SURVIVORSHIP
2000
Prospectus Dated July 21, 1997
Survivorship 2000 is a flexible premium joint survivorship variable life
insurance policy issued by The Equitable Life Assurance Society of the United
States (Equitable).
You may decide the amount of premiums to invest and when, within limits. Other
than the initial premium, there are no required premiums (however, under certain
conditions, additional premiums may be needed to keep the policy in effect). Net
premiums are deposited in a Policy Account.
Policy Account values increase or decrease with investment experience and
reflect certain deductions and charges. You may allocate your Policy Account
value to a guaranteed fixed return and the following twenty-four investment
portfolios:
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIOS
- -------------------------------------------------------------------------------------------------------------------
FIXED INCOME SERIES: EQUITY SERIES: ASSET ALLOCATION SERIES:
- ---------------------------- --------------------------------------------------------- ---------------------------
<S> <C> <C> <C>
Domestic Fixed Income Domestic Equity International Equity o Alliance Conservative
- --------------------- --------------- -------------------- Investors
o Alliance Money Market o T. Rowe Price Equity o Alliance Global o EQ/Putnam Balanced
o Alliance Intermediate Income o Alliance International o Alliance Balanced
Government Securities o EQ/Putnam Growth & o T. Rowe Price o Alliance Growth
o Alliance Quality Bond Income Value International Stock Investors
o Alliance Growth & o Morgan Stanley o Merrill Lynch World
Aggressive Fixed Income Income Emerging Markets Strategy
- ----------------------- o Alliance Equity Index Equity (available on
o Alliance High Yield o Merrill Lynch Basic or about Sept. 2,
Value Equity 1997)
o Alliance Common Stock
o MFS Research
Aggressive Equity
-----------------
o Alliance Aggressive
Stock
o Warburg Pincus Small
Company Value
o Alliance Small Cap
Growth
o MFS Emerging Growth
Companies
</TABLE>
We do not guarantee the investment performance of these investment portfolios,
which involve varying degrees of risk.
Survivorship 2000 provides life insurance coverage on two insureds, with a death
benefit payable when the last surviving insured person dies while the policy is
in effect. You may choose either a fixed benefit equal to the Face Amount of the
policy or a variable benefit equal to the Face Amount plus the Policy Account.
You can reduce the Face Amount and change the death benefit option, within
limits.
The policy may go into default if the Net Cash Surrender Value (Policy Account
value less any loan and accrued loan interest) is insufficient to pay the
policy's monthly deductions. When this condition exists, we guarantee that the
policy will remain in force under the death benefit guarantee provision (if
available) as long as the accumulated premiums you've paid, less withdrawals,
are at least equal to a guaranteed minimum death benefit premium fund and any
policy loan does not exceed the Cash Surrender Value (Policy Account value).
Otherwise, your policy will end without value unless you make a required
payment.
Ask your Equitable agent to determine if changing, or adding to, your existing
insurance coverage with Survivorship 2000 would be to your advantage. You may
examine the policy for a limited period after your initial payment and if you
are not satisfied for any reason, you may return the policy 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
SURVIVORSHIP 2000. THIS PROSPECTUS IS NOT VALID UNLESS IT IS ATTACHED TO CURRENT
PROSPECTUSES FOR BOTH THE HUDSON RIVER TRUST AND THE EQ ADVISORS 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 1997 The Equitable Life Assurance Society of the United States.
All rights reserved.
EVM-119 Cat. No. 127365
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF SURVIVORSHIP 2000 FEATURES........................1
PART 1 -- DETAILED INFORMATION ABOUT EQUITABLE AND
SURVIVORSHIP 2000 INVESTMENT CHOICES...............7
THE COMPANY THAT ISSUES SURVIVORSHIP 2000..........7
Equitable........................................7
THE SEPARATE ACCOUNT AND THE TRUSTS................7
The Separate Account.............................7
The Trusts.......................................7
The HRT's Investment Adviser.....................8
The EQAT's Manager And Investment Advisers.......8
Investment Policies Of The Trusts' Portfolios....8
THE GUARANTEED INTEREST ACCOUNT...................10
Amounts In The Guaranteed Interest Account......11
Adding Interest In The Guaranteed Interest
Account.........................................11
Transfers Out Of The Guaranteed Interest
Account.........................................11
PART 2 -- DETAILED INFORMATION ABOUT SURVIVORSHIP 2000......12
FLEXIBLE PREMIUMS.................................12
DEATH BENEFITS....................................12
CHANGES IN INSURANCE PROTECTION...................13
Reducing The Face Amount........................13
Changing The Death Benefit Option...............13
When Policy Changes Go Into Effect..............13
MATURITY BENEFITS.................................13
LIVING BENEFIT OPTION.............................13
ADDITIONAL BENEFITS MAY BE AVAILABLE..............14
YOUR POLICY ACCOUNT VALUE.........................14
Amounts In The Separate Account.................14
How We Determine The Unit Value.................14
Transfers Of Policy Account Value...............15
Automatic Transfer Service......................15
Telephone Transfers.............................15
Charge For Transfers............................15
BORROWING FROM YOUR POLICY ACCOUNT................15
How To Request A Loan...........................16
Policy Loan Interest............................16
When Interest Is Due............................16
Repaying The Loan...............................16
The Effects Of A Policy Loan....................16
PARTIAL WITHDRAWALS AND SURRENDER.................16
Partial Withdrawals.............................16
Allocation Of Partial Withdrawals And Charges...17
The Effects Of A Partial Withdrawal.............17
Surrender For Net Cash Surrender Value..........17
DEDUCTIONS AND CHARGES............................17
Deductions From Your Premiums...................17
Deductions From Your Policy Account.............18
DEDUCTIONS AND CHARGES (CONTINUED)
How Policy Account Charges Are Allocated........18
Charge Against The Separate Account.............19
Charges Of The Trusts...........................19
ADDITIONAL INFORMATION ABOUT SURVIVORSHIP 2000....19
Your Policy Can Terminate.......................19
You May Restore A Policy After It Terminates....19
Policy Periods, Anniversaries, Dates And Ages...20
TAX EFFECTS.......................................20
Policy Proceeds.................................20
Policy Terminations.............................21
Living Benefits.................................21
Diversification.................................21
Riders..........................................22
Policy Changes..................................22
Tax Changes.....................................22
Estate And Generation Skipping Taxes............22
Our Taxes.......................................22
When We Withhold Income Taxes...................22
PART 3 -- ADDITIONAL INFORMATION............................23
YOUR VOTING PRIVILEGES............................23
Trust Voting Privileges.........................23
How We Determine Your Voting Shares.............23
Separate Account Voting Rights..................23
OUR RIGHT TO CHANGE HOW WE OPERATE................23
OUR REPORTS TO POLICYOWNERS.......................23
LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY.......23
YOUR PAYMENT OPTIONS..............................24
YOUR BENEFICIARY..................................24
ASSIGNING YOUR POLICY.............................24
WHEN WE PAY POLICY PROCEEDS.......................24
DIVIDENDS.........................................24
REGULATION........................................25
SPECIAL CIRCUMSTANCES.............................25
DISTRIBUTION......................................25
LEGAL PROCEEDINGS.................................25
ACCOUNTING AND ACTUARIAL EXPERTS..................25
ADDITIONAL INFORMATION............................25
MANAGEMENT........................................26
PART 4 -- ILLUSTRATIONS OF POLICY BENEFITS..................30
INDIVIDUAL ILLUSTRATIONS..........................30
SEPARATE ACCOUNT FP FINANCIAL STATEMENTS.................FSA-1
EQUITABLE FINANCIAL STATEMENTS.............................F-1
APPENDIX A -- COMMUNICATING PERFORMANCE DATA...............A-1
LONG-TERM MARKET TRENDS......................A-1
- --------------------------------------------------------------------------------
In this prospectus "we," "our" and "us" mean Equitable, a New York stock life
insurance company. "You" and "your" mean the owner(s) of the policy. We refer to
the persons who are covered by the policy as the "insured persons," because the
insured persons and the policyowner(s) may not be the same. Unless indicated
otherwise, the discussion in this prospectus assumes that there is no policy
loan outstanding and that the policy is not in a grace period.
THE POLICY IS NOT AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. EQUITABLE DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN
AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED SUPPLEMENT THERETO OR IN ANY
SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY EQUITABLE.
<PAGE>
SUMMARY OF SURVIVORSHIP 2000 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).
INVESTMENT FEATURES
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 in
Part 2 of this prospectus.
POLICY ACCOUNT
o After certain charges are deducted from your premium payment, the balance,
called your net premium, is put in your Policy Account. Net premiums can be
allocated to a Guaranteed Interest Account and to one or more funds of
Equitable's Separate Account FP (each a Fund, and together, the Funds or the
Separate Account). The Funds invest in corresponding portfolios of The Hudson
River Trust (HRT), or the EQ Advisors Trust (EQAT), each of which is a mutual
fund. Subject to certain conditions, you have access to the Policy Account
value through loans, partial withdrawals or by surrendering the policy. You
may also adjust your allocation to the various investment options by changing
your allocation percentages or by making transfers among the Funds and the
Guaranteed Interest Account. If the policy is owned by two or more persons,
we will require authorization from each owner before taking any action under
the policy.
o REQUESTS FOR TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT CAN ONLY BE
MADE ON OR WITHIN 30 DAYS OF A POLICY ANNIVERSARY. SUCH TRANSFERS WILL BE
EFFECTIVE AS OF THE DATE WE RECEIVE YOUR REQUEST, BUT NO EARLIER THAN THE
POLICY ANNIVERSARY. TRANSFERS INTO THE GUARANTEED INTEREST ACCOUNT AND AMONG
THE FUNDS MAY BE REQUESTED AT ANY TIME. Transfers are subject to the rules
discussed under TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT in Part 1 of
this prospectus and TRANSFERS OF POLICY ACCOUNT VALUE in Part 2 of this
prospectus.
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 deductions from that Account and on the interest rates declared each year
by Equitable (4% minimum, before deductions).
REDEMPTION
o Loans may be taken against 90% of a policy's Cash Surrender Value (equal to
the 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 in Part 2 of
this prospectus.
o Partial withdrawals of Net Cash Surrender Value may be taken after the first
policy year, subject to our approval and certain conditions. See PARTIAL
WITHDRAWALS AND SURRENDER in Part 2 of this prospectus.
o The policy may be surrendered for its Net Cash Surrender Value (Policy
Account value less any loan and accrued loan interest), less any lien
securing a Living Benefit payment, at which time insurance coverage will end.
INSURANCE PROTECTION FEATURES
DEATH BENEFITS
o Option A, a fixed benefit equal to the policy's Face Amount.
o Option B, a variable benefit that equals the Face Amount plus the Policy
Account.
o In some cases a higher death benefit may apply in order to meet Federal
income tax law requirements. See DEATH BENEFITS in Part 2 of this prospectus.
o After the first year, you may reduce the Face Amount or change the death
benefit option, within limits. The minimum Face Amount is $200,000. See
CHANGES IN INSURANCE PROTECTION in Part 2 of this prospectus.
o The death benefit is payable when the last surviving insured person dies
while the policy is in effect.
DEATH BENEFIT GUARANTEE
o The death benefit is guaranteed if the amount of premiums you've paid,
accumulated at 4% interest, less withdrawals, also accumulated at 4%
interest, is at least equal to a guaranteed minimum death benefit premium
fund and any policy loan does not exceed the Cash Surrender Value (Policy
Account Value). The death benefit guarantee is not available in some
jurisdictions, including New York, New Jersey and Massachusetts. You should
check with your Equitable agent to determine whether the guaranteed minimum
death benefit is available in your state. See DEATH BENEFITS in Part 2 of
this prospectus.
MATURITY BENEFITS
o A maturity benefit equal to the Net Cash Surrender Value, less any lien
securing a Living Benefit payment and accrued interest, is payable on the
policy anniversary nearest the younger insured person's 100th birthday, if
either or both of the insured persons are still living on that date. See
MATURITY BENEFITS in Part 2 of this prospectus.
1
<PAGE>
LIVING BENEFIT
o The Living Benefit rider enables the policyowner to receive a portion of the
policy's death benefit (excluding death benefits payable under certain
riders) if the sole surviving insured has a terminal illness. The Living
Benefit rider will be added to most policies at issue for no additional cost.
See LIVING BENEFIT OPTION in Part 2 of this prospectus.
ADDITIONAL BENEFITS
o Estate Protector, Option to Split Upon Divorce and Option to Split Upon
Federal Tax Law Change riders are available. See ADDITIONAL BENEFITS MAY BE
AVAILABLE in Part 2 of this prospectus.
DEDUCTIONS AND CHARGES
FROM PREMIUMS (See DEDUCTIONS FROM YOUR PREMIUMS in Part 2 of this prospectus.)
o Charge for taxes imposed by states and other jurisdictions. Such charges
currently range between .75% and 5% (Virgin Islands).
o Premium Sales Charge in the first policy year equal to 30% of premiums paid
up to one "target premium," plus 3% of premiums paid in excess of the target
premium in that year. If you paid at least one target premium in the first
policy year, the Premium Sales Charge in each subsequent year is equal to
7.5% (6% for certain age combinations of insured persons) of premiums paid up
to one target premium, plus 3% of premiums paid in excess of the target
premium in each year. However, if you paid less than one target premium in
the first policy year, the Premium Sales Charge in the second, third and
fourth policy years is equal to 7.5% (6% for certain combinations of insured
persons) of premiums paid up to the lesser of one target premium or the
highest amount of premiums paid in any prior year, plus 30% on premiums paid
in excess of this amount until premiums paid in that year equal the target
premium, plus 3% of premiums paid in excess of the target premium in that
year. The Premium Sales Charge in policy years five and later is equal to
7.5% (6% for certain age combinations of insured persons) of premiums paid up
to one target premium, plus 3% of premiums paid in excess of the target
premium in each year. Equitable currently intends to stop deducting the
Premium Sales Charge at the end of the twentieth policy year. See DEDUCTIONS
FROM YOUR PREMIUMS in Part 2 of this prospectus for a detailed discussion,
including an explanation of "target premium."
FROM THE POLICY ACCOUNT (See DEDUCTIONS FROM YOUR POLICY ACCOUNT in Part 2 of
this prospectus.)
o Monthly administrative charge of $0.07 per $1,000 of Face Amount during the
first policy year, plus a current monthly administrative charge of $6 during
each policy year. We may increase this latter charge, but we guarantee that
it will never exceed $8 per month.
o Current monthly cost of insurance rates for standard risk insureds range from
less than $0.01 per thousand of net amount at risk at the youngest ages to
$83.33 per thousand of net amount at risk at the oldest ages (age 99 of each
insured). The net amount at risk is the difference between the Policy Account
value and the current death benefit. Guaranteed cost of insurance rates for
standard risk insureds range from less than $0.01 (youngest ages) to $83.33
(oldest ages).
o Monthly charge for any additional insurance benefits.
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 Monthly guaranteed minimum death benefit charge equal to $0.01 per $1,000 of
Face Amount for policies with a guaranteed minimum death benefit provision.
FROM THE SEPARATE ACCOUNT (See CHARGE AGAINST THE SEPARATE ACCOUNT in Part 2 of
this prospectus.)
o Charge for certain mortality and expense risks of .90% per annum.
FROM THE TRUSTS
o The Separate Account Funds purchase Class IA shares of corresponding
portfolios of the HRT or Class IB shares of corresponding portfolios of the
EQAT at net asset value. That price reflects investment management fees, any
Rule 12b-1 distribution fees, indirect expenses, such as brokerage
commissions, and certain other operating expenses.
The Hudson River Trust. Effective May 1, 1997, a new investment advisory
agreement relating to each of the HRT portfolios was entered into between HRT
and Alliance, HRT's Investment Adviser. The table below shows (i) the
investment management fees paid by the HRT in 1996 and (ii) other expenses
deducted from HRT assets in 1996, both restated to reflect the fees and other
expenses that would have been paid by the portfolios if the present
investment advisory agreement had been in effect as of January 1, 1996. These
restated fees and expenses are based on average net assets for 1996. For
actual investment management fees and other expenses paid by HRT in 1996, see
the HRT prospectus. Investment management fees may increase or decrease based
on the level of portfolio net assets. These fees are subject to maximum
rates, as described in the attached HRT prospectus. Other HRT expenses are
likely to fluctuate from year to year. Both investment management fees and
other expenses are expressed in the table below as an annual percentage of
each portfolio's daily average net assets:
2
<PAGE>
<TABLE>
<CAPTION>
1996 FEES AND EXPENSES RESTATED AS IF SUBJECT TO 1997 ADVISORY AGREEMENT
-------------------------------------------------------------------------------------
RESTATED 1996 RESTATED 1996 RESTATED 1996
HRT PORTFOLIO MANAGEMENT FEE OTHER EXPENSES TOTAL EXPENSES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Money Market 0.35% 0.04% 0.39%
Alliance Intermediate Govt. Securities 0.50% 0.09% 0.59%
Alliance Quality Bond 0.53% 0.05% 0.58%
Alliance High Yield 0.60% 0.06% 0.66%
Alliance Growth & Income 0.55% 0.05% 0.60%
Alliance Equity Index 0.33% 0.05% 0.38%
Alliance Common Stock 0.38% 0.03% 0.41%
Alliance Global 0.65% 0.08% 0.73%
Alliance International 0.90% 0.18% 1.08%
Alliance Aggressive Stock 0.55% 0.03% 0.58%
Alliance Small Cap Growth* 0.90%** 0.10%*** 1.00%***
Alliance Conservative Investors 0.48% 0.07% 0.55%
Alliance Balanced 0.42% 0.05% 0.47%
Alliance Growth Investors 0.53% 0.06% 0.59%
<FN>
- --------------------------------------
*Commenced operations on May 1, 1997. **Maximum management fee payable. ***Estimated 1997 expenses.
</FN>
</TABLE>
EQ Advisors Trust. The table below shows (i) the annual rates payable by the
EQAT for management fees in 1997, (ii) Rule 12b-1 distribution fees and (iii)
other estimated expenses to be deducted from EQAT assets in 1997. Other EQAT
expenses are likely to fluctuate from year to year. The management fees are not
subject to any reduction based on the level of portfolio net assets. The
management fees, 12b-1 fees and other expenses are expressed in the table below
as an annual percentage of each portfolio's daily average net assets:
<TABLE>
<CAPTION>
ESTIMATED 1997 ESTIMATED 1997
EQAT PORTFOLIO 1997 MANAGEMENT FEE 12B-1 FEES OTHER EXPENSES* TOTAL EXPENSES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
T. Rowe Price Equity Income 0.55% 0.25% 0.05% 0.85%
EQ/Putnam Growth & Income Value 0.55% 0.25% 0.05% 0.85%
Merrill Lynch Basic Value Equity 0.55% 0.25% 0.05% 0.85%
MFS Research 0.55% 0.25% 0.05% 0.85%
T. Rowe Price International Stock 0.75% 0.25% 0.20% 1.20%
Morgan Stanley Emerging Markets Equity 1.15% 0.25% 0.35% 1.75%
Warburg Pincus Small Company Value 0.65% 0.25% 0.10% 1.00%
MFS Emerging Growth Companies 0.55% 0.25% 0.05% 0.85%
EQ/Putnam Balanced 0.55% 0.25% 0.10% 0.90%
Merrill Lynch World Strategy 0.70% 0.25% 0.25% 1.20%
<FN>
- --------------------------------------
* After fee waivers or assumptions by EQAT's Manager pursuant to an expense
limitation agreement. See the attached EQAT prospectus.
