delivered as part of the policy. Any additional
charges for persons who do not meet standard underwriting requirements will also
be indicated in the policy.
By administrative practice, Equitable will reduce the cost of insurance
rate classification for an existing policy, including any riders, if new
evidence of insurability demonstrates that the insured person qualifies for a
lower classification. After the reduced rating is determined, the policyowner
will pay a lower current monthly cost of insurance charge each month. A similar
reduction will be made for tobacco users who meet our non-tobacco user
requirements.
c. Repayment of Loan
-----------------
When a loan is made, Equitable will transfer from each investment division
of the Account to the General Account an amount of Policy Account Value equal to
the amount of the loan allocable to that division. Upon repayment of
indebtedness, Equitable will reduce its General Account policy loan assets and
transfer those assets first to the Guaranteed Interest Account to the extent
loans were attributable to the Guaranteed Interest Account and then to the
Account's investment funds according to the policyowner's instruction or the
premium payment allocation percentages then in effect.
d. Face Amount Increases
---------------------
The policies do not permit face amount increases.
3
<PAGE>
II. "Redemption Procedures":
Surrender and Related Transactions
----------------------------------
This section will outline those procedures which differ in certain
significant respects from redemption procedures for mutual funds and contractual
plans. The policies provide for the payment of monies to a policyowner or
beneficiary upon presentation of the policy. The amount received by the payee
will depend upon the particular benefit for which the policy is presented:
surrender for net cash surrender value, payment of a death claim, living benefit
payment or maturity benefit. There are also certain policy provisions -- such as
partial withdrawals, termination and the loan privilege -- under which the
policy will not be presented to Equitable but which will affect the
policyowner's benefits and may involve a transfer of the assets supporting the
policy reserve out of the Account.
Any combined transactions on the same day which counteract each other will
be allowed. We will assume the policyowner is aware of the conflicting nature of
these transactions and desires their combined result. In addition, if a
transaction is requested which we will not allow (for example, a request for a
face amount decrease which lowers the face amount below our minimum) we will
reject the whole request and not just the portion which fails to comply with our
rules. Policyowners will be informed of the rejection and will have an
opportunity to give new instructions. Finally, state insurance or other laws may
require that certain requirements be met before Equitable is permitted to make
payments to the payee.
Generally, except for the payment of death benefits, the imposition of
insurance and administrative charges and the effects of policy loans, the payee
will receive a pro rata or proportionate share of the Account's assets within
the meaning of the 1940 Act in any transaction involving "redemption
procedures".
a. Surrender for Net Cash Surrender Value
--------------------------------------
Equitable will make the payment of Net Cash Surrender Value out of its
General Account and, at the same time, transfer assets from the Account to the
General Account in an amount equal to the policy reserves in the Account.
b. Death Claims
------------
Equitable will issue a death benefit payable to the beneficiary within
seven days after receipt, at our Administrative Office, of the policy, due proof
of death of the insured person, and all other requirements necessary(1) to make
payment.
Equitable will make payment of the death benefit out of its General
Account, and will transfer assets from the Account to the General Account in an
amount equal to the policy reserves in that Account . The excess, if any, of the
death benefit over the amount transferred will be paid out of the General
Account reserve maintained for that purpose.
- ----------
(1) State insurance laws impose various requirements, such as receipt of a tax
waiver, before payment of the death benefit may be made. In addition,
payment of the death benefit is subject to the provisions of the policies
regarding suicide and incontestability.
4
<PAGE>
c. Transfer
--------
The policies allow the policyowner, in lieu of a conversion privilege, to
transfer all the amounts in the investment funds of the Account to the
Guaranteed Interest Account (which is part of our General Account and pays
interest at a declared guaranteed rate) without charge.
d. Policy Loan
-----------
When a loan is made, Equitable transfers a portion of the assets in the
Account (which is a portion of the cash surrender value and which also
constitutes a portion of the reserves for the death benefit) equal to the
indebtedness to the General Account.
