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PROSPECTUS
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IL COLI II (TM)
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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
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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.
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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
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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
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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
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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>
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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%
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</TABLE>
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<TABLE>
<CAPTION>
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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>
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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.
8
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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.
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<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>
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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.
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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.
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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.
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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 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>
23
<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>
24
<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.
25
<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