</FN>
</TABLE>
VARIATIONS
o Equitable is subject to the insurance laws and regulations in every
jurisdiction in which Survivorship 2000 is sold. As a result, the terms of
Survivorship 2000 may vary from jurisdiction to jurisdiction. The terms of
Survivorship 2000 may also vary where special circumstances result in a
reduction in our costs.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
o You have the right to examine the policy. If for any reason you are not
satisfied with it, you may cancel the policy within the time limit described
below. You may cancel the policy by sending it to our Administrative Office
with a written request to cancel. Insurance coverage ends when you send your
request.
o Your request to cancel the policy must be postmarked no later than 10 days
after you receive the policy.
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 an
existing life insurance policy, we may reinstate the prior policy. The
cancellation right may vary in certain states. There may be income tax and
withholding implications associated with cancellation.
3
<PAGE>
DEFAULT AND TERMINATION
o If the Net Cash Surrender Value is insufficient to pay the policy's monthly
deductions the policy will go into default unless the operation of the
policy's guaranteed minimum death benefit provision results in a waiver of
the monthly deductions. In order to benefit from the guaranteed minimum death
benefit provision, accumulated premiums you've paid at 4% interest, less
withdrawals at 4% interest, must be at least equal to a guaranteed minimum
death benefit premium fund and any policy loan must not exceed the Cash
Surrender Value. The guaranteed death benefit provision is not available in
some jurisdictions, including New York and New Jersey. If the policy goes
into default, it will terminate without value unless you make a required
payment. See YOUR POLICY CAN TERMINATE in Part 2 of this prospectus.
o You will be notified if a default occurs and given the opportunity to
maintain the policy in force by paying the amount specified in the notice.
You may be able to restore a terminated policy within a limited time period,
but this will require additional evidence of insurability. See YOU MAY
RESTORE A POLICY AFTER IT TERMINATES in Part 2 of this prospectus.
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 so long as they remain in the Policy Account. Loans, partial withdrawals,
surrender, maturity or policy termination may result in recognition of income
for tax purposes. See TAX EFFECTS in Part 2 of this prospectus.
RATES OF RETURN OF THE HRT
The rates of return shown in the table below are based on the actual investment
performance of The Hudson River Trust Portfolios (other than the Alliance Small
Cap Growth Portfolio), after deduction for investment management fees and direct
operating expenses of the Trust, for periods ending December 31, 1996. The
historical performance of the Alliance Common Stock and Alliance 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 restated to
reflect the investment management fees and estimated direct operating expenses
that commenced on that date. The Alliance Common Stock Portfolio and its
predecessors have been in existence since 1976. No shares of the Alliance Small
Cap Growth Portfolio were outstanding as of December 31, 1996.
The HRT yields shown below are derived from the actual rate of return of the HRT
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
Alliance Money Market Portfolio and 30-day yield for the Alliance Intermediate
Government Securities, Alliance Quality Bond and Alliance High Yield Portfolios.
These rates of return and yields are not illustrative of how actual investment
performance would 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 HRT ONLY AND DO NOT REFLECT THE
ADMINISTRATIVE AND COST OF INSURANCE CHARGES, SALES CHARGES, TAX CHARGES AND THE
MORTALITY AND EXPENSE RISK CHARGE APPLICABLE UNDER A SURVIVORSHIP 2000 POLICY.
SUCH CHARGES WOULD REDUCE THE RETURNS AND YIELDS SHOWN. SEE ILLUSTRATIONS OF
SURVIVORSHIP 2000 POLICY ACCOUNT AND CASH SURRENDER VALUES BASED ON HISTORICAL
INVESTMENT RESULTS BELOW.
<TABLE>
<CAPTION>
RATES OF RETURN FOR PERIODS ENDING DECEMBER 31, 1996
--------------------------------------------------------------------------
SEC SINCE
HRT PORTFOLIO YIELDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 20 YEARS INCEPTION(A)
- ------------- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Fixed Income Series:
Alliance Money Market ........................ 5.18% 5.33% 5.03% 4.31% 5.90% -- 7.28%
Alliance Intermediate Government Securities .. 5.60 3.78 3.99 5.60 -- -- 6.95
Alliance Quality Bond ........................ 5.94 5.36 5.38 -- -- -- 4.79
Alliance High Yield .......................... 10.65 22.89 12.73 14.66 -- -- 11.41
The Equity Series:
Alliance Growth & Income ..................... 20.09 14.00 -- -- -- 12.77
Alliance Equity Index ........................ 22.39 -- -- -- -- 20.25
Alliance Common Stock ........................ 24.28 17.22 15.72 15.83 15.49% 15.22
Alliance Global .............................. 14.60 12.74 13.50 -- -- 11.70
Alliance International ....................... 9.82 -- -- -- -- 12.14
Alliance Aggressive Stock .................... 22.20 15.66 11.83 18.60 -- 20.22
The Asset Allocation Series:
Alliance Conservative Investors .............. 5.21 6.70 7.32 -- -- 9.03
Alliance Balanced ............................ 11.68 7.15 6.06 10.38 -- 12.05
Alliance Growth Investors .................... 12.61 11.29 10.76 -- -- 15.57
<FN>
- -------------
(a) The Alliance International Portfolio received its initial funding on April 3, 1995; the Alliance Equity Index Portfolio on
March 1, 1994; the Alliance Growth & Income and Alliance Quality Bond Portfolios on October 1, 1993; the Alliance Intermediate
Government Securities Portfolio on April 1, 1991; the Alliance Conservative Investors and the Alliance Growth Investors
Portfolios on October 2, 1989; the Alliance Global Portfolio on August 27, 1987; the Alliance High Yield Portfolio on January
2, 1987; the Alliance Aggressive Stock and Alliance Balanced Portfolios on January 27, 1986; the predecessor of the Alliance
Money Market Portfolio on July 13, 1981; and the predecessor of the Alliance Common Stock Portfolio on January 13, 1976.
</FN>
</TABLE>
Additional investment performance information appears in the attached HRT
prospectus.
4
<PAGE>
NEW PORTFOLIOS. The EQAT portfolios and the Alliance Small Cap Growth Portfolio
of the HRT commenced operations beginning May 1, 1997. Therefore, no actual
historical rates of return for these portfolios are available. For investment
performance of public mutual funds (or combinations thereof) advised by the same
EQAT or HRT Investment Adviser that have investment objectives, policies,
strategies and risks that their advisers believe to be substantially similar to
those of corresponding portfolios of the EQAT or HRT, see the respective EQAT or
HRT prospectus, attached to this prospectus. Such results are intended to show a
potential investor the past results of a similar style of investment management
and are not intended to be a substitute for actual performance, nor are such
results an estimate or guarantee of future results for the EQAT or Alliance
Small Cap Growth Portfolios. Keep in mind that such results do not reflect the
deductions and charges under your policy, which, if applied, would reduce the
returns shown.
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 HRT and its predecessors would have affected the
Cash Surrender Value of hypothetical Survivorship 2000 policies held for
specified periods of time. The table illustrates premiums and Cash Surrender
Values of thirteen hypothetical Survivorship 2000 policies, each with a 100%
premium allocation to a different Fund. The illustration also assumes that the
insureds are a standard risk 55-year-old male and a standard risk 50-year-old
female, both non-smokers, and that each policy has a level death benefit, a
$1,000,000 face amount and a $13,580 annual premium. The table does not reflect
any allocation to any of the EQAT portfolios or the Alliance Small Cap Growth
Portfolio because those portfolios had not commenced operations prior to May 1,
1997.
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
December 31, 1996.
5
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATIONS OF SURVIVORSHIP 2000 POLICY ACCOUNT AND CASH SURRENDER VALUES
BASED ON HISTORICAL INVESTMENT RESULTS, $1,000,000 OF INITIAL INSURANCE PROTECTION
AND CURRENT CHARGES(1)
MALE AGE 55 / FEMALE AGE 50
STANDARD NON-SMOKER
ASSUMED POLICY AT THE END OF AT THE END OF
PURCHASE DATE(2) THE FIRST POLICY YEAR THE FIFTH POLICY YEAR
------------------ -------------------------------- -----------------------------------
TOTAL POLICY ACCOUNT TOTAL POLICY ACCOUNT
BEGINNING OF PREMIUM VALUE AND CASH PREMIUM VALUE AND CASH
PORTFOLIO YEAR: PAID SURRENDER VALUE PAID SURRENDER VALUE
- ---------- ------------------ ------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C> <C>
THE FIXED INCOME SERIES:
- ------------------------
Alliance Money Market ........... 1982 $13,580 $ 9,210 $67,900 $ 69,295
Alliance Int. Gov't Securities .. 1991 13,580 9,132 67,900 65,623
Alliance Quality Bond ........... 1994 13,580 7,606 -- --
Alliance High Yield ............. 1987 13,580 8,450 67,900 71,624
THE EQUITY SERIES:
- ------------------
Alliance Growth & Income ........ 1994 13,580 8,012 -- --
Alliance Equity Index ........... 1994 13,580 8,215 -- --
Alliance Common Stock ........... 1976 13,580 8,883 67,900 103,137
Alliance Global ................. 1988 13,580 8,997 67,900 71,608
Alliance International .......... 1995 13,580 9,095 -- --
Alliance Aggressive Stock ....... 1986 13,580 11,037 67,900 85,489
THE ASSET ALLOCATION SERIES:
- ----------------------------
Alliance Conservative Investors . 1990 13,580 8,614 67,900 63,299
Alliance Balanced ............... 1986 13,580 10,521 67,900 73,063
Alliance Growth Investors ....... 1990 13,580 8,979 67,900 73,021
</TABLE>
<TABLE>
<CAPTION>
AT THE END OF FROM POLICY PURCHASE THROUGH
THE TENTH POLICY YEAR DECEMBER 31, 1996
----------------------------------- -----------------------------------
TOTAL POLICY ACCOUNT TOTAL POLICY ACCOUNT
PREMIUM VALUE AND CASH PREMIUM VALUE AND CASH
PORTFOLIO PAID SURRENDER VALUE PAID SURRENDER VALUE
- ---------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C>
THE FIXED INCOME SERIES:
- ------------------------
Alliance Money Market ........... $135,800 $164,484 $203,700 $ 254,809
Alliance Int. Gov't Securities .. -- -- 81,480 79,565
Alliance Quality Bond ........... -- -- 40,740 36,291
Alliance High Yield ............. 135,800 223,071 135,800 223,071
THE EQUITY SERIES:
- ------------------
Alliance Growth & Income ........ -- -- 40,740 43,619
Alliance Equity Index ........... -- -- 40,740 47,875
Alliance Common Stock ........... 135,800 269,838 285,180 1,502,951
Alliance Global ................. -- -- 122,220 197,178
Alliance International .......... -- -- 27,160 22,996
Alliance Aggressive Stock ....... 135,800 308,124 149,380 386,778
THE ASSET ALLOCATION SERIES:
- ----------------------------
Alliance Conservative Investors . -- -- 95,060 105,565
Alliance Balanced ............... 135,800 189,726 149,380 222,403
Alliance Growth Investors ....... -- -- 95,060 131,581
</TABLE>
THE DEATH BENEFIT GUARANTEE PREMIUM FOR THIS POLICY WOULD BE $13,580. SEE DEATH
BENEFITS IN PART 2 OF THIS PROSPECTUS.
THESE VALUES ARE NOT AN ESTIMATE OR GUARANTEE OF FUTURE PERFORMANCE.
(1) Policy values reflect all charges assessed under the policy and by the HRT,
including an assumed charge for taxes of 2%. Current non-guaranteed charges
have been used for the cost of insurance charges, Premium Sales Charge and
monthly administrative charge. Such charges may be increased in the future,
but will never exceed the guaranteed maximum charges set forth in
DEDUCTIONS AND CHARGES in Part 2 of this prospectus. If the guaranteed
maximum cost of insurance charges, Premium Sales Charge and monthly
administrative charge were used, the results would be lower.
(2) Assumed Policy Purchase Date is based upon inception date of the HRT
portfolio. Please refer to the explanation of this table on the previous
page.
6
<PAGE>
PART 1: DETAILED INFORMATION ABOUT EQUITABLE AND SURVIVORSHIP 2000
INVESTMENT CHOICES
THE COMPANY THAT ISSUES SURVIVORSHIP 2000
EQUITABLE. Equitable, a New York stock life insurance company, has been in
business since 1859. We are a wholly-owned subsidiary of The Equitable Companies
Incorporated (the Holding Company). The largest shareholder of the Holding
Company is AXA-UAP (AXA), a French insurance holding company. As of December 31,
1996, AXA beneficially owned 63.8% of the outstanding shares of common stock of
the Holding Company (assuming conversion of the convertible preferred stock held
by AXA). Under its investment arrangements with Equitable and the Holding
Company, AXA is able to exercise significant influence over the operations and
capital structure of the Holding Company and its subsidiaries, including
Equitable. AXA is the holding company for an international group of insurance
and related financial services companies. Equitable, the Holding Company and
their subsidiaries managed approximately $239.8 billion of assets as of December
31, 1996, including third party assets of approximately $184.8 billion.
Equitable's home office is 1290 Avenue of the Americas, New York, New York
10104. We are licensed to do business in all 50 states, Puerto Rico, the Virgin
Islands and the District of Columbia. We maintain local offices throughout the
United States. At December 31, 1996, we had approximately $114.6 billion face
amount of variable life insurance in force, as compared to $103.9 billion at
December 31, 1995. Prior to January 1, 1997, Survivorship 2000 policies were
issued by Equitable's wholly-owned subsidiary, Equitable Variable Life Insurance
Company (Equitable Variable). Equitable Variable was merged into Equitable as of
January 1, 1997.
THE SEPARATE ACCOUNT AND THE TRUSTS
THE SEPARATE ACCOUNT. The Separate Account was established on September 21, 1995
under the Insurance Law of the State of New York. The Separate Account is a type
of investment company called a unit investment trust and is registered with the
Securities and Exchange Commission (SEC) under the Investment Company Act of
1940 (1940 Act). This registration does not involve any supervision by the SEC
of the management or investment policies of the Separate Account. The Separate
Account is a successor to a separate account that was established by Equitable
Variable on April 19, 1985. The assets of that separate account became assets of
the Separate Account on January 1, 1997 when Equitable Variable was merged into
Equitable.
Under New York law, we own the assets of the Separate Account and use them to
support your policy and other variable life insurance policies. The portion of
the Separate Account's assets supporting these policies may not be used to
satisfy liabilities arising out of any other business we may conduct. This means
that the assets supporting Policy Account values maintained in the Separate
Account are not subject to the claims of our other creditors.
The Separate Account has several Funds, each of which invests in either Class IA
shares of a corresponding portfolio of the HRT or Class IB shares of a
corresponding portfolio of the EQAT. You may allocate some or all premiums among
the Funds.
In addition to premiums made under the policies, we may allocate to the Separate
Account monies received under other variable life insurance policies. Owners of
all such policies will participate in the Separate Account in proportion to the
amounts they have in the Funds that relate to their policies. We may also retain
in the Separate Account assets that are in excess of the reserves and other
liabilities relating to Policy Account values, or we may transfer them to our
general account.
If any changes are made that result in a material change in the underlying
investments of a Fund, policyowners will be notified. We may make other changes
in the policies that do not reduce any Cash Surrender Value, Death Benefit,
Policy Account value, or other accrued rights or benefits.
THE TRUSTS
The Hudson River Trust ("HRT") and the EQ Advisors Trust ("EQAT") consist of the
investment portfolios (listed below) in which the Funds of the Separate Account
invest according to your instructions.
<TABLE>
<CAPTION>
HRT PORTFOLIOS EQAT PORTFOLIOS
- ------------------------------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C>
Fixed Income Series: Equity Series:
o Alliance Money Market o Alliance Quality Bond o T. Rowe Price Equity o Morgan Stanley
o Alliance Intermediate o Alliance High Yield Income Emerging Markets
Government Securities o EQ/Putnam Growth & Equity (available on or
Income Value about Sept. 2, 1997)
o Merrill Lynch o Warburg Pincus
Equity Series: Basic Value Equity Small Company Value
o Alliance Growth & Income o Alliance International o MFS Research o MFS Emerging
o Alliance Equity Index o Alliance Aggressive o T. Rowe Price Growth Companies
o Alliance Common Stock Stock International Stock
o Alliance Global o Alliance Small Cap
Growth
Asset Allocation Series: Asset Allocation Series:
o Alliance Conservative o Alliance Growth o EQ/Putnam Balanced o Merrill Lynch
Investors Investors World Strategy
o Alliance Balanced
</TABLE>
7
<PAGE>
The Trusts are open-end, management investment companies registered under the
1940 Act, more commonly called mutual funds. As a "series" type of mutual fund,
each Trust issues several different series of stock, each of which relates to a
different portfolio of that Trust. The HRT commenced operations in January 1976
with a predecessor of its Alliance Common Stock Portfolio. The EQAT commenced
operations on May 1, 1997. The Trusts do not impose sales charges or "loads" for
buying and selling their shares. All dividends and other distributions on a
portfolio's shares are reinvested in full and fractional shares of the portfolio
to which they relate. Each Fund invests in either Class IA or Class IB shares of
a corresponding portfolio. HRT portfolios sell Class IA shares to the Funds and
EQAT portfolios sell Class IB shares to the Funds.
The EQAT sells its shares to Equitable separate accounts in connection with
Equitable's variable life insurance and annuity products. The HRT 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, HRT'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 HRT'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 Trusts'
portfolios is so large as to materially impair the investment performance of the
portfolio or the Trust involved, we will examine other investment options.
All of the portfolios, except for the Morgan Stanley Emerging Markets Equity
Portfolio and Merrill Lynch World Strategy Portfolio, are diversified for 1940
Act purposes. The Trustees of the HRT or the EQAT may establish additional
Portfolios at any time. More detailed information about the Trusts, their
investment objectives, policies, restrictions, risks, expenses, multiple class
distribution systems, the Rule 12b-1 distribution plan relating to Class IB
shares and all other aspects of their operations, appears in the HRT prospectus
(beginning after this prospectus), the EQAT prospectus (beginning after the HRT
prospectus), or in the related Statements of Additional Information, which are
available upon request.