e. Living Benefit Payment
----------------------
The Living Benefit option enables eligible policyowners to receive a
portion of the death benefit if the insured has a terminal illness. When
Equitable receives written notice of a Living Benefit claim it will send the
policyowner a "quote letter" detailing the effect of a Living Benefit payment on
the remaining policy values as well as an explanation of amounts that are
available through policy loan or surrender. The letter will be accompanied by
the forms necessary for the policyowner to finalize his or her Living Benefit
claim. When those forms are received, Equitable will determine whether the
policyowner is eligible to receive the Living Benefit payment (e.g., whether
satisfactory evidence has been received that the insured's life expectancy is
less than six months). Once this eligibility determination is complete,
Equitable will pay the Living Benefit amount within seven days.
f. Federal Income Tax
------------------
In certain circumstances, a premium payment or change to a policy may
cause a policy to be treated as a "modified endowment." (See Tax Effects in the
Prospectus). Due to the potential adverse tax consequences, Equitable has
instituted procedures aimed to prevent a policy from becoming a modified
endowment without the policyowner's prior knowledge. If Equitable determines
that, based on the first premium, the policy will be a modified endowment
contract, Equitable will issue the policy based on the first premium remitted,
provided that the policyowner signs a form acknowledging that the policy is a
modified endowment. Alternatively, the policyowner may reduce the amount of the
first premium to a level at which the policy will not be a modified endowment.
Equitable will then issue the policy based on the reduced premium. Equitable
will not deliver a policy unless one of these options is selected.
In the case of a subsequent premium payment, which, if applied, would
cause a policy to become a modified endowment, Equitable plans to return the
excess premium payment (the amount which would cause the contract to become a
modified endowment) to the policyowner within one business day. The excess
premium payment will be accompanied by a letter of explanation. The letter will
explain to the policyowner that the premium payment he submitted would cause the
policy to become a modified endowment under federal income tax law. The letter
will instruct the policyowner that he may either return the excess premium
payment to Equitable with a signed acknowledgment form (enclosed with the
letter) or forego making the payment at this time. The acknowledgment form will
describe the federal income tax consequences of owning a modified endowment.
5
<PAGE>
There may be cases in which a policy becomes a modified endowment before
all procedures aimed at preventing this have been fully implemented. In such
cases, Equitable may, but is not obligated under applicable federal income tax
law to, refund the excess premium with interest not later than 60 days following
the policy year in which it was received. In such case the policy should
generally be removed from modified endowment status. If an offer to refund
premium is made, the policyowner will be notified and given an opportunity to
elect a refund. If a refund is elected, the Policy Account will be adjusted to
take into account the amount of the refund. The amount of the refund would
include interest earned on the excess premium amount in the Guaranteed Interest
Account and net return on the excess premium amount in the divisions of the
Separate Account, but not less in total than minimum interest of 4%. An election
to take a refund and the related adjustments will be effected upon receipt at
our administrative office.
35118/R31 1.DOC
36014-1
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<DISTRIBUTIONS-OF-INCOME> 3,089,395
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<TABLE> <S> <C>
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<MULTIPLIER> 1
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<S> <C>
<PERIOD-TYPE> 9-MOS
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<PERIOD-START> Jan-01-1996
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<INVESTMENTS-AT-VALUE> 165,937,243
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP EVLICO
<SERIES>
<NUMBER> 04
<NAME> Aggressive Stock Division
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP EVLICO
<SERIES>
<NUMBER> 05
<NAME> Balanced Division
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP EVLICO
<SERIES>
<NUMBER> 06
<NAME> High Yield Division
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP EVLICO
<SERIES>
<NUMBER> 07
<NAME> Global Division
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP EVLICO
<SERIES>
<NUMBER> 08
<NAME> Conservative Investors Division
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP EVLICO
<SERIES>
<NUMBER> 09
<NAME> Growth Investors Division
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP EVLICO
<SERIES>
<NUMBER> 12
<NAME> Intermed Gov Securities Div
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP EVLICO
<SERIES>
<NUMBER> 13
<NAME> Growth & Income Division
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP EVLICO
<SERIES>
<NUMBER> 14
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<TABLE> <S> <C>
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<CIK> 0000771726
<NAME> Sep Acct FP EVLICO
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<NAME> Equity Index
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<TABLE> <S> <C>
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<CIK> 0000771726
<NAME> Sep Acct FP EVLICO
<SERIES>
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<NAME> International Fund Division
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<S> <C>
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