THE HRT'S INVESTMENT ADVISER
The HRT is advised by Alliance Capital Management L.P. (ALLIANCE), which is
registered with the SEC as an investment adviser under the Investment Advisers
Act of 1940 (the "Advisers Act"). Alliance, a publicly-traded limited
partnership, is indirectly majority-owned by Equitable. On December 31, 1996,
Alliance was managing over $182.8 billion in assets. Alliance acts as 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, endowments funds, insurance companies, foreign
entities, qualified and non-tax qualified corporate funds, public and private
pension and profit-sharing plans, foundations and tax-exempt organizations.
Alliance's main office is located at 1345 Avenue of the Americas, New York, New
York 10105.
THE EQAT'S MANAGER AND INVESTMENT ADVISERS
The EQAT is managed by EQ Financial Consultants, Inc. ("Manager"). The Manager
has overall responsibility for the general management of EQAT. The Manager is an
investment adviser registered under the Advisers Act. The Manager currently
furnishes specialized investment advice to other clients, including individuals,
pension and profit-sharing plans, trusts, charitable organizations,
corporations, and other business entities. The Manager is a Delaware corporation
and an indirect, wholly-owned subsidiary of Equitable.
The Manager is responsible for, among other things, selecting the investment
advisers for EQAT's Portfolios, and evaluating and monitoring the investment
programs and results of the advisers for each EQAT Portfolio.
Each EQAT Adviser makes investment decisions on behalf of its EQAT Portfolio(s),
and places all orders for the purchase and sale of investments for the
Portfolio's account.
Rowe Price-Fleming International, Inc., T. Rowe Price Associates, Inc., Putnam
Investment Management, Inc., Massachusetts Financial Services Company, Morgan
Stanley Asset Management, Inc., Warburg, Pincus Counsellors, Inc. and Merrill
Lynch Asset Management, L.P. serve as the investment advisers (each an "EQAT
Adviser" and together the "EQAT Advisers") to one or more of the EQAT
portfolios. Each EQAT Adviser is a well-known investment adviser and mutual fund
manager in the U.S. and/or Europe. Additional information regarding each EQAT
Adviser appears in the EQAT prospectus, attached at the end of this prospectus.
INVESTMENT POLICIES OF THE TRUSTS' 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 portfolios are as follows:
8
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT POLICY OBJECTIVE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FIXED INCOME SERIES:
DOMESTIC FIXED INCOME:
- ----------------------
ALLIANCE MONEY Primarily high quality short-term money market High level of current income while
MARKET................... instruments. preserving assets and maintaining liquidity.
ALLIANCE INTERMEDIATE Primarily debt securities issued or guaranteed by the High current income consistent with
GOVERNMENT U.S. Government, its agencies and instrumentalities. relative stability of principal.
SECURITIES............... 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.
ALLIANCE QUALITY BOND.... Primarily investment grade fixed-income securities. High current income consistent with
preservation of capital.
AGGRESSIVE FIXED
INCOME:
ALLIANCE HIGH YIELD...... Primarily a diversified mix of high yield, High return by maximizing current income
fixed-income securities involving greater volatility and, to the extent consistent with that
of price and risk of principal and income than high objective, capital appreciation.
quality fixed-income securities. The medium and
lower quality debt securities in which the Portfolio
may invest are known as "junk bonds."
- ------------------------------------------------------------------------------------------------------------------------------------
EQUITY SERIES:
DOMESTIC EQUITY:
- ----------------
T. ROWE PRICE EQUITY Primarily dividend paying common stocks of Substantial dividend income and also
INCOME................... established companies. capital appreciation.
EQ/PUTNAM GROWTH & Primarily common stocks that offer potential for Capital growth and, secondarily, current
INCOME VALUE ............ capital growth and may, consistent with the income.
Portfolio's investment objective, invest in common
stocks that offer potential for current income.
ALLIANCE GROWTH & Primarily income producing common stocks and High total return through a combination of
INCOME................... securities convertible into common stocks. current income and capital appreciation.
ALLIANCE 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 and Separate Account annual
aggregate, approximate the performance results of the expenses) that approximates the investment
Index. performance of the Index (including
reinvestment of dividends) at a risk level
consistent with that of the Index.
MERRILL LYNCH BASIC Securities, primarily equities, that the Portfolio Capital appreciation and, secondarily,
VALUE EQUITY............. adviser believes are undervalued and therefore income.
represent basic investment value.
ALLIANCE COMMON Primarily common stock and other equity-type Long-term growth of capital and increasing
STOCK.................... instruments. income.
MFS RESEARCH............. A substantial portion of assets invested in common Long-term growth of capital and future
stock or securities convertible into common stock of income.
companies believed by the Portfolio adviser to possess
better than average prospects for long-term growth.
INTERNATIONAL EQUITY:
- ---------------------
ALLIANCE GLOBAL.......... Primarily equity securities of non-United States as Long-term growth of capital.
well as United States companies.
ALLIANCE INTERNATIONAL... Primarily equity securities selected principally to Long-term growth of capital.
permit participation in non-United States companies
with prospects for growth.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT POLICY OBJECTIVE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTERNATIONAL EQUITY: (CONT)
- ---------------------
T. ROWE PRICE Primarily common stocks of established non-United Long-term growth of capital.
INTERNATIONAL STOCK...... States companies.
MORGAN STANLEY Primarily equity securities of emerging market country Long-term capital appreciation.
EMERGING MARKETS EQUITY.. issuers with a focus on those in which the Portfolio
adviser believes the economies are developing strongly
and in which the markets are becoming more sophisticated.
AGGRESSIVE EQUITY:
- ------------------
ALLIANCE AGGRESSIVE Primarily common stocks and other equity-type Long-term growth of capital.
STOCK.................... securities issued by medium and other smaller sized
companies with strong growth potential.
WARBURG PINCUS SMALL Primarily a portfolio of equity securities of small Long-term capital appreciation.
COMPANY VALUE............ capitalization companies (i.e., companies having
market capitalizations of $1 billion or less at the time
of initial purchase) that the Portfolio adviser considers
to be relatively undervalued.
ALLIANCE SMALL CAP Primarily U.S. common stock and other equity-type Long-term growth of capital.
GROWTH................... securities issued by smaller companies with favorable
growth prospects.
MFS EMERGING Primarily in common stocks of emerging growth Long-term growth of capital.
GROWTH COMPANIES......... companies that the Portfolio adviser believes are early
in their life cycle but which have the potential to
become major enterprises.
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET ALLOCATION SERIES:
ALLIANCE CONSERVATIVE Diversified mix of publicly-traded, fixed-income and High total return without, in the adviser's
INVESTORS................ equity securities; asset mix and security selection are opinion, undue risk to principal.
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.
EQ/PUTNAM BALANCED....... A well-diversified portfolio of stocks and bonds that Balanced investment.
will produce both capital growth and current income.
ALLIANCE BALANCED........ Primarily common stocks, publicly-traded debt High return through a combination of
securities and high quality money market instruments. current income and capital appreciation.
The Portfolio is generally expected to hold 50% of its
assets in equity securities and 50% in fixed-income
securities.
ALLIANCE GROWTH Diversified mix of publicly-traded, fixed-income and High total return consistent with the
INVESTORS................ equity securities; asset mix and security selection adviser's determination of reasonable risk.
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.
MERRILL LYNCH WORLD Primarily equity and fixed-income securities, including High total investment return.
STRATEGY................. convertible securities, of U. S. and foreign issuers.
</TABLE>
Because you may invest Policy Account values in the Fund options described
above, Survivorship 2000 offers an opportunity for the Policy Account 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 Policy Account value may not appreciate as rapidly and indeed,
may decrease in value.
THE GUARANTEED INTEREST ACCOUNT
You may allocate some or all of your Policy Account to the Guaranteed Interest
Account, which is funded by our general account and pays interest at a declared
rate guaranteed for each policy year. The principal, after deductions, is also
guaranteed. The general account supports our insurance and annuity guarantees,
including the Guaranteed Interest Account, as well as our general obligations.
The
10
<PAGE>
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
generally subject to regulation under these Acts. 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 law relating
to the accuracy and completeness of statements made in prospectuses.
AMOUNTS IN THE GUARANTEED INTEREST ACCOUNT. You may accumulate amounts in the
Guaranteed Interest Account by allocating net premiums and loan repayments to
that Account, transferring amounts from the Funds to the Guaranteed Interest
Account or earning interest on amounts you already have 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 in
Part 2 of this prospectus. 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.
The amount you have in the Guaranteed Interest Account at any time is the sum of
all net premiums and loan repayments allocated to that Account, all transfers
into that Account (including amounts securing any policy loan or Living Benefit
payment) plus earned interest, less amounts transferred out or withdrawn, and
monthly deductions allocated to, that Account.
ADDING INTEREST IN THE GUARANTEED INTEREST ACCOUNT. We pay a declared interest
rate on all amounts that you have in the Guaranteed Interest Account. At policy
issuance, and prior to each policy anniversary, we declare the rates that will
apply to amounts in the Guaranteed Interest Account for the following policy
year. Different rates may apply to policies currently being issued and
previously issued policies. These annual interest rates will never be less than
the minimum guaranteed interest rate of 4% (before deductions). Different rates
are also paid on unloaned and loaned amounts in the Guaranteed Interest Account.
We reserve the right to declare higher interest rates for higher Face Amount
policies. See POLICY LOAN INTEREST in Part 2 of this prospectus. Amounts
securing a Living Benefit payment are considered unloaned amounts for purposes
of crediting interest.
Interest is compounded daily at an effective annual rate that equals the
declared rate for each policy year. We credit interest on unloaned amounts in
the Guaranteed Interest Account at the end of each policy month. Interest is
credited on any loaned amount in the Guaranteed Interest Account on each policy
anniversary and at any time you repay a policy loan in full. Credited interest
on the loaned amount is allocated to the Funds and to the unloaned portion of
the Guaranteed Interest Account in accordance with your premium allocation
percentages.
TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT. Once during each policy year,
you may request a transfer from your unloaned amount in the Guaranteed Interest
Account to one or more of the Funds. If we receive your transfer request within
30 days prior to your policy anniversary, the transfer will be made on your
policy anniversary. If we receive your request on or within 30 days after your
policy anniversary, the transfer will be made as of the date we receive your
request. You may transfer up to 25% of your unloaned value in the Guaranteed
Interest Account as of the transfer date or the minimum transfer amount shown in
your policy, whichever is more. The minimum transfer amount is the minimum
transfer amount shown in the policy or your total unloaned value in the
Guaranteed Interest Account on the transfer date, whichever is less. Amounts
securing a Living Benefit payment may not be transferred from the Guaranteed
Interest Account.
11
<PAGE>
PART 2: DETAILED INFORMATION ABOUT SURVIVORSHIP 2000
FLEXIBLE PREMIUMS
You may choose the amount and frequency of premium payments, as long as they are
within the limits described below. We determine the applicable minimum initial
premium based on the age, sex, rating class and smoker/non-smoker status of each
of the insured persons, the initial Face Amount of the policy (the minimum Face
Amount is $200,000) and any additional benefits selected. In certain situations,
however, no distinction is made based on the sex of either insured person. See
COST OF INSURANCE CHARGE in Part 2 of this prospectus. You may choose to pay a
higher initial premium.
The minimum initial premium must be paid on or before the date on which the
policy is delivered to you. No insurance under your policy will take effect (a)
until a policy is delivered and the minimum initial premium is paid while the
persons proposed to be insured are 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. See POLICY PERIODS, ANNIVERSARIES, DATES
AND AGES in Part 2 of this prospectus.
Your first premium payment should be given to your agent or broker and must be
by check or money order drawn on a U.S. bank in U.S. dollars and made payable to
Equitable. Any additional premiums must be sent directly to our Administrative
Office. We will not accept cash payments. If you have submitted the full initial
premium with your application, we may, subject to certain conditions, provide a
limited amount of temporary insurance on the proposed insureds. You may review a
copy of our Temporary Insurance Agreement on request.
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 the Funds 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 Information Page of your policy
(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 in Part 2 of
this prospectus.
Until the Allocation Date, any net premiums allocated to a Fund will be
allocated to the Money Market Fund, and all monthly charges allocable to the
Separate Account will be deducted from the Money Market Fund. On the Allocation
Date, amounts in the Money Market Fund will be allocated to the Funds in
accordance with your policy application. See TRANSFERS OF POLICY ACCOUNT VALUE
in Part 2 of this prospectus and POLICY PERIODS, ANNIVERSARIES, DATES AND AGES
in Part 2 of this prospectus. 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. See
TRANSFERS OF POLICY ACCOUNT VALUE in Part 2 of this prospectus.
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 after such date.
Although premiums are flexible, page 3 of your policy (the Policy Information
Page) will show a "planned" periodic premium. You determine the planned premium
(within limits set by us) when you apply for the policy. The planned premium is
not necessarily designed to equal the amount of premium that will keep your
policy in effect. You may make or skip a planned premium. We will send premium
notices if you selected annual, semi-annual or quarterly planned premiums.
The Policy Information Page will also show a "specified premium" if the policy's
guaranteed minimum death benefit provision is available in your state. This
specified premium is what we refer to in this prospectus as the guaranteed
minimum death benefit premium. We measure actual premium payments against these
hypothetical premiums in order to determine whether your policy is in default
when the Net Cash Surrender Value is insufficient to pay monthly charges in any
month. These are not required premium payments. See YOUR POLICY CAN TERMINATE in
Part 2 of this prospectus.
The guaranteed minimum death benefit premium is actuarially determined at issue
based on the age, sex, smoker status and rating class of the insured persons.
The guaranteed minimum death benefit premium will change if you request a Face
Amount decrease, add or eliminate a rider, or if there is a change in either
insured person's rating or smoker classification. We reserve the right to limit
the amount of any premium payments you make which are in addition to your
guaranteed minimum death benefit premium.
Generally, premiums may be paid at any time and in any amount, as long as each
payment is at least $100. (Policies issued in some states or automatic payment
plans may require different minimum premium payments.) Except for Texas
policyowners, this minimum may be increased if we give you 90 days written
notice. We may return premium payments if we determine that they would cause
your policy to become a modified endowment contract or to cease to qualify as
life insurance under Federal income tax law. We may also make such changes to
the policy as we deem necessary to continue to qualify the policy as life
insurance. See TAX EFFECTS in Part 2 of this prospectus for an explanation of
modified endowment contracts, the special tax consequences of such contracts,
and how your policy might become a modified endowment contract.
DEATH BENEFITS
We pay a benefit to the beneficiary of the policy when the last surviving
insured person dies. This benefit will be equal to the death benefit under your
policy plus any additional benefits included in your policy and then due, less
any unpaid policy loan, any lien securing a Living Benefit payment and accrued
interest. If the last surviving insured person dies during a grace period we
will also deduct any overdue monthly deductions.
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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 variable death benefit equal to the policy's Face Amount
PLUS the amount in your Policy Account on the day the last surviving insured
person dies. Under Option B, the value of the benefit is variable and
fluctuates with the amount in your Policy Account.
Policyowners who prefer to have favorable investment experience reflected in
increased insurance coverage should choose Option B. Policyowners who prefer to
have insurance coverage that generally does not vary in amount and lower cost of
insurance charges should choose Option A.
Under both options, a higher death benefit may apply. This higher death benefit
is a percentage multiple of the amount in your Policy Account. The percentage is
designed to ensure that the policy meets the provisions of Federal tax law which
require a minimum death benefit in relation to cash value for your policy to
qualify as life insurance. We may apply a higher percentage multiple than that
required by Federal tax law. This means that when the death benefit is
calculated using those higher percentage multiples, the benefit will be higher
than that otherwise necessary to continue to qualify your policy as life
insurance. See TAX EFFECTS in Part 2 of this prospectus. 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 last surviving insured person dies times a percentage based on the younger
insured person's age (nearest birthday) at the beginning of the policy year of
the last surviving insured person's death. The percentages decline with age and
are shown on the Policy Information Page of your policy.
The death benefit is guaranteed if the amount of premiums you've paid,
accumulated at 4% interest, less withdrawals, also accumulated at 4% interest,
is at least equal to a guaranteed minimum death benefit premium fund and any
policy loan does not exceed the Cash Surrender Value. In other words, 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, as
long as you have not withdrawn or overloaned those amounts. This guaranteed
minimum death benefit provision is not available in some jurisdictions,
including New York and New Jersey. You should check with your Equitable agent to
determine whether the guaranteed minimum death benefit is available in your
state.
CHANGES IN INSURANCE PROTECTION
REDUCING THE FACE AMOUNT. You may request a Face Amount decrease anytime after
the first policy year by sending a signed written request to our Administrative
Office. Any change will be subject to our approval. 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. Our current procedure is to
disapprove a requested decrease if it would cause a death benefit based upon the
Policy Account percentage multiple to apply. See DEATH BENEFITS in Part 2 of
this prospectus. See TAX EFFECTS in Part 2 of this prospectus for the tax
consequences of reducing the Face Amount. If you reduce the Face Amount while
the Estate Protector rider is in effect, the face amount of that rider will
generally be reduced proportionately. See ADDITIONAL BENEFITS MAY BE AVAILABLE
in Part 2 of this prospectus. Monthly deductions from your Policy Account for
the cost of insurance will generally decrease, beginning on the date the
reduction in Face Amount takes effect.
CHANGING THE DEATH BENEFIT OPTION. At any time after the first policy year while
your policy is in force, you may request a change in the death benefit option by
sending a signed written request to our Administrative Office. See TAX EFFECTS
in Part 2 of this prospectus 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. 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.
o If you change from OPTION B TO OPTION A, the Face Amount of insurance will be
increased by the amount in the Policy Account on the date of the change.
These increases and decreases in Face Amount are made so that the amount of the
death benefit remains the same on the date of the change. When the death benefit
remains the same, there is no change in the net amount at risk, which is the
amount on which cost of insurance charges are based. See DEDUCTIONS FROM YOUR
POLICY ACCOUNT -- COST OF INSURANCE CHARGE in Part 2 of this prospectus. If your
death benefit is determined by a percentage multiple of the Policy Account,
however, the new Face Amount will be determined differently.
WHEN POLICY CHANGES GO INTO EFFECT. A reduction in Face Amount or change in
death benefit option will go into effect at the beginning of the policy month
that coincides with or follows the date we approve the request for the change.
In some cases we may not approve a change because it might disqualify your
policy as life insurance under applicable Federal income tax law. In other cases
there may be tax consequences as a result of the change. See TAX EFFECTS in Part
2 of this prospectus.
MATURITY BENEFITS
If either or both of the insured persons are still living on the policy
anniversary nearest the younger insured person's 100th birthday (the Maturity
Date), we will pay you a benefit in an amount equal to the Net Cash Surrender
Value as of the Maturity Date, less 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 in Part 2 of this prospectus
and YOUR PAYMENT OPTIONS in Part 3 of this prospectus.
LIVING BENEFIT OPTION
Subject to regulatory approval in your state and our underwriting guidelines,
our Living Benefit rider will be included with your policy at issue. The Living
Benefit rider enables the policyowner to receive a portion of the policy's death
benefit (excluding death benefits payable under cer-
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tain riders) if the sole surviving insured has a terminal illness. Certain
eligibility requirements apply when you submit a Living Benefit claim (for
example, satisfactory evidence of less than six-month life expectancy). There is
no additional charge for the rider, but we will deduct an administrative charge
of up to $250 from the proceeds of the Living Benefit payment. In addition, if
you tell us that you do not wish to have the rider added at issue, but you later
ask to add it, additional underwriting will be required and there will be a $100
administrative charge.
When a Living Benefit claim is paid, Equitable establishes a lien against the
policy. The amount of the lien is the sum of the Living Benefit payment and any
accrued interest on that payment. Interest will be charged at a rate equal to
the greater of: (i) the yield on a 90-day Treasury bill and (ii) the maximum
adjustable policy loan interest rate permitted in the state your policy is
delivered. See BORROWING FROM YOUR POLICY ACCOUNT -- POLICY LOAN INTEREST in
Part 2 of this prospectus.
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 in Part 1
of this prospectus. This liened amount will not be available for loans,
transfers or partial withdrawals. Any death benefit, maturity benefit or Net
Cash Surrender Value payable upon policy surrender will be reduced by the amount
of the lien.
The receipt of a Living Benefit payment may be able to qualify for exclusion
from income tax. See TAX EFFECTS in Part 2 of this prospectus. Consult your tax
adviser. Receipt of a Living Benefit payment may also affect a policyowner's
eligibility for certain government benefits or entitlements. You should contact
your Equitable agent if you wish to make a claim under the rider.
ADDITIONAL BENEFITS MAY BE AVAILABLE
Your policy may include additional benefits. These benefits are subject to our
rules. More details will be included in your policy if you choose any of these
benefits. The following additional benefits are currently available:
o ESTATE PROTECTOR RIDER under which an additional benefit is payable during
the first four policy years if both insured persons die during this period. A
monthly charge will be deducted from the Policy Account for this rider. This
rider may not be cancelled but will automatically terminate four years from
the policy's Register Date or the date the policy terminates, whichever is
earlier.
o OPTION TO SPLIT UPON DIVORCE RIDER permits you to split the Survivorship 2000
policy into two other individual life insurance policies upon divorce,
without evidence of insurability. A monthly charge will be deducted from the
Policy Account for this rider. Certain conditions, as described in the rider,
must be met before the rider's benefit can be exercised.
o OPTION TO SPLIT UPON FEDERAL TAX LAW CHANGE RIDER also permits you to split
the Survivorship 2000 policy into two other individual life insurance
policies, without evidence of insurability, if certain Federal tax law
changes occur. These changes are described in the rider. There is no charge
for this rider.
See TAX EFFECTS -- RIDERS in Part 2 of this prospectus for possible tax
consequences of splitting a Survivorship 2000 policy.
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 various Funds. Your Policy Account also
reflects various charges. See DEDUCTIONS AND CHARGES in Part 2 of this
prospectus.
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 the New York
Stock Exchange is open for trading.
A transaction date is the day we perform automatic transactions, such as policy
anniversary reports and monthly charge deductions, or process requested
transactions, such as remittances, disbursements and transfers. If your request
for a policy transaction is not accompanied by complete information or is
directed to the wrong address, the transaction date will be the date we receive
such complete information at our administrative office. If your request for a
policy transaction reaches our administrative office on a day we are closed, or
after the New York Stock Exchange closes, the transaction date will be the next
following business day.
The unit value that applies to a transaction will be the unit value calculated
at the close of business on the transaction date. When an automatic transaction
is scheduled on a non-business day, the unit value applied will be the unit
value calculated for the next business day. 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 every business day as
follows: first, we take the net asset value of a share in the corresponding
Trust portfolio at the close of business that day, as reported by the Trust, and
we add the per share amount of any dividends or capital gains distributions paid
by the Trust on that day. We divide this amount by the per share net asset value
on the preceding business day. Then, we subtract a daily mortality and expense
risk charge for each calendar day between business days (for example, a Monday
calculation will include charges for Saturday, Sunday and Monday). The daily
mortality and expense risk charge is guaranteed not to exceed the current annual
rate of .90%. See CHARGE AGAINST THE SEPARATE ACCOUNT in Part 2 of this
prospectus. Finally, we reserve the right to subtract any daily charge for taxes
or amounts set aside as a reserve for taxes. For current Survivorship 2000 unit
values, call (212) 314-3310.
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TRANSFERS OF POLICY ACCOUNT VALUE. You may request a transfer of amounts from
any Fund to any other Fund 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 in Part 1 of this prospectus. 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 in Part 2 of this prospectus.
The minimum amount which may be transferred on any date will be shown on the
Policy Information Page and is usually $500. This minimum need not come from any
one Fund or be transferred to any one Fund as long as the total amount
transferred that day, including any amount transferred to or from the Guaranteed
Interest Account, is at least equal to the minimum. However, we will transfer
the entire amount in any Fund even if it is less than the minimum specified in
your policy. A lower minimum amount applies to our Automatic Transfer Service,
which is described below.
Transfers take effect on the date we receive your request, but no earlier than
the first business day following the Allocation Date. When part of a transfer
request cannot be processed, we will not process any part of the request. This
could occur, for example, where the request does not comply with our transfer
limitations, or where the request is for a transfer of an amount greater than
currently allocated to that fund. We may delay making a transfer if the New York
Stock Exchange is closed or the SEC has declared that an emergency exists. In
addition, we may delay transfers where permitted under applicable law.
AUTOMATIC TRANSFER SERVICE. The Automatic Transfer Service enables you to make
automatic monthly transfers out of the Alliance Money Market Fund into the other
Funds.
To start using this service you must first complete a special election form that
is available from your agent or our Administrative Office. You must also have a
minimum of $5,000 in the Alliance Money Market Fund on the date the Automatic
Transfer Service is scheduled to begin. You can elect up to eight Funds for
monthly transfers, but the minimum amount that may be transferred to each Fund
each month is $50.
If you elect the Automatic Transfer Service with your policy application, the
automatic transfers will begin in the second policy month following the
Allocation Date. If you elect the Automatic Transfer Service after your
application has been submitted, automatic transfers will begin on the next
monthly processing date after we receive your election form at our
Administrative Office. See POLICY PERIODS, ANNIVERSARIES, DATES AND AGES in Part
2 of this prospectus.
The Automatic Transfer Service will remain in effect until the earliest of the
following events: (1) the amount in the Money Market Fund is insufficient to
cover the automatic transfer amount; (2) the policy is in a grace period; (3) we
receive at our Administrative Office your written instruction to cancel the
Automatic Transfer Service; or (4) we receive notice of the sole surviving
insured's death under the policy.
Using the Automatic Transfer Service does not guarantee a profit or protect
against loss in a declining market.
TELEPHONE TRANSFERS. In order to make a transfer by telephone, each policyowner
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. The transfer will be processed based on the Fund's 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. 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. You will be able to
make 12 free transfers in any policy year, but we will charge $25 per transfer
after the twelfth transfer. All transfers made on one transfer request form will
count as one transfer, and all transfers made in one telephone request will
count as one transfer. Transfers made through the Automatic Transfer Service or
on the Allocation Date will not count toward the twelve free transfers. No
charge will ever apply to the transfer of all of your amounts in the Separate
Account to the Guaranteed Interest Account.
BORROWING FROM YOUR POLICY ACCOUNT
You may borrow up to 90% of your policy's Cash Surrender Value using only your
policy as security for the loan. Any new loan must be at least the minimum
amount shown on the Policy Information Page, usually $500. If you request an
additional loan, the additional amount requested will be added to the amount of
any 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
requested loan you want taken from your unloaned amount in the Guaranteed
Interest Account and how much you want taken from your amounts in 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 the loan, it will be allocated
according to the deduction allocation percentages applicable to your Policy
Account. See FLEXIBLE PREMIUMS in Part 2 of this prospectus. If the loan cannot
be allocated based on these percentages, it will be allocated based on the
proportions that your unloaned amounts in the Guaranteed Interest Account and
your value in each Fund bear to the unloaned value of your Policy Account.
POLICY LOAN INTEREST. Interest on a policy loan accrues daily at an adjustable
interest rate. We determine the rate at the beginning of each policy year. The
same rate applies to any outstanding policy loan and any additional 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%. Your
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.
Loaned amounts will earn interest at a lower rate than the rate you are charged
for policy loan interest. Currently the rate we credit on loaned amounts is 1%
less than the rate we charge for policy loan interest. Beginning in the
twenty-first policy year, the rate we currently credit on loaned amounts is 1/2
of 1% less than the rate we charge for policy loan interest. Because
Survivorship 2000 was offered for the first time in 1992, no reduction in the
loan spread in the twenty-first policy year has yet been attained. These loan
spreads are those currently in effect and are not guaranteed. However, the
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 anytime 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 and
allocated based on the deduction allocation percentages for your Policy Account
which are then in effect. This means an additional loan is made to pay the
interest and amounts are transferred from the Funds to make the loan. If the
interest cannot be allocated on this basis, it will be allocated as described
above for allocating your loan.
REPAYING THE LOAN. You may repay all or part of a policy loan at any time while
your policy is in force. While you have a policy loan and your policy is not in
grace, we assume that any money you send us is meant to repay the loan. If you
wish to have any of these payments applied as premium payments, you must
specifically so indicate in writing at the time you make your payment. 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 loan originally allocated to that
Account has been repaid. After you have repaid this amount, you may choose how
you want us to allocate the balance of any additional repayments. If you do not
provide specific instructions, repayments will be allocated on the basis of your
premium allocation percentages.
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 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 last surviving insured person, maturity or
policy surrender. In addition, a loan will reduce the amount available for you
to withdraw from your policy. 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 the monthly deductions. See YOUR POLICY CAN TERMINATE
and TAX EFFECTS in Part 2 of this prospectus for the tax consequences of a
policy loan.
PARTIAL WITHDRAWALS AND SURRENDER
PARTIAL WITHDRAWALS. At any time after the first policy year while either of the
insured persons 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 withdrawn, whichever is less, will be deducted from your Policy
Account. Any such withdrawal is subject to our approval and to certain
conditions. Amounts securing a Living Benefit payment are not available for
partial withdrawals. In addition, we reserve the right to decline a request for
a partial withdrawal. Under our current rules, a withdrawal must:
o be at least $500,
o not cause the Face Amount to fall below the minimum 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.
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ALLOCATION OF PARTIAL WITHDRAWALS AND CHARGES. You may specify how much of the
withdrawal you want taken from amounts you have in each Fund and the unloaned
portion of the Guaranteed Interest Account. The related expense charge will also
be deducted from the amount withdrawn. If you do not specifically indicate, we
will make the withdrawal and deduct the related expense charge on the basis of
your deduction allocation percentages. If we cannot make the withdrawal and
deduct the expense charge in the manner described above, we will make the
withdrawal and deduction 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.
THE EFFECTS OF A PARTIAL WITHDRAWAL. A partial withdrawal reduces the amount you
have in your Policy Account and your Net Cash Surrender Value on a
dollar-for-dollar basis. Normally, it also reduces the death benefit on a
dollar-for-dollar basis, but does not affect the net amount at risk, which is
the difference between the current death benefit and the amount in your Policy
Account. If you selected death benefit Option A, the Face Amount of your policy
will generally be reduced so that there will be no change in the net amount at
risk. However, under either option, if the death benefit is based on the Policy
Account percentage multiple, the reduction in death benefit would be greater and
the net amount at risk would be reduced. See DEATH BENEFITS in Part 2 of this
prospectus. The partial withdrawal and these reductions will be effective as of
the date your withdrawal request is received at our Administrative Office. See
TAX EFFECTS in Part 2 of this prospectus for the tax consequences of a reduction
in benefits or a partial withdrawal.
SURRENDER FOR NET CASH SURRENDER VALUE. You may surrender your policy for its
Net Cash Surrender Value (Policy Account minus any loan and accrued loan
interest) at any time while either of the insured persons are living. We will
deduct from the Net Cash Surrender Value any amount securing a Living Benefit
payment. You may surrender the policy by sending a written request and the
policy to our Administrative Office. We will compute the Net Cash Surrender
Value as of the date we receive your request and the policy at our
Administrative Office. All insurance coverage under your policy will end on that
date. See TAX EFFECTS in Part 2 of this prospectus for the tax consequences of a
policy surrender.
DEDUCTIONS AND CHARGES
DEDUCTIONS FROM YOUR 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 other 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. Any change will take effect on the next policy anniversary, if
received at least 60 days prior to the policy anniversary.
Premium Sales Charge. This charge is intended to compensate us in part for sales
and promotional expenses in connection with selling Survivorship 2000, such as
commissions, advertising, and the cost of preparing and printing sales
literature and prospectuses. We pay these expenses from our own resources,
including the Premium Sales Charge and any profit we may earn on other charges
deducted under the policy, such as the mortality and expense risk charge.
The Premium Sales Charge in the first policy year is equal to 30% of premiums
paid up to one "target premium," plus 3% of premiums paid in excess of the
target premium in that year. The target premium is actuarially determined based
upon the age, sex and smoker status of each of the insured persons. If your
policy has a guaranteed minimum death benefit provision, a target premium equals
one guaranteed minimum death benefit premium at issue, excluding premiums for
riders and substandard ratings. The target premium is established at issue, and
will be reduced if you request a Face Amount decrease or if there is a change
from smoker to non-smoker status of an insured person. See COST OF INSURANCE
CHARGE on the next page.
If you paid at least one target premium in the first policy year, the Premium
Sales Charge in each subsequent year is equal to 7.5% (6% for joint insureds
whose combined issue ages equal 134 or more) of premiums paid up to one target
premium, plus 3% of premiums paid in excess of the target premium in each year.
If you paid less than one target premium in the first policy year, the Premium
Sales Charge in the second, third and fourth policy years is equal to 7.5% (6%
for joint insureds whose combined issue ages equal 134 or more) of premiums paid
up to the lesser of one target premium or the highest amount of premiums paid in
any prior year, plus 30% on premiums paid in excess of this amount until
premiums paid in that year equal the target premium, plus 3% of premiums paid in
excess of the target premium in that year. The Premium Sales Charge in policy
years five and later is 7.5% (6% for joint insureds whose combined issue ages
equal 134 or more) of premiums paid up to one target premium, plus 3% of
premiums paid in excess of the target premium in each year.
Equitable currently intends to stop deducting the Premium Sales Charge at the
end of the twentieth policy year. However, this is our current intention and is
not guaranteed.
Paying less than one target premium in each of the first four policy years or
paying more than one target premium in any policy year (including the first
year) could reduce the policyowner's total Premium Sales Charge. For an example
of the latter, assume that the target premium is $10,000 and that the
policyowner would like to pay ten target premiums in a way that does not cause
the policy to become a modified endowment contract. If the policyowner paid
$20,000 (i.e., two times the amount of the target premium) in every other policy
year up to the ninth policy year, the total Premium Sales Charge would be
$7,500. If, however, the policyowner paid $10,000 in each of the first ten
policy years, the total Premium Sales Charge would be $9,750.
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Attempting to structure the timing and amount of premium payments to reduce the
potential Premium Sales Charge is not recommended as it could increase the risk
that your policy will terminate without value. Remember, a target premium is
generally the equivalent of a guaranteed minimum death benefit premium.
Therefore, delaying the payment of target premiums to later years could
adversely effect the availability of the guaranteed minimum death benefit
provision if, as a result of the delay, actual premium payments were less than
the accumulation of guaranteed minimum death benefit premiums. If the policy's
guaranteed minimum death benefit provision is not in effect and the Net Cash
Surrender Value is insufficient to pay monthly deductions, the policy will lapse
unless a required premium payment is made. See YOUR POLICY CAN TERMINATE in Part
2 of this prospectus. In addition, any acceleration of premium payments to early
years should take into account the modified endowment seven-pay premium limit.
If at any time the aggregate premiums paid exceed the policy's cumulative
seven-pay limit, the policy will become a modified endowment and the policyowner
may incur adverse tax consequences when distributions are made. See TAX EFFECTS
in Part 2 of this prospectus.
DEDUCTIONS FROM YOUR POLICY ACCOUNT. At the beginning of each policy month, the
following charges are deducted from your Policy Account:
Monthly Administrative Charges. $0.07 per $1,000 of Face Amount during the first
policy year, plus a $6 per month charge in each policy year to compensate us for
administrative activities in connection with issuing and maintaining your
policy, such as billing, policy transactions and policyowner communications. We
may increase this latter charge, but we guarantee that it will never exceed $8
per month. All administrative charges are designed to reimburse us for expenses,
and we do not expect to profit from them.
Cost Of Insurance Charge. The cost of insurance charge is calculated by
multiplying the net amount at risk at the beginning of the policy month by the
monthly cost of insurance rate applicable to the insured persons at that time.
The net amount at risk is the difference between the current death benefit and
the amount in your Policy Account. We may earn a profit from this charge.
Your cost of insurance charge will vary from month to month with changes in the
net amount at risk. For example, if the current death benefit for the month is
increased because the death benefit is based on a percentage multiple of the
Policy Account, then the net amount at risk for the month will increase.
Assuming the percentage multiple is not in effect, increases or decreases to the
Policy Account will result in a corresponding decrease or increase to the net
amount at risk under Option A policies, but no change to the net amount at risk
under Option B policies. Increases or decreases to the Policy Account can result
from making premium payments, investment experience or the deduction of charges.
The monthly cost of insurance rate applicable to your policy will be based on
our current monthly cost of insurance rates. The current monthly cost of
insurance rates may be changed from time to time. However, the current rates
will never be more than the guaranteed maximum rates set forth in your policy.
The guaranteed rates are based on the Commissioner's 1980 Standard Ordinary Male
and Female, Smoker and Non-Smoker Mortality Tables. The current monthly cost of
insurance rates are determined based on the sex, age, rating class and
smoker/non-smoker status of each of the insured persons and the policy year.
Lower cost of insurance rates apply for insured persons who qualify as
non-smokers. To qualify, an insured person must meet additional requirements
that relate to smoking habits.
There will be no distinctions based on sex in the cost of insurance rates for
Survivorship 2000 policies sold in Montana and in other states for other special
circumstances. In these cases the references to sex in this prospectus should be
disregarded. Cost of insurance rates applicable to a policy issued with unisex
rates would not be greater than the comparable male rates set forth or
illustrated in this prospectus. Similarly, illustrated policy values in Part 4
would be no less favorable for comparable policies issued with unisex rates. The
guaranteed cost of insurance rates for Survivorship 2000 are based on the
Commissioner's 1980 Standard Ordinary SD Smoker and ND 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 and rating class.
Charges For Additional Benefits. The charges for any additional benefits you
choose will be deducted monthly. The amount and duration of these charges are
shown on the Policy Information Page.
Guaranteed Minimum Death Benefit Charge. One cent per $1,000 of Face Amount of
insurance is deducted monthly to compensate us for the risk we assume by
guaranteeing a death benefit, no matter how unfavorable investment experience
may be, as long as the accumulated premiums you've paid, less withdrawals,
exceed a guaranteed minimum death benefit premium fund and any policy loan does
not exceed the Cash Surrender Value. This charge will be deducted only for those
policies that contain a guaranteed minimum death benefit provision regardless of
whether the guaranteed minimum death benefit premiums are paid. See YOUR POLICY
CAN TERMINATE in Part 2 of this prospectus. This charge will be assessed as long
as your policy remains in force.
Any changes in the cost of insurance rates, charges for additional benefits,
Premium Sales Charge, mortality and expense risk charge or administrative
charges will be by class of insured persons 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.
In addition to the monthly deductions from your Policy Account described above,
we may charge fees for certain policy transactions. See PARTIAL WITHDRAWALS AND
SURRENDER, LIVING BENEFIT OPTION and TRANSFERS OF POLICY ACCOUNT VALUE in Part 2
of this prospectus for a description of policy transaction fees. Also, if you
request more than one illustration in a policy year, we may charge a fee. See
INDIVIDUAL ILLUSTRATIONS in Part 4 of this prospectus.
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 FLEXIBLE PREMIUMS in Part 2 of this prospectus. If a deduction
cannot be made in
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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.
CHARGE AGAINST THE SEPARATE ACCOUNT. This charge is reflected in the unit values
for the Funds of the Separate Account. See HOW WE DETERMINE THE UNIT VALUE in
Part 2 of this prospectus.
o A daily charge for assuming MORTALITY AND EXPENSE RISKS will be made. The
annual rate is .90%. We are committed to fulfilling our obligations under the
policy and providing service to you over the lifetime of your policy. Despite
the uncertainty of future events, we guarantee that monthly administrative
and cost of insurance deductions from your Policy Account will never be
greater than the maximum amounts shown in your policy. In making this
guarantee, we assume the mortality risk that insured persons will live for
shorter periods than we estimated. When this happens, we have to pay a
greater amount of death benefit than we expected to pay in relation to the
cost of insurance charges we received. We also assume the expense risk that
the cost of issuing and administering policies will be greater than we
expected. We make a charge for these mortality and expense risks at an
effective annual rate applied to the value of the assets in the Separate
Account attributable to Survivorship 2000. If the amount collected from this
charge exceeds losses from the risks assumed, it will be to our profit.
o We reserve the right to make a charge in the future for taxes or reserves set
aside for taxes, which will reduce the investment experience of the Funds.
See TAX EFFECTS in Part 2 of this prospectus.
CHARGES OF THE TRUSTS. The Funds purchase Class IA shares of the HRT or Class IB
shares of the EQAT, respectively, at net asset value. That price reflects
investment management fees, indirect expenses, such as brokerage commissions,
12b-1 distribution fee charges (for Class IB shares) and certain other operating
expenses. The Trusts do not impose a sales charge. See DEDUCTIONS AND CHARGES in
the Summary and THE HRT'S INVESTMENT ADVISER and THE EQAT'S MANAGER AND
INVESTMENT ADVISERS in Part 1 of this prospectus.
ADDITIONAL INFORMATION ABOUT SURVIVORSHIP 2000
YOUR POLICY CAN TERMINATE. Your insurance coverage will continue as long as the
Net Cash Surrender Value of the policy is enough to pay the monthly deductions.
If the Net Cash Surrender Value at the beginning of a policy month is less than
such deductions for that month, your policy will go into default unless the
operation of the guaranteed minimum death benefit provision results in a waiver
of the monthly deductions. The guaranteed minimum death benefit provision is not
available in some jurisdictions, including New York and New Jersey.
Under the guaranteed minimum death benefit provision, we compare the guaranteed
minimum death benefit premium fund with the actual premium fund in order to
determine whether your coverage remains in effect. If the actual premium fund is
equal to or greater than the guaranteed minimum death benefit premium fund and
any policy loan outstanding does not exceed the Cash Surrender Value, then
monthly deductions in excess of the Net Cash Surrender Value will be waived for
that policy month and the policy will not go into default. If there is a loan
outstanding that exceeds the Cash Surrender Value, the policy will be in
default. The policy will also be in default if the actual premium fund is less
than the guaranteed minimum death benefit premium fund.
The guaranteed minimum death benefit premium fund for any policy month is the
accumulation of all the "specified premiums" shown on the Policy Information
Page up to that month, at 4% interest. The actual premium fund for any policy
month is the accumulation of all the premiums actually paid under the policy at
4% interest, less all withdrawals accumulated at 4% interest.
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 approximate 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, decrease the Face Amount, make a partial withdrawal or
change the death benefit option.
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 assignees, at last known addresses, that
your policy has ended without value. See TAX EFFECTS in Part 2 of this
prospectus for the potential tax consequences of a policy termination.
YOU MAY RESTORE A POLICY AFTER IT TERMINATES. Subject to certain state
variations, you may restore a policy within six months after it terminates if
the insured persons who were living on the date the policy terminates are still
alive, you provide evidence of insurability on those insured persons that is
satisfactory to us, 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 date of
default 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
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date of restoration will be deducted from the Policy Account. See TAX EFFECTS in
Part 2 of this prospectus for the potential tax consequences of restoring a
terminated policy. Some states may vary the time period and conditions of policy
restoration.
POLICY PERIODS, ANNIVERSARIES, DATES AND AGES. When the applications for a
Survivorship 2000 policy are completed and submitted to us, we decide whether or
not to issue the policy. This decision is made based on the information in the
applications and our standards for issuing insurance and classifying risks. If
we decide not to issue a policy, we will either refund any premium paid or
reinstate a prior policy.
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, months and anniversaries (annual and monthly). Charges and
deductions under the policy are first made as of the Register Date. As to when
coverage under the policy begins, see FLEXIBLE PREMIUMS in Part 2 of this
prospectus.
Generally, we determine the Register Date based upon when we receive your
minimum initial premium. In most cases:
o If you submit at least the 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 a payment equal to or greater than the minimum initial
premium at our Administrative Office before the Issue Date or, if the policy
is not issued as applied for, the Register Date will be the same as the Issue
Date.
An early Register Date may be permitted for employer-sponsored cases in order to
accommodate a common Register Date for all employees. An early Register Date may
also be permitted to provide a younger age at issue. We may also permit
policyowners to delay a Register Date (up to three months) in employer-sponsored
cases.
The investment start date is the date that your initial net premium begins to
vary with the investment performance of the Funds or accrue interest in the
Guaranteed Interest Account. Generally, the investment start date will be the
same as the Register Date if the minimum initial premium is received at our
Administrative Office before the Register Date. Otherwise, the investment start
date will be the date the full minimum initial premium is received at our
Administrative Office. Thus, to the extent that your first premium is received
before the Register Date, there will be a period during which the initial
premium will not be experiencing investment performance. The investment start
date for policies with early Register Dates will also be the date the minimum
initial premium is received at our Administrative Office. Remember, the amount
of your first net premium to be allocated to the Funds will initially be
allocated to the Money Market Fund of the Separate Account until the Allocation
Date. See FLEXIBLE PREMIUMS in Part 2 of this prospectus. Any subsequent premium
payment received after the investment start date will begin to experience
investment performance as of the date such payment is received at our
Administrative Office.
Generally, when we refer to the age of an insured person, we mean his or her age
on the birthday nearest to the beginning of the particular policy year.
TAX EFFECTS
This discussion is based on our understanding of the effect of the current
Federal income tax laws as currently interpreted on Survivorship 2000 policies
owned by U.S. resident individuals. The tax effects on corporate taxpayers,
subject to the Federal alternative minimum tax, other non-natural persons such
as trusts, non-U.S. residents or non-U.S. citizens may be different. This
discussion is general in nature and should not be considered tax advice, for
which you should consult your legal or tax adviser.
POLICY PROCEEDS. A Survivorship 2000 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
Survivorship 2000 will meet these requirements, and that:
o the death benefit received by the beneficiary under your Survivorship 2000
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.
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. Special tax rules may apply, however, if you transfer your ownership of
the policy. Consult your tax adviser before any transfer of your policy.
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
persons 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
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limit. A material change could occur as a result of a change in death benefit
option, the selection of additional benefits, the restoration of a terminated
policy and certain other changes.
If the benefits under your policy are reduced for example, by requesting a
decrease in Face Amount, or in some cases by making partial withdrawals,
terminating additional benefits under a rider, changing the death benefit
option, or as a result of policy termination, 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 or a modified endowment which
terminates and is restored, 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 as income.
See POLICY CHANGES on the next page.
IF YOUR SURVIVORSHIP 2000 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 fifteen 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 ages of the
insured persons at the time of the withdrawal. If at any time your policy is
surrendered, the excess, if any, of your Cash Surrender Value (which includes
the amount of any policy loan and accrued loan interest) over your Basis will be
subject to Federal income tax. In addition, if a policy terminates while there
is a policy loan, the cancellation of such loan and accrued loan interest will
be treated as a distribution and could be subject to tax under the above rules.
Upon the Maturity Date of the policy, 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 distribution 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 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 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
beneficiary. If your policy is surrendered, the excess, if any, of your Cash
Surrender Value over your Basis will be subject to Federal income tax and,
unless one of the above exceptions applies, the 10% penalty tax. If your policy
terminates while there is a policy loan, the cancellation of such loan and
accrued loan interest will be treated as a distribution to the extent not
previously treated as such and could be subject to tax, including the penalty
tax, as described under the above rules. In addition, upon the Maturity Date of
the policy, 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 under POLICY PROCEEDS on the previous page even
though you may be able to restore your policy. For tax purposes, some
restorations may be treated as the purchase of a new insurance contract.
LIVING BENEFITS. Amounts received under a life insurance contract on the life of
individuals who are terminally ill, as defined by the tax law, are generally
excludable from gross income as amounts paid by reason of the death of the
insured. We believe that the living benefit which may be payable under your
policy meets the law's definition of terminally ill and can qualify for this
exclusion. This exclusion does not apply, however, to amounts paid to someone
other than the insured if the payee has an insurable interest in the insured's
life because the insured is a director, officer or employee of the payee or by
reason of the insured being financially interested in any trade or business
carried on by the payee.
DIVERSIFICATION. Under Section 817(h) of the Code, the Secretary of the Treasury
has the authority to set standards for diversification of the investments
underlying variable life insurance policies. The Treasury Department has issued
final regulations regarding the diversification re-
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quirements. Failure to meet these requirements would disqualify your policy as a
variable life insurance policy under Section 7702 of the Code. If this were to
occur, you would be subject to Federal income tax on the income under the policy
for the period of the disqualification and subsequent periods. The Separate
Account, through the Trust, intends to comply with these requirements in order
to avoid such occurrence.
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 divisions 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 Separate
Account would be included in your gross income for Federal income tax purposes.
Under current law we believe that Equitable, and not the owner of the policy,
would be considered the owner of the assets of the Separate Account.
RIDERS. Certain riders permit the splitting of a policy into two other
individual policies on the lives of a husband and wife, upon a divorce or
certain changes in the Federal estate tax law. This splitting of a policy could
have adverse tax consequences including but not limited to, the recognition of
taxable income in an amount up to any gain in the policy at the time of the
split.
POLICY CHANGES. For you and your beneficiary to receive the tax treatment
discussed above, your policy must initially qualify and continue to qualify as
life insurance under Sections 7702 and 817(h) of the Code. We may make changes
in the policy or its riders 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 advance 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. Among the specific tax
proposals currently under consideration by Congress is the pro rata disallowance
of a taxpayer's interest expense that is allocable to the unborrowed cash
surrender value of life insurance policies. This limitation on the deductibility
of interest expense would generally not apply to natural persons. This
limitation will generally apply to the extent an entity engaged in a trade or
business owns or is directly or indirectly the beneficiary of a life insurance
policy (whether or not the policy is held by a natural person), unless the
policy covers an employee, officer or director of such trade or business.
Another proposal would make changes to the federal gift and estate tax rules
including increasing the unified credit and providing relief for farms and small
businesses. In addition, the Treasury Department may amend existing regulations,
issue new regulations, or adopt new interpretations of existing laws. Proposed
Treasury Regulations concerning what constitutes reasonable mortality and
expense charges in testing whether a policy qualifies as life insurance would,
if finalized as now proposed, provide stricter rules for policies covering more
than one life. As currently drafted the rules would only apply to policies
issued after the regulations are finalized, causing such policies to generally
provide increased levels of death benefits relative to policy account values.
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 or your beneficiary.
These laws may change from time to time without notice and, as a result, the tax
consequences may be altered. There is no way of predicting whether, when or in
what form any such change would be adopted. Any such change could have a
retroactive effect regardless of the date of enactment. We suggest you consult
your legal or tax adviser.
ESTATE AND GENERATION SKIPPING TAXES. When the last surviving insured dies, the
death benefit will generally be includable in the policyowner's estate for
purposes of Federal estate tax if the insured owned the policy. If the
policyowner is not the insured person, under certain conditions only the fair
market value of the policy would be included. Federal estate tax is integrated
with Federal gift tax under a unified rate schedule. In general, estates less
than $600,000 will not incur a Federal estate tax liability. In addition, an
unlimited marital deduction may be available for Federal estate and gift 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, generation skipping and other taxes.
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 of the Separate Account 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 make tax payments 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.
22
<PAGE>
PART 3: ADDITIONAL INFORMATION
YOUR VOTING PRIVILEGES
TRUST VOTING PRIVILEGES. As explained in Part 1, we invest the assets in the
Funds in Class IA or Class IB shares of the corresponding portfolios of the HRT
or the EQAT, respectively. Equitable is the legal owner of the shares of each
Trust and will attend, and has the right to vote at, any meeting of the HRT's or
EQAT's shareholders. Among other things, we may vote on any matters described in
either 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 HRT or EQAT
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 HRT or
EQAT 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 HRT or EQAT in our own right or to restrict
policyowner voting, we may do so.
HOW WE DETERMINE YOUR VOTING SHARES. You may participate in voting only on
matters concerning the HRT or EQAT portfolios corresponding to the Funds to
which your Policy Account is allocated. The number of HRT or EQAT 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 portfolio as of the record date set by either HRT's
or EQAT's Board for its respective shareholders meeting. The record date for
this purpose must be at least 10 and no more than 90 days before the particular
shareholder meeting. Fractional shares are counted.
If you are entitled to give us voting instructions, we will send you proxy
material and a form for providing instructions. In certain cases, we may
disregard instructions relating to changes in a portfolio's adviser or its
investment policies. We will advise you if we do and detail the reasons in the
next semi-annual 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
Survivorship 2000 from one Fund and put them into another;
o register or end the registration of the Separate Account under the 1940 Act;
o operate the Separate Account under the direction of a committee or discharge
such a committee at any time (the committee may be composed entirely of
persons who are "interested persons" of Equitable under the 1940 Act);
o restrict or eliminate any voting rights of policyowners or other people who
have voting rights that affect the Separate Account;
o operate the Separate Account or one or more of the Funds in any other form
the law allows, including a form that allows us to make direct investments.
Our Separate Account may be charged an advisory fee if its investments are
made directly rather than through an investment company. We may make any
legal investments we wish. In choosing these investments, we will rely on our
own or outside counsel for advice. In addition, we may disapprove any change
in investment advisers or in investment policy unless a law or regulation
provides differently.
If any changes are made that result in a material change in the underlying
investments of a Fund, you will be notified as required by law. We may, for
example, cause the Fund to invest in a mutual fund other than, or in addition
to, the Trusts. If you then wish to transfer the amount you have in that Fund to
another Fund 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, Cash Surrender
Value and policy loan. Notices will be sent to you to confirm premium payments
(except premiums paid through an automated payment plan), transfers of amounts
between Funds 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
lifetimes of both insured persons, for two years from the date the policy was
issued.
o We cannot challenge any policy change that requires evidence of insurability
or any restoration of the policy after the change or restoration has been in
effect for two years during the lifetime of any insured person living at the
time the change or restoration takes effect.
23
<PAGE>
If the last surviving 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. Some states may require that we measure these times in
some other way. If an 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 that insured person's
correct age and sex.
If the last surviving insured person commits suicide within two years after the
date on which the policy was issued or following a policy change that increases
the death benefit, the death benefit will be limited as described in the policy.
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.
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 last surviving 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 last surviving
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. While either or both of the
insured persons are living, you may change the beneficiary by writing to our
Administrative Office. You can name more than one beneficiary. Beneficiaries may
be classed as primary and contingent beneficiaries. When two or more persons are
named in a class they will share equally unless you have specified their
respective shares. If no beneficiary is living when the last surviving insured
person dies, we will pay the death benefit in equal shares to such insured
person's surviving children. If there are no surviving children, we will pay the
death benefit to that 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. If you do, 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 last surviving 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 Net Cash Surrender Value withdrawal 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.
24
<PAGE>
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. As a result, the provisions of the
Survivorship 2000 policy may vary somewhat from jurisdiction to jurisdiction.
The Survivorship 2000 policy (Plan No. 92-500) has been filed with and approved
by insurance officials in 50 states, Puerto Rico and the Virgin Islands. No
Survivorship 2000 policy is available in the District of Columbia. We submit
annual reports on our operations and finances to insurance officials in all the
jurisdictions where we sell policies. The officials are responsible for
reviewing our reports to be sure that we are financially sound.
SPECIAL CIRCUMSTANCES
Equitable may vary the charges and other terms of Survivorship 2000 where
special circumstances result in sales or administrative expenses or mortality
risks that are different than those normally associated with Survivorship 2000
policies. These variations will be made only in accordance with uniform rules
that we establish.
DISTRIBUTION
EQ Financial Consultants, Inc. (EQF) is the principal underwriter of the HRT and
one of the principal underwriters of EQAT, and is also a distributor of our
variable life insurance policies and variable annuity contracts. EQF is
registered with the SEC as an investment adviser under the Investment Advisers
Act of 1940 and also is the Manager of the EQAT. EQF's principal business
address is 1755 Broadway, New York, NY 10019. EQF is registered with the SEC as
a broker-dealer under the Securities Exchange Act of 1934 (1934 Act) and is a
member of the National Association of Securities Dealers, Inc. In 1995 and 1996,
Equitable Variable paid EQF a fee of $325,380 annually for its services as
distributor of its policies.
We sell our policies through agents who are licensed by state insurance
officials to sell our variable life policies. These agents are also registered
representatives of EQ Financial Consultants. The agent who sells you this policy
receives sales commissions from Equitable. We pay commissions from our own
resources, including the Premium Sales Charge deducted from your premium.
Generally, during the first policy year, the agent will receive an amount equal
to a maximum of 50% of the premiums paid up to a certain amount and 4% of the
premiums paid in excess of that amount. For policy years two through ten, the
agent receives an amount up to a maximum of 4% of the premiums paid up to a
certain amount; and, for years eleven and later, the agent receives an amount up
to 3% of the premiums paid. Agents with limited years of service may be paid
differently. Commissions paid to agents based upon refunded premiums may be
recovered.
We also sell our policies through independent brokers who are licensed by state
insurance officials to sell our variable life policies. They will also be
registered representatives either of EQ Financial Consultants or of another
company registered with the SEC as a broker-dealer under the Exchange Act. The
commissions for independent brokers will be no more than those for agents and
the same policy for recovery of commissions applies. Commissions will be paid
through the registered broker-dealer.
LEGAL PROCEEDINGS
We are not involved in any legal proceedings that would be considered material
with respect to a policyowner's interest in the Separate Account.
ACCOUNTING AND ACTUARIAL EXPERTS
The financial statements of Separate Account FP and Equitable included in this
prospectus have been audited for the years ended December 31, 1996, 1995 and
1994 by Price Waterhouse LLP, as stated in their reports. The financial
statements of Separate Account FP and Equitable have been so included in
reliance on the reports of Price Waterhouse LLP, independent accountants, given
on the authority of such firm as experts in accounting and auditing.
The financial statements of Equitable contained in this prospectus should be
considered only as bearing upon the ability of Equitable to meet its obligations
under the Survivorship 2000 policies. They should not be considered as bearing
upon the investment experience of the Funds of the Separate Account. The
financial statements of Separate Account FP include periods when Separate
Account FP was part of Equitable Variable, a wholly-owned subsidiary of
Equitable. The assets of Separate Account FP were assumed by Equitable on
January 1, 1997 when Equitable Variable was merged into Equitable.
Actuarial matters in this prospectus have been examined by Barbara Fraser,
F.S.A., M.A.A.A., who is a Vice President and Actuary of Equitable. Her opinion
on actuarial matters is filed as an exhibit to the Registration Statement we
filed with the SEC.
ADDITIONAL INFORMATION
We have filed a Registration Statement relating to the Separate Account and the
variable life insurance policy described in this prospectus with the SEC. The
Registration Statement, which is required by the Securities Act of 1933,
includes additional information that is not required in this prospectus under
the rules and regulations of the SEC. If you would like the additional
information, you may obtain it from the SEC's main office in Washington, D.C.
You will have to pay a fee for the material.
25
<PAGE>
MANAGEMENT
Here is a list of our directors and, to the extent they are responsible for
variable life insurance operations, our principal officers and a brief statement
of their business experience for the past five years. Unless otherwise noted,
their address is 1290 Avenue of the Americas, New York, New York 10104.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Claude Bebear Director of Equitable since July 1991. Chairman of the Board of the Holding Company
AXA-UAP (February 1996 -- present) and a Director of other affiliates of Equitable. Chairman of the
23, Avenue Matignon Executive Board of AXA-UAP ("AXA-UAP") since January 1997. Prior thereto, he was
75008 Paris, France Chairman and Chief Executive Officer of AXA S.A. Chief Executive Officer of the
AXA-UAP Group (formerly known as the AXA Group) since 1974 and Chairman or Director of
numerous subsidiaries and affiliated companies of the AXA-UAP Group.
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J Brocksom Director of Equitable since July 1992. Retired Chief Executive Officer, AXA Equity & Law
Elbury 9 Life Assurance Society PLC ("AXA Equity & Law") and various directorships and officerships
Weedon Lane with AXA Equity & Law affiliated companies.
Buckinghamshire
HP6505
England
- ------------------------------------------------------------------------------------------------------------------------------------
Francoise Colloc'h Director of Equitable since July 1992. Senior Executive Vice President Human Resources and
AXA-UAP Communications of AXA-UAP, and various positions with AXA-UAP affiliated companies. Director
23, Avenue Matignon of the Holding Company.
75008 Paris, France
- ------------------------------------------------------------------------------------------------------------------------------------
Henri de Castries Director of Equitable since September 1993. Vice Chairman of the Board of the Holding
AXA-UAP Company since February 1996. Senior Executive Vice President Financial Services and Life
23, Avenue Matignon Insurance Activities of AXA-UAP since 1996. Also Director or Officer of various
75008 Paris, France subsidiaries and affiliates of the AXA-UAP Group. Director of the Holding Company
and of other Equitable affiliates. Previously held officerships with the AXA Group.
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph L. Dionne Director of Equitable since May 1982. Chairman (since April 1988) and Chief Executive
The McGraw-Hill Companies Officer (since April 1983) of The McGraw-Hill Companies. Director of the Holding Company.
1221 Avenue of the Americas
New York, NY 10020
- ------------------------------------------------------------------------------------------------------------------------------------
William T. Esrey Director of Equitable since July 1986. Chairman (since April 1990) and Chief Executive
Sprint Corporation Officer (since 1985) of Sprint Corporation. Director of the Holding Company.
P.O. Box 11315
Kansas City, MO 64112
- ------------------------------------------------------------------------------------------------------------------------------------
Jean-Rene Fourtou Director of Equitable since July 1992. Chairman and Chief Executive Officer, Rhone-Poulenc
Rhone-Poulenc S.A. S.A. since 1986. Member of the Supervisory Board of AXA-UAP. Director of the Holding
25, Quai Paul Doumer Company.
92408 Courbevoie Cedex
France
- ------------------------------------------------------------------------------------------------------------------------------------
Norman C. Francis Director of Equitable since March 1989. President, Xavier University of Louisiana.
Xavier University of Louisiana
7325 Palmetto Street
New Orleans, LA 70125
- ------------------------------------------------------------------------------------------------------------------------------------
Donald J. Greene Director of Equitable since July 1991. Partner, LeBoeuf, Lamb, Greene & MacRae since 1965.
LeBouef, Lamb, Greene & MacRae Director of the Holding Company.
125 West 55th Street
New York, NY 10019-4513
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECTORS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
John T. Hartley Director of Equitable since August 1987. Retired Chairman and Chief Executive Officer of
Harris Corporation Harris Corporation (retired since July 1995); previously held other officerships with Harris
1025 NASA Boulevard Corporation. Director of Harris Corporation and The McGraw-Hill Companies. Director of the
Melbourne, FL 32919 Holding Company.
- ------------------------------------------------------------------------------------------------------------------------------------
John H.F. Haskell, Jr. Director of Equitable since July 1992. Managing Director of Dillon, Read & Co., Inc. since
Dillon, Read & Co., Inc. 1975 and member of its Board of Directors. Director of Kaydon Corporation. Director of the
535 Madison Avenue Holding Company.
New York, NY 10022
- ------------------------------------------------------------------------------------------------------------------------------------
Mary R. (Nina) Henderson Director of Equitable since December 1996. President of CPC Specialty Markets Group of CPC
CPC Specialty Markets Group International, Inc. since 1993. Prior thereto, President of CPC Specialty Products and Best
700 Sylvan Avenue Foods Exports. Director of Hunt Manufacturing Company. Director of the Holding Company
Englewood Cliffs, NJ 07632
- ------------------------------------------------------------------------------------------------------------------------------------
W. Edwin Jarmain Director of Equitable since July 1992. President of Jarmain Group Inc. since 1979; also an
Jarmain Group Inc. Officer or Director of several affiliated companies. Chairman and Director of FCA
121 King Street West International Ltd. Director of various AXA affiliated companies. Previously held other
Suite 2525, Box 36 officerships with FCA International. Director of the Holding Company.
Toronto, Ontario M5H 3T9,
Canada
- ------------------------------------------------------------------------------------------------------------------------------------
G. Donald Johnston, Jr. Director of Equitable since January 1986. Retired Chairman and Chief Executive Officer, JWT
184-400 Ocean Road Group, Inc. and J. Walter Thompson Company.
John's Island
Vero Beach, FL 32963
- ------------------------------------------------------------------------------------------------------------------------------------
Winthrop Knowlton Director of Equitable since October 1973. Chairman of the Board of Knowlton Brothers, Inc.
Knowlton Brothers, Inc. since May 1989; also President of Knowlton Associates, Inc. since September 1987; Director
530 Fifth Avenue of Bethlehem Steel Corporation, Infosys, Inc. and Audible, Inc. Director of the Holding
New York, NY 10036 Company.
- ------------------------------------------------------------------------------------------------------------------------------------
Arthur L. Liman Director of Equitable since March 1984. Partner, Paul, Weiss, Rifkind, Wharton & Garrison
Paul, Weiss, Rifkind, since 1966. Director of the Holding Company.
Wharton and Garrison
1285 Avenue of the Americas
New York, NY 10019
- ------------------------------------------------------------------------------------------------------------------------------------
George T. Lowy Director of Equitable since July 1992. Partner, Cravath, Swaine & Moore since 1965.
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
- ------------------------------------------------------------------------------------------------------------------------------------
Didier Pineau-Valencienne Director of Equitable since February 1996. Chairman and Chief Executive Officer of
Schneider S.A. Schneider S.A. since 1981 and Chairman or Director of numerous subsidiaries and affiliated
64/70, Avenue Jean-Baptiste Clement companies of Schneider. Member, Supervisory Board of AXA-UAP since January 1997, prior
92646 Boulogne-Billancourt Cedex thereto, Director. Director of the Holding Company.
France
- ------------------------------------------------------------------------------------------------------------------------------------
George J. Sella, Jr. Director of Equitable since May 1987. Retired Chairman and Chief Executive Officer of
P.O. Box 397 American Cyanamid Company (until April 1993); previously held other officerships with
Newton, NJ 07860 American Cyanamid. Director of the Holding Company.
- ------------------------------------------------------------------------------------------------------------------------------------
Dave H. Williams Director of Equitable since March 1991. Chairman and Chief Executive Officer of Alliance
Alliance Capital Management since 1977 and Chairman or Director of numerous subsidiaries and affiliated companies of
Corporation Alliance. Director of the Holding Company.
1345 Avenue of the Americas
New York, NY 10105
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS and DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
William T. McCaffrey Director, Senior Executive Vice President and Chief Operating Officer of Equitable (all
since February 1996). Executive Vice President and Chief Administrative Officer (since
February 1994) of the Holding Company. Director of various Equitable affiliated companies.
Previously held other officerships with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph J. Melone Chairman, Chief Executive Officer and President of Equitable. Chief Executive Officer of the
Holding Company since February 1996 and Director and President of the Holding Company since
May 1992. Director of various Equitable and AXA-UAP affiliated companies. Director, Foster
Wheeler Corp. and AT&T Capital Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
A. Frank Beaz Senior Vice President, Equitable. Executive Vice President, EQ Financial Consultants, Inc.
("EQF") (since May 1995). Director, Equitable Realty Assets Corporation since December 1996.
Previously held other officerships with Equitable.
- ------------------------------------------------------------------------------------------------------------------------------------
Leon B. Billis Senior Vice President, Equitable. Director, J.M.R. Realty Services, Inc. since March 1995.
Previously held other officerships with Equitable.
- ------------------------------------------------------------------------------------------------------------------------------------
Harvey Blitz Senior Vice President and Deputy Chief Financial Officer, Equitable. Senior Vice President,
the Holding Company; Vice President and Director, EQ Advisors Trust (EQAT); Chairman of
Frontier Trust Company and Director of various Equitable affiliated companies. Previously
held other officerships with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin R. Byrne Vice President and Treasurer, Equitable and the Holding Company; Treasurer, EquiSource and
Frontier Trust Company. Vice President and Treasurer, Equitable Casualty Insurance Company
and EQAT. Previously held other officerships with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Alvin H. Fenichel Senior Vice President and Controller, Equitable and the Holding Company. Previously held
other officerships with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Paul J. Flora Senior Vice President and Auditor, Equitable. Vice President and Auditor, Holding Company
(since September 1994). Vice President/Auditor, National Westminster Bank (November 1984 to
June 1993).
- ------------------------------------------------------------------------------------------------------------------------------------
Robert E. Garber Executive Vice President and General Counsel, Equitable and the Holding Company. Previously
held other officerships with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Donald R. Kaplan Vice President and Chief Compliance Officer, Equitable. Previously held other officerships
with Equitable.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael S. Martin Senior Vice President, Equitable. Chairman and Chief Executive Officer, EQF. Vice President,
EQAT and HRT. Director, Equitable Underwriting and Sales Agency (Bahamas), Ltd. (since May
1996) and the Equitable of Colorado, Inc. (since January 1995). Vice President, Hudson
River Trust. Previously held other officerships with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Peter D. Noris Executive Vice President and Chief Investment Officer, Equitable. Executive Vice President
(since May 1995) and Chief Investment Officer (since July 1995), the Holding Company.
Trustee, HRT and President and Trustee, EQAT. Director of Alliance and Equitable Real
Estate. Executive Vice President, EQF. Prior to May 1995, Vice President/Manager, Insurance
Companies Investment Strategies Group, Salomon Brothers, Inc. Prior to November 1992, with
Morgan Stanley & Co., Inc., as Principal, Fixed Income Insurance Group.
- ------------------------------------------------------------------------------------------------------------------------------------
Anthony C. Pasquale Senior Vice President, Equitable. Director of Equitable Agri-Business, Inc. Previously held
other officerships with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Michael J. Rich Senior Vice President, Equitable. Prior to October 1994, Vice President of Underwriting,
John Hancock Mutual Life Insurance Co.
- ------------------------------------------------------------------------------------------------------------------------------------
Pauline Sherman Vice President, Secretary and Associate General Counsel, Equitable and the Holding Company,
and since September 1995. Previously held other officerships with Equitable.
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel B. Shlesinger Senior Vice President and Actuary, Equitable. Director, Chairman and Chief Executive
Officer, The Equitable of Colorado, Inc. since 1985. Vice President, HRT and EQAT.
Previously held other officerships with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Jose S. Suquet Executive Vice President nd Chief Agency Officer, Equitable, since August 1994. Prior
thereto, with Equitable as Sales/Agency Manager.
- ------------------------------------------------------------------------------------------------------------------------------------
Stanley B. Tulin Senior Executive Vice President and Chief Financial Officer, Equitable since April 1996.
Executive Vice President, the Holding Company. Vice President, EQAT. Prior thereto,
Chairman, Insurance Consulting and Actuarial Practice, Coopers & Lybrand.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<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 the death benefits and Cash
Surrender Values ("policy benefits") under a hypothetical Survivorship 2000
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 policy benefits will differ from those shown in
the tables if the annual investment returns AVERAGE 0%, 6% or 12% over a period
of years but go above or below those figures in individual policy years. Actual
policy benefits will also differ, depending on your premium allocations to each
Fund, if the overall actual rates of return averaged 0%, 6% or 12%, but went
above or below those figures for the individual investment Funds. The tables are
for a standard risk male non-smoker, age 55, and a standard risk female
non-smoker, age 50. Planned premiums of $13,580 for an initial Face Amount of
$1,000,000 are assumed to be paid at the beginning of each policy year.
The tables illustrate cost of insurance and expense charges (policy cost
factors) at both the current rates and at the maximum rates guaranteed in the
policy. Beginning in policy year twenty, the current charges reflect the
termination of the Premium Sales Charge, which is not guaranteed. See DEDUCTIONS
FROM YOUR PREMIUMS in Part 2 of this prospectus. The tables also assume daily
charges against the Separate Account Funds of .90% for mortality and expense
risks, .59% for investment management (the average of the advisory fees payable
with respect to each HRT portfolio except Alliance Small Cap Growth portfolio
during 1996 based on assets as of December 31, 1996, restated to reflect certain
changes effective May 1, 1997 in the investment advisory agreement between HRT
and its Investment Adviser, and the maximum advisory fee for the Alliance Small
Cap Growth and EQAT portfolios) and .04% for other Trust expenses. The
assumption for other Trust expenses equals the weighted average of restated
other expenses of the HRT portfolios based on assets as of December 31, 1996,
and estimates of the annual direct expenses expected to be paid by EQAT and the
Alliance Small Cap Growth portfolio during 1997 (including any 12b-1 fees, if
applicable). The effect of these adjustments is that on a 0% gross rate of
return the net rate of return would be -1.53%, on 6% it would be 4.38% and on
12% it would be 10.29%. Remember, however, that investment management fees and
other Trust expenses vary by portfolio. See THE HRT'S INVESTMENT ADVISER and THE
EQAT'S MANAGER AND INVESTMENT ADVISERS in Part 1 of this prospectus.
The tables assume first year monthly administrative charges of $0.07 per $1,000
of Face Amount and $6 per month, and a charge for taxes of 2% of premiums. There
are tables for both death benefit Option A and death benefit Option B and each
option is illustrated using current and guaranteed policy cost factors. The
current tables assume that the monthly administrative charge remains constant at
$6 after the first policy year. The guaranteed tables assume that this monthly
charge is $8. The tables reflect the fact that no charge is currently made for
Federal taxes. If a charge is made for those taxes in the future, it will take a
higher rate of return to produce after-tax returns of 0%, 6% or 12%.
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 columns show that if a policy is surrendered in its very early years, the
Cash Surrender Value will be low in comparison to the amount of the premiums
accumulated with interest. Thus, the cost of owning your policy for a relatively
short time will be high.
The internal rate of return on Cash Surrender Value is equivalent to an interest
rate (after taxes) at which an amount equal to the illustrated premiums could
have been invested outside the Policy to arrive at the Cash Surrender Value of
the Policy. The internal rate of return on the death benefit is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated premiums
could have been invested outside the Policy to arrive at the death benefit of
the Policy. The internal rate of return is compounded annually, and the premiums
are assumed to be paid at the beginning of each policy year.
INDIVIDUAL ILLUSTRATIONS. On request, we will furnish you with a comparable
illustration based on the age and sex of the proposed insured persons, standard
risk assumptions and an initial Face Amount and planned premium of your choice.
If you purchase a policy, we will, on request, deliver an individualized
illustration reflecting the planned premium you have chosen and the insured
persons' actual risk classes. Upon request after issuance, we will also provide
a comparable illustration reflecting your actual Net Cash Surrender Value. If
you request illustrations more than once in any policy year, we may charge for
the illustration.
30
<PAGE>
<TABLE>
<CAPTION>
SURVIVORSHIP 2000
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FLEXIBLE PREMIUM JOINT SURVIVORSHIP VARIABLE LIFE INSURANCE
PLANNED PREMIUM $13,580 INITIAL FACE AMOUNT $1,000,000
MALE AGE 55/FEMALE AGE 50
NON-SMOKER DEATH BENEFIT OPTION A
ASSUMING CURRENT CHARGES
DEATH BENEFIT(2) CASH SURRENDER VALUE(2)
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 $ 14,259 $1,000,000 $1,000,000 $1,000,000 $ 8,048 $ 8,561 $ 9,073
2 29,231 1,000,000 1,000,000 1,000,000 19,766 21,494 23,283
3 44,951 1,000,000 1,000,000 1,000,000 31,242 34,930 38,890
4 61,458 1,000,000 1,000,000 1,000,000 42,470 48,880 56,026
5 78,790 1,000,000 1,000,000 1,000,000 53,446 63,360 74,844
6 96,988 1,000,000 1,000,000 1,000,000 64,181 78,401 95,526
7 116,097 1,000,000 1,000,000 1,000,000 74,655 94,004 118,240
8 136,161 1,000,000 1,000,000 1,000,000 84,853 110,177 143,184
9 157,228 1,000,000 1,000,000 1,000,000 94,762 126,931 170,575
10 179,348 1,000,000 1,000,000 1,000,000 104,374 144,280 200,660
15 307,689 1,000,000 1,000,000 1,146,564 147,069 240,033 401,598
20 471,487 1,000,000 1,000,000 1,723,293 179,463 352,555 717,740
25 680,541 1,000,000 1,000,000 2,447,447 198,281 486,920 1,205,639
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------------- ---------------------------------------------
YEAR 0% 6% 12% 0% 6% 12%
---- ----------- ------------ ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 -40.73% -36.96% -33.19% 7,263.76% 7,263.76% 7,263.76%
2 -19.41 -14.62 -9.84 709.58 709.58 709.58
3 -12.70 -7.50 -2.31 281.01 281.01 281.01
4 -9.61 -4.18 1.24 161.03 161.03 161.03
5 -7.88 -2.30 3.26 108.39 108.39 108.39
6 -6.78 -1.10 4.56 79.68 79.68 79.68
7 -6.04 -0.28 5.46 61.90 61.90 61.90
8 -5.52 0.31 6.11 49.92 49.92 49.92
9 -5.14 0.76 6.60 41.37 41.37 41.37
10 -4.85 1.10 6.99 34.99 34.99 34.99
15 -4.19 2.02 8.10 18.25 18.25 19.74
20 -4.14 2.42 8.56 11.26 11.26 15.58
25 -4.44 2.67 8.75 7.55 7.55 13.15
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</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.
31
<PAGE>
<TABLE>
<CAPTION>
SURVIVORSHIP 2000
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FLEXIBLE PREMIUM JOINT SURVIVORSHIP VARIABLE LIFE INSURANCE
PLANNED PREMIUM $13,580 INITIAL FACE AMOUNT $1,000,000
MALE AGE 55/FEMALE AGE 50
NON-SMOKER DEATH BENEFIT OPTION A
ASSUMING GUARANTEED CHARGES
DEATH BENEFIT(2) CASH SURRENDER VALUE(2)
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 $ 14,259 $1,000,000 $1,000,000 $1,000,000 $ 8,038 $ 8,549 $ 9,062
2 29,231 1,000,000 1,000,000 1,000,000 19,697 21,422 23,209
3 44,951 1,000,000 1,000,000 1,000,000 31,088 34,766 38,716
4 61,458 1,000,000 1,000,000 1,000,000 42,195 48,582 55,705
5 78,790 1,000,000 1,000,000 1,000,000 53,000 62,870 74,306
6 96,988 1,000,000 1,000,000 1,000,000 63,480 77,622 94,660
7 116,097 1,000,000 1,000,000 1,000,000 73,611 92,833 116,924
8 136,161 1,000,000 1,000,000 1,000,000 83,365 108,490 141,268
9 157,228 1,000,000 1,000,000 1,000,000 92,710 124,582 167,880
10 179,348 1,000,000 1,000,000 1,000,000 101,607 141,086 196,965
15 307,689 1,000,000 1,000,000 1,107,426 137,193 228,382 387,890
20 471,487 1,000,000 1,000,000 1,604,920 147,712 316,241 668,438
25 680,541 1,000,000 1,000,000 2,116,774 107,283 387,407 1,042,746
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------------- ---------------------------------------------
YEAR 0% 6% 12% 0% 6% 12%
---- ----------- ------------ ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 -40.81% -37.04 -33.27 7,263.76% 7,263.76% 7,263.76%
2 -19.60 -14.82 -10.03 709.58 709.58 709.58
3 -12.92 -7.72 -2.53 281.01 281.01 281.01
4 -9.85 -4.42 1.01 161.03 161.03 161.03
5 -8.15 -2.55 3.02 108.39 108.39 108.39
6 -7.09 -1.38 4.30 79.68 79.68 79.68
7 -6.40 -0.59 5.18 61.90 61.90 61.90
8 -5.92 -0.03 5.81 49.92 49.92 49.92
9 -5.58 0.38 6.29 41.37 41.37 41.37
10 -5.35 0.69 6.66 34.99 34.99 34.99
15 -5.13 1.42 7.70 18.25 18.25 19.37
20 -6.25 1.43 7.97 11.26 11.26 15.02
25 -10.63 1.00 7.82 7.55 7.55 12.26
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</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.
32
<PAGE>
<TABLE>
<CAPTION>
SURVIVORSHIP 2000
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FLEXIBLE PREMIUM JOINT SURVIVORSHIP VARIABLE LIFE INSURANCE
PLANNED PREMIUM $13,580 INITIAL FACE AMOUNT $1,000,000
MALE AGE 55/FEMALE AGE 50
NON-SMOKER DEATH BENEFIT OPTION B
ASSUMING CURRENT CHARGES
DEATH BENEFIT(2) CASH SURRENDER VALUE(2)
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 $ 14,259 $1,008,048 $1,008,560 $1,009,073 $ 8,048 $ 8,560 $ 9,073
2 29,231 1,019,764 1,021,492 1,023,281 19,764 21,492 23,281
3 44,951 1,031,237 1,034,924 1,038,883 31,237 34,924 38,883
4 61,458 1,042,455 1,048,862 1,056,005 42,455 48,862 56,005
5 78,790 1,053,414 1,063,321 1,074,798 53,414 63,321 74,798
6 96,988 1,064,125 1,078,331 1,095,438 64,125 78,331 95,438
7 116,097 1,074,562 1,093,883 1,118,084 74,562 93,883 118,084
8 136,161 1,084,707 1,109,981 1,142,920 84,707 109,981 142,920
9 157,228 1,094,544 1,126,626 1,170,149 94,544 126,626 170,149
10 179,348 1,104,058 1,143,822 1,199,997 104,058 143,822 199,997
15 307,689 1,145,616 1,237,507 1,397,419 145,616 237,507 397,419
20 471,487 1,175,082 1,343,308 1,707,865 175,082 343,308 707,865
25 680,541 1,186,618 1,456,727 2,415,932 186,618 456,727 1,190,114
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------------- ---------------------------------------------
YEAR 0% 6% 12% 0% 6% 12%
---- ----------- ------------ ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 -40.73% -36.96% -33.19% 7,323.03% 7,326.80% 7,330.58%
2 -19.41 -14.63 -9.84 718.00 718.74 719.49
3 -12.71 -7.51 -2.32 285.37 285.88 286.43
4 -9.62 -4.19 1.23 164.18 164.64 165.16
5 -7.89 -2.32 3.24 110.98 111.45 111.99
6 -6.81 -1.13 4.54 81.96 82.45 83.03
7 -6.08 -0.31 5.42 63.97 64.49 65.12
8 -5.56 0.27 6.07 51.85 52.40 53.10
9 -5.18 0.71 6.55 43.19 43.78 44.55
10 -4.91 1.04 6.93 36.73 37.36 38.21
15 -4.33 1.90 7.98 19.74 20.57 21.89
20 -4.40 2.18 8.44 12.56 13.62 15.51
25 -4.99 2.21 8.67 8.65 9.95 13.07
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</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.
33
<PAGE>
<TABLE>
<CAPTION>
SURVIVORSHIP 2000
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FLEXIBLE PREMIUM JOINT SURVIVORSHIP VARIABLE LIFE INSURANCE
PLANNED PREMIUM $13,580 INITIAL FACE AMOUNT $1,000,000
MALE AGE 55/FEMALE AGE 50
NON-SMOKER DEATH BENEFIT OPTION B
ASSUMING GUARANTEED CHARGES
DEATH BENEFIT(2) CASH SURRENDER VALUE(2)
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 $ 14,259 $1,008,037 $1,008,549 $1,009,061 $ 8,037 $ 8,549 $ 9,061
2 29,231 1,019,695 1,021,420 1,023,206 19,695 21,420 23,206
3 44,951 1,031,079 1,034,756 1,038,705 31,079 34,756 38,705
4 61,458 1,042,173 1,048,556 1,055,674 42,173 48,556 55,674
5 78,790 1,052,953 1,062,813 1,074,238 52,953 62,813 74,238
6 96,988 1,063,393 1,077,512 1,094,524 63,392 77,512 94,524
7 116,097 1,073,461 1,092,638 1,116,673 73,461 92,638 116,673
8 136,161 1,083,124 1,108,165 1,140,832 83,124 108,165 140,832
9 157,228 1,092,340 1,124,065 1,167,161 92,340 124,065 167,161
10 179,348 1,101,061 1,140,295 1,195,821 101,061 140,295 195,821
15 307,689 1,134,511 1,223,688 1,379,893 134,511 223,688 379,893
20 471,487 1,138,572 1,296,353 1,645,360 138,572 296,353 645,360
25 680,541 1,084,921 1,320,860 2,037,358 84,921 320,860 1,003,625
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</FN>
</TABLE>
<TABLE>
<CAPTION>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY -------------------------------------- ---------------------------------------------
YEAR 0% 6% 12% 0% 6% 12%
---- ----------- ------------ ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1 -40.82% -37.05% -33.27% 7,322.95% 7,326.72% 7,330.49%
2 -19.61 -14.82 -10.04 717.97 718.71 719.46
3 -12.94 -7.74 -2.54 285.35 285.86 286.40
4 -9.87 -4.44 0.99 164.16 164.62 165.14
5 -8.18 -2.58 2.99 110.96 111.43 111.96
6 -7.13 -1.42 4.26 81.93 82.42 83.00
7 -6.45 -0.65 5.12 63.94 64.46 65.09
8 -5.98 -0.10 5.74 51.82 52.36 53.06
9 -5.67 0.30 6.21 43.15 43.74 44.50
10 -5.45 0.59 6.56 36.68 37.30 38.15
15 -5.39 1.16 7.46 19.63 20.45 21.76
20 -6.97 0.82 7.67 12.31 13.34 15.22
25 -13.47 -0.44 7.57 8.08 9.33 12.03
<FN>
(1) Assumes net interest of 5% compounded annually.
(2) Assumes no policy loan has been made.
</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.
34
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accounts..................................................................................... FSA-2
Financial Statements:
Statements of Assets and Liabilities, December 31, 1996...................................................... FSA-3
Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994................................ FSA-4
Statements of Changes in Net Assets for the Years Ended December 31, 1996, 1995 and 1994..................... FSA-8
Notes to Financial Statements................................................................................ FSA-12
</TABLE>
+ Formerly known as Equitable Variable Life Insurance Company Separate
Account FP.
FSA-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Equitable Life Assurance Society of the United States
and Policyowners of Separate Account FP
of The Equitable Life Assurance Society of the United States
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of the Money Market Fund,
Intermediate Government Securities Fund, Quality Bond Fund, High Yield Fund,
Growth & Income Fund, Equity Index Fund, Common Stock Fund, Global Fund,
International Fund, Aggressive Stock Fund, Conservative Investors Fund, Balanced
Fund and Growth Investors Fund, separate investment funds of The Equitable Life
Assurance Society of the United States ("Equitable Life") Separate Account FP
(formerly Equitable Variable Life Insurance Company Separate Account FP) at
December 31, 1996 and the results of their operations and changes in each of
their net assets for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of Equitable Life's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these 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, 1996 with the transfer agent, provide a resonable basis for the
opinion expressed above. The rates of return information presented in note 7 for
the year ended December 31, 1992, and for each of the periods indicated prior
thereto, were audited by other independent accountants whose report dated
February 16, 1993 expressed an unqualified opinion on the financial statements
containing such information.
Price Waterhouse LLP
New York, New York
February 10, 1997
FSA-2
<PAGE>
EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
INTERMEDIATE
MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY COMMON
MARKET SECURITIES BOND YIELD INCOME INDEX STOCK
FUND FUND FUND FUND FUND FUND FUND
----------- ------------- ------------ ------------- ----------- ----------- --------------
<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: $ 242,546,651.. $242,570,674
44,817,781.. $44,676,302
127,911,618.. $125,949,796
96,502,438.. $102,167,262
32,957,253.. $38,031,591
73,126,833.. $94,575,057
1,277,628,295.. $1,572,061,192
374,535,031..
39,937,334..
747,842,158..
167,148,611..
388,200,062..
631,813,336..
Receivable for The Hudson
River Trust shares sold.. -- -- -- -- -- -- 967,531
Receivable for policy
related transactions .... 8,940,540 77,313 -- 105,241 122,406 188,428 --
------------ ------------ ------------ ------------ ----------- ----------- --------------
Total Assets................ 251,511,214 44,753,615 125,949,796 102,272,503 38,153,997 94,763,485 1,573,028,723
------------ ------------ ------------ ------------ ----------- ----------- --------------
LIABILITIES
Payable for The Hudson
River Trust shares
purchased ............... 9,060,754 87,411 28,516 149,241 129,487 188,527 --
Payable for policy related
transactions ............ -- -- 173,197 -- -- -- 983,555
Amount retained by
Equitable Life
in Separate Account
FP (Note 4) ............. 577,366 538,792 533,770 733,423 558,057 337,447 1,267,289
------------ ----------- ------------ ------------ ----------- ----------- --------------
Total Liabilities .......... 9,638,120 626,203 735,483 882,664 687,544 525,974 2,250,844
------------ ----------- ------------ ------------ ----------- ----------- --------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS.......... $241,873,094 $44,127,412 $125,214,313 $101,389,839 $37,466,453 $94,237,511 $1,570,777,879
============ =========== ============ ============ =========== =========== ==============
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
------------------------------------------
AGGRESSIVE CONSERVATIVE GROWTH
GLOBAL INTERNATIONAL STOCK INVESTORS BALANCED INVESTORS
FUND FUND FUND FUND FUND FUND
------------ ------------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 6)
Cost: $ 242,546,651..
44,817,781..
127,911,618..
96,502,438..
32,957,253..
73,126,833..
1,277,628,295..
374,535,031.. $433,153,085
39,937,334.. $41,795,127
747,842,158.. $794,459,393
167,148,611.. $174,848,746
388,200,062.. $430,582,886
631,813,336.. $698,964,029
Receivable for shares of
The Hudson River Trust ... 802,100 -- 3,729,663 114,675 142,333 --
Receivable for policy
related transactions ..... -- 159,777 -- -- -- 41,689
------------ ----------- ------------ ------------ ------------ ------------
Total Assets................. 433,955,185 41,954,904 798,189,056 174,963,421 430,725,219 699,005,718
------------ ----------- ------------ ------------ ------------ ------------
LIABILITIES
Payable for The Hudson
River Trust shares
purchased ................ -- 135,983 -- -- -- 245,089
Payable for policy
related transactions ..... 577,736 -- 3,989,373 97,966 399,398 --
Amount retained by
Equitable Life
in Separate Account
FP (Note 4) .............. 600,145 242,714 600,552 526,975 631,766 521,008
------------ ----------- ------------ ------------ ------------ ------------
Total Liabilities ........... 1,177,881 378,697 4,589,925 624,941 1,031,164 766,097
------------ ----------- ------------ ------------ ------------ ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS........... $432,777,304 $41,576,207 $793,599,131 $174,338,480 $429,694,055 $698,239,621
============ =========== ============ ============ ============ ============
<FN>
See Notes to Financial Statements.
+ Formerly known as Equitable Variable Life Insurance Company Separate Account FP.
</FN>
</TABLE>
FSA-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET FUND SECURITIES FUND
------------------------------------ -----------------------------------
1996 1995 1994 1996 1995 1994
---------- ----------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from The Hudson River Trust ............ $9,126,793 $9,225,401 $5,368,883 $2,367,498 $2,010,283 $ 5,671,984
Expenses (Note 3):
Mortality and expense risk charges ............... 1,025,149 954,556 826,379 245,038 197,721 527,675
---------- ----------- ----------- ---------- ---------- -----------
NET INVESTMENT INCOME ................................. 8,101,644 8,270,845 4,542,504 2,122,460 1,812,562 5,144,309
---------- ----------- ----------- ---------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (110,954) (432,347) 95,530 (490,315) (810,768) (10,163,976)
Realized gain distribution from
The Hudson River Trust ........................ -- -- -- -- -- --
---------- ----------- ----------- ---------- --------- -----------
NET REALIZED GAIN (LOSS) .............................. (110,954) (432,347) 95,530 (490,315) (810,768) (10,163,976)
Unrealized appreciation/(depreciation) on investments:
Beginning of period .............................. 89,976 32,760 (14,267) 145,522 (2,736,863) (1,617,237)
End of period .................................... 24,023 89,976 32,760 (141,479) 145,522 (2,736,863)
---------- ----------- ----------- ---------- ---------- -----------
Change in unrealized appreciation/(depreciation)
during the period ................................ (65,953) 57,216 47,027 (287,001) 2,882,385 (1,119,626)
---------- ----------- ----------- ---------- --------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ...................................... (176,907) (375,131) 142,557 (777,316) 2,071,617 (11,283,602)
---------- ----------- ----------- ---------- --------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ..................................... $7,924,737 $7,895,714 $4,685,061 $1,345,144 $3,884,179 $(6,139,293)
========== =========== =========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
QUALITY BOND FUND
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from The Hudson River Trust ............ $8,972,983 $ 7,958,285 $ 8,123,722
Expenses (Note 3):
Mortality and expense risk charges ............... 869,312 767,627 689,178
----------- ----------- -----------
NET INVESTMENT INCOME ................................. 8,103,671 7,190,658 7,434,544
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments .............. (1,130,915) (632,666) (410,697)
Realized gain distribution from
The Hudson River Trust ........................ -- -- --
----------- ----------- -----------
NET REALIZED GAIN (LOSS) ............................... (1,130,915) (632,666) (410,697)
Unrealized appreciation/(depreciation) on investments:
Beginning of period .............................. (2,105,676) (15,521,200) (1,886,621)
End of period .................................... (1,961,822) (2,105,676) (15,521,200)
----------- ----------- -----------
Change in unrealized appreciation/(depreciation)
during the period ................................ 143,854 13,415,524 (13,634,579)
----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ...................................... (987,061) 12,782,858 (14,045,276)
----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ..................................... $ 7,116,610 $19,973,516 $(6,610,732)
=========== =========== ===========
<FN>
See Notes to Financial Statements.
+ Formerly known as Separate Account FP of Equitable Variable Life Insurance Company.
</FN>
</TABLE>
FSA-4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
HIGH YIELD FUND GROWTH & INCOME FUND
----------------------------------------- ------------------------------------
1996 1995 1994 1996 1995 1994
------------ ------------ ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from The Hudson River Trust .... $ 8,696,039 $ 6,518,568 $ 4,578,946 $ 525,200 $ 380,677 $ 108,492
Expenses (Note 3):
Mortality and expense risk charges ....... 518,429 371,369 305,522 155,175 69,716 19,204
----------- ----------- ----------- ---------- ---------- ---------
NET INVESTMENT INCOME ......................... 8,177,610 6,147,199 4,273,424 370,025 310,961 89,288
----------- ----------- ----------- ---------- ---------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments ...... 939,559 (179,454) (328,199) 5,198 2,791 (11,709)
Realized gain distribution from
The Hudson River Trust ................ 6,119,053 -- -- 1,943,415 -- --
----------- ----------- ----------- ---------- ---------- ---------
NET REALIZED GAIN (LOSS) ...................... 7,058,612 (179,454) (328,199) 1,948,613 2,791 (11,709)
Unrealized appreciation/(depreciation) on
investments:
Beginning of period ...................... 3,823,981 (873,103) 4,734,999 2,123,346 (141,585) (904)
End of period ............................ 5,664,824 3,823,981 (873,103) 5,074,338 2,123,346 (141,585)
----------- ----------- ----------- ---------- ---------- ---------
Change in unrealized appreciation/
(depreciation) during the period ......... 1,840,843 4,697,084 (5,608,102) 2,950,992 2,264,931 (140,681)
----------- ----------- ----------- ---------- ---------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS .............................. 8,899,455 4,517,630 (5,936,301) 4,899,605 2,267,722 (152,390)
----------- ----------- ----------- ---------- ---------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ............................ $17,077,065 $10,664,829 $(1,662,877) $5,269,630 $2,578,683 $ (63,102)
=========== =========== =========== ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX FUND
------------------------------------------
1996 1995 1994*
----------- ------------ ----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from The Hudson River Trust .... $ 1,751,848 $ 964,775 $596,180
Expenses (Note 3):
Mortality and expense risk charges ....... 605,961 289,199 152,789
----------- ----------- --------
NET INVESTMENT INCOME .......................... 1,145,887 675,576 443,391
----------- ----------- --------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments ...... 8,013,073 3,060 (6,949)
Realized gain distribution from
The Hudson River Trust ................ 3,889,944 536,890 134,154
----------- ----------- --------
NET REALIZED GAIN (LOSS) ...................... 11,903,017 539,950 127,205
Unrealized appreciation/(depreciation) on
investments:
Beginning of period ...................... 12,451,765 (399,286) --
End of period ............................ 21,448,224 12,451,765 (399,286)
----------- ----------- --------
Change in unrealized appreciation/
(depreciation) during the period ......... 8,996,459 12,851,051 (399,286)
----------- ----------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS .............................. 20,899,476 13,391,001 (272,081)
------------ ----------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS ............................. $22,045,363 $14,066,577 $171,310
=========== =========== ========
<FN>
See Notes to Financial Statements.
* Commencement of Operations on October 1, 1994.
+ Formerly known as Equitable Variable Life Insurance Company Separate Account FP.
</FN>
</TABLE>
FSA-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
COMMON STOCK FUND GLOBAL STOCK FUND
------------------------------------------- ---------------------------------------
1996 1995 1994 1996 1995 1994
-------------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from The
Hudson River Trust..................... $ 11,773,551 $ 14,259,262 $ 11,755,355 $ 7,019,392 $ 5,152,442 $2,768,605
Expenses (Note 3):
Mortality and expense
risk charges......................... 8,267,795 6,050,368 4,741,008 2,314,066 1,743,898 1,211,620
------------ ------------ ----------- ----------- ----------- ----------
NET INVESTMENT INCOME...................... 3,505,756 8,208,894 7,014,347 4,705,326 3,408,544 1,556,985
------------ ------------ ----------- ----------- ----------- ----------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
(Note 2):
Realized gain (loss)
on investments......................... 30,128,838 16,793,683 292,144 4,971,547 3,049,444 3,347,704
Realized gain distribution
from The Hudson
River Trust............................ 157,423,606 63,838,178 43,936,280 18,802,992 9,214,950 4,821,242
------------ ------------ ----------- ----------- ----------- ----------
NET REALIZED GAIN (LOSS)................... 187,552,444 80,631,861 44,228,424 23,774,539 12,264,394 8,168,946
Unrealized appreciation/
(depreciation) on investments:
Beginning of period.................... 181,824,279 (2,048,649) 71,350,568 36,525,596 3,130,280 7,062,877
End of period.......................... 294,432,897 181,824,279 (2,048,649) 58,618,054 36,525,596 3,130,280
------------ ------------ ----------- ----------- ----------- ----------
Change in unrealized
appreciation/(depreciation)
during the period...................... 112,608,618 183,872,928 (73,399,217) 22,092,458 33,395,316 (3,932,597)
------------ ----------- ------------ ----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS........................... 300,161,062 264,504,789 (29,170,793) 45,866,997 45,659,710 4,236,349
------------ ------------ ------------ ----------- ----------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS.......................... $303,666,818 $272,713,683 $(22,156,446) $50,572,323 $49,068,254 $5,793,334
============ ============ ============ =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL FUND AGGRESSIVE STOCK FUND
--------------------------- -----------------------------------------
1996 1995* 1996 1995 1994
----------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from The
Hudson River Trust..................... $ 575,524 $195,500 $ 1,661,263 $ 1,268,689 $ 400,102
Expenses (Note 3):
Mortality and expense
risk charges......................... 164,149 36,471 4,086,388 2,702,978 1,944,639
---------- -------- ------------ ------------ ------------
NET INVESTMENT INCOME...................... 411,375 159,029 (2,425,125) (1,434,289) (1,544,537)
---------- -------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
(Note 2):
Realized gain (loss)
on investments......................... (28,490) (790) 30,549,608 11,560,966 (6,075,250)
Realized gain distribution
from The Hudson
River Trust............................ 737,771 51,741 133,080,595 61,903,470 --
---------- -------- ------------ ------------ ------------
NET REALIZED GAIN (LOSS)................... 709,281 50,951 163,630,203 73,464,436 (6,075,250)
Unrealized appreciation
(depreciation) on investments:
Beginning of period.................... 667,906 -- 80,271,118 30,761,318 35,185,988
End of period.......................... 1,857,793 667,906 46,617,235 80,271,118 30,761,318
---------- -------- ------------ ------------ ------------
Change in unrealized
appreciation (depreciation)
during the period...................... 1,189,887 667,906 (33,653,883) 49,509,800 (4,424,670)
---------- -------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS........................... 1,899,168 718,857 129,976,320 122,974,236 (10,499,920)
---------- -------- ------------ ------------ ------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS.......................... $2,310,543 $877,886 $127,551,195 $121,539,947 $(12,044,457)
========== ======== ============ ============ ============
<FN>
See Notes to Financial Statements.
* Commencement of Operations on April 3, 1995.
+ Formerly known as Equitable Variable Life Insurance Company Separate Account FP.
</FN>
</TABLE>
FSA-6
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
STATEMENTS OF OPERATIONS (CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-----------------------------------------------------------------------------------
CONSERVATIVE INVESTORS FUND BALANCED FUND
--------------------------------------- -----------------------------------------
1996 1995 1994 1996 1995 1994
----------- ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from The Hudson River Trust.... $ 7,737,745 $ 8,169,109 $ 6,205,574 $13,094,730 $12,276,328 $ 10,557,487
Expenses (Note 3):
Mortality and expense risk charges....... 1,046,858 921,294 750,164 2,490,188 2,237,982 2,103,510
----------- ----------- ----------- ----------- ----------- ------------
NET INVESTMENT INCOME........................ 6,690,887 7,247,815 5,455,410 10,604,542 10,038,346 8,453,977
----------- ----------- ----------- ----------- ----------- ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments...... (752,434) (378,551) (421,502) (873,535) (2,466,524) 858,164
Realized gain distribution from
The Hudson River Trust................. 4,429,977 1,068,272 -- 34,113,772 10,894,130 --
----------- ----------- ----------- ----------- ----------- ------------
NET REALIZED GAIN (LOSS)..................... 3,677,543 689,721 (421,502) 33,240,237 8,427,606 858,164
Unrealized appreciation/(depreciation)
on investments:
Beginning of period...................... 10,362,120 (8,767,697) 1,915,037 43,097,187 (2,878,875) 37,960,661
End of period............................ 7,700,135 10,362,120 (8,767,697) 42,382,824 43,097,187 (2,878,875)
----------- ----------- ----------- ----------- ----------- ------------
Change in unrealized appreciation/
(depreciation) during the period........... (2,661,985) 19,129,817 (10,682,734) (714,363) 45,976,062 (40,839,536)
----------- ----------- ----------- ----------- ----------- ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS............................. 1,015,558 19,819,538 (11,104,236) 32,525,874 54,403,668 (39,981,372)
----------- ----------- ----------- ----------- ----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $ 7,706,445 $27,067,353 $(5,648,826) $43,130,416 $64,442,014 $(31,527,395)
=========== =========== =========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
----------------------------------------
GROWTH INVESTORS FUND
----------------------------------------
1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Investment Income (Note 2):
Dividends from The Hudson River Trust.... $15,504,412 $ 15,855,901 $ 10,663,204
Expenses (Note 3):
Mortality and expense risk charges....... 3,746,683 2,796,354 1,995,747
----------- ------------ ------------
NET INVESTMENT INCOME........................ 11,757,729 13,059,547 8,667,457
----------- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments...... 1,799,247 1,752,185 241,591
Realized gain distribution from
The Hudson River Trust................. 73,474,967 7,421,853 --
----------- ------------ ------------
NET REALIZED GAIN (LOSS)..................... 75,274,214 9,174,038 241,591
Unrealized appreciation/(depreciation)
on investments:
Beginning of period...................... 81,785,873 (770,693) 20,567,604
End of period............................ 67,150,693 81,785,873 (770,693)
----------- ------------ ------------
Change in unrealized appreciation/
(depreciation) during the period........... (14,635,180) 82,556,566 (21,338,297)
----------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS............................. 60,639,034 91,730,604 (21,096,706)
----------- ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $72,396,763 $104,790,151 $(12,429,249)
=========== ============ ============
<FN>
See Notes to Financial Statements.
+ Formerly known as Equitable Variable Life Insurance Company Separate Account FP.
</FN>
</TABLE>
FSA-7
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
MONEY MARKET FUND INTERMEDIATE GOVERNMENT SECURITIES FUND
-------------------------------------------- ------------------------------------------
1996 1995 1994 1996 1995 1994
------------- ------------- -------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............... $ 8,101,644 $ 8,270,845 $ 4,542,504 $ 2,122,460 $ 1,812,562 $ 5,144,309
Net realized gain (loss) ............ (110,954) (432,347) 95,530 (490,315) (810,768) (10,163,976)
Change in unrealized appreciation/
(depreciation) on investments ...... (65,953) 57,216 47,027 (287,001) 2,882,385 (1,119,626)
------------ ------------ ------------ ----------- ----------- ------------
Net increase (decrease)in net assets
from operations ................... 7,924,737 7,895,714 4,685,061 1,345,144 3,884,179 (6,139,293)
------------ ------------ ------------ ----------- ----------- ------------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 3) ............... 101,890,108 96,773,056 82,536,703 10,397,104 11,016,347 18,915,140
Benefits and other policy related
transactions (Note 3) ............. (38,404,209) (39,770,849) (32,432,771) (7,387,385) (6,286,070) (5,813,181)
Net transfers among funds ........... (36,607,946) 4,776,165 (25,466,044) 2,645,675 953,149 (125,116,319)
------------ ------------ ------------ ----------- ----------- ------------
Net increase (decrease)in net assets
from policy related transactions .. 26,877,953 61,778,372 24,637,888 5,655,394 5,683,426 (112,014,360)
------------ ------------ ------------ ----------- ----------- ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT FP (Note 4) ...... (63,127) (36,640) (24,067) (22,170) (72,636) 15,335
------------ ------------ ------------ ----------- ----------- ------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS....... 34,739,563 69,637,446 29,298,882 6,978,368 9,494,969 (118,138,318)
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, BEGINNING OF PERIOD . 207,133,531 137,496,085 108,197,203 37,149,044 27,654,075 145,792,393
------------ ------------ ------------ ----------- ----------- ------------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, END OF PERIOD ....... $241,873,094 $207,133,531 $137,496,085 $44,127,412 $37,149,044 $ 27,654,075
============ ============ ============ =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
QUALITY BOND FUND
-----------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ............... $ 8,103,671 $ 7,190,658 $ 7,434,544
Net realized gain (loss) ............ (1,130,915) (632,666) (410,697)
Change in unrealized appreciation/
(depreciation) on investments ...... 143,854 13,415,524 (13,634,579)
------------ ------------ ------------
Net increase (decrease) in net assets
from operations ................... 7,116,610 19,973,516 (6,610,732)
------------ ------------ ------------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 3) ............... 5,753,712 2,516,135 850,240
Benefits and other policy related
transactions (Note 3) ............. (32,021,058) (3,189,044) (2,891,278)
Net transfers among funds ........... 6,117,471 2,462,969 25,765,197
------------ ------------ ------------
Net increase (decrease) in net assets
from policy related transactions .. (20,149,875) 1,790,060 23,724,159
------------ ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT FP (Note 4) ...... (39,868) (712,602) 255,654
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS....... (13,073,133) 21,050,974 17,369,081
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, BEGINNING OF PERIOD . 138,287,446 117,236,472 99,867,391
------------ ------------ ------------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, END OF PERIOD ....... $125,214,313 $138,287,446 $117,236,472
============ ============ ============
<FN>
See Notes to Financial Statements.
+ Formerly known as Equitable Variable Life Insurance Company Separate Account FP.
</FN>
</TABLE>
FSA-8
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
HIGH YIELD FUND GROWTH & INCOME FUND
------------------------------------------- -----------------------------------------
1996 1995 1994 1996 1995 1994
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ................. $ 8,177,610 $ 6,147,199 $ 4,273,424 $ 370,025 $ 310,961 $ 89,288
Net realized gain (loss) .............. 7,058,612 (179,454) (328,199) 1,948,613 2,791 (11,709)
Change in unrealized appreciation/
(depreciation) on investments ....... 1,840,843 4,697,084 (5,608,102) 2,950,992 2,264,931 (140,681)
------------ ----------- ----------- ----------- ----------- -----------
Net increase (decrease)in net assets
from operations...................... 17,077,065 10,664,829 (1,662,877) 5,269,630 2,578,683 (63,102)
------------ ----------- ----------- ----------- ----------- ----------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 3) ................. 19,454,716 15,333,474 14,287,345 11,382,745 6,464,035 2,953,965
Benefits and other policy
related transactions (Note 3) ....... (16,165,764) (8,211,013) (7,162,537) (2,909,569) (1,385,132) (481,430)
Net transfers among funds ............. 9,301,980 4,789,450 (11,048,174) 5,211,758 5,274,221 3,033,230
------------ ----------- ----------- ----------- ----------- ----------
Net increase (decrease) in net assets
from policy related transactions .... 12,590,932 11,911,911 (3,923,366) 13,684,934 10,353,124 5,505,765
------------ ----------- ----------- ----------- ----------- ----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT FP (Note 4) .......... (209,120) (100,679) 16,028 (106,424) (221,877) 6,113
------------ ----------- ----------- ----------- ----------- ----------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS .......... 29,458,877 22,476,061 (5,570,215) 18,848,140 12,709,930 5,448,776
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, BEGINNING OF PERIOD ..... 71,930,962 49,454,901 55,025,116 18,618,313 5,908,383 459,607
------------ ----------- ----------- ----------- ----------- ----------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, END OF PERIOD ........... $101,389,839 $71,930,962 $49,454,901 $37,466,453 $18,618,313 $5,908,383
============ =========== =========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
EQUITY INDEX FUND
--------------------------------------------
1996 1995 1994*
------------ ------------ --------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ................. $ 1,145,887 $ 675,576 $ 443,391
Net realized gain (loss) .............. 11,903,017 539,950 127,205
Change in unrealized appreciation/
(depreciation) on investments ....... 8,996,459 12,851,051 (399,286)
----------- ----------- -----------
Net increase (decrease)
from operations...................... 22,045,363 14,066,577 171,310
----------- ----------- -----------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 3) ................. 33,692,683 10,308,871 690,540
Benefits and other policy related
transactions (Note 3) ............... (56,493,042) (2,111,532) (472,818)
Net transfers among divisions ......... 23,434,912 18,305,589 30,736,505
----------- ----------- -----------
Net increase (decrease) in net assets
policy related transactions ......... 634,553 26,502,928 30,954,227
----------- ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE IN
SEPARATE ACCOUNT FP (Note 4) .......... (66,020) (71,293) (134)
----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS .......... 22,613,896 40,498,212 31,125,403
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, BEGINNING OF PERIOD ..... 71,623,615 31,125,403 --
----------- ----------- -----------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS, END OF PERIOD ........... $94,237,511 $71,623,615 $31,125,403
=========== =========== ===========
<FN>
See Notes to Financial Statements.
* Commencement of Operations on October 1, 1994.
+ Formerly known as Equitable Variable Life Insurance Company Separate Account FP.
</FN>
</TABLE>
FSA-9
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
COMMON STOCK FUND GLOBAL STOCK FUND
------------------------------------------------- ---------------------------------------------
1996 1995 1994 1996 1995 1994
--------------- --------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
FROM OPERATIONS:
Net investment income ........ $ 3,505,756 $ 8,208,894 $ 7,014,347 $ 4,705,326 $ 3,408,544 $ 1,556,985
Net realized gain (loss) ..... 187,552,444 80,631,861 44,228,424 23,774,539 12,264,394 8,168,946
Change in unrealized
appreciation/(depreciation)
on investments ............. 112,608,618 183,872,928 (73,399,217) 22,092,458 33,395,316 (3,932,597)
-------------- -------------- ------------ ------------ ------------ ------------
Net increase (decrease)in net
assets from operations ..... 303,666,818 272,713,683 (22,156,446) 50,572,323 49,068,254 5,793,334
-------------- -------------- ------------ ------------ ------------ ------------
FROM POLICY RELATED
TRANSACTIONS:
Net premiums (Note 3) ........ 271,193,481 216,068,996 171,525,812 96,457,308 92,666,618 77,766,997
Benefits and other policy
related transactions
(Note 3) ................... (154,302,728) (118,456,643) (93,481,219) (43,292,191) (37,507,499) (23,371,745)
Net transfers among funds ...... 4,064,266 (34,354,864) 19,730,410 (4,363,741) (12,472,104) 47,610,957
-------------- -------------- ------------ ------------ ------------ ------------
Net increase (decrease) in net
assets from policy related
transactions ................. 120,955,019 63,257,489 97,775,003 48,801,376 42,687,015 102,006,209
-------------- -------------- ------------ ------------ ------------ ------------
NET (INCREASE) DECREASE IN
AMOUNT RETAINED BY
EQUITABLE LIFE IN
SEPARATE ACCOUNT FP
(Note 4) ..................... (429,232) (392,099) 44,948 (93,415) (96,720) (17,737)
-------------- -------------- ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET
ASSETS ATTRIBUTABLE TO
POLICYOWNERS ................. 424,192,605 335,579,073 75,663,505 99,280,284 91,658,549 107,781,806
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS,
BEGINNING OF PERIOD .......... 1,146,585,274 811,006,201 735,342,696 333,497,020 241,838,471 134,056,665
-------------- -------------- ------------ ------------ ------------ ------------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS,
END OF PERIOD ................ $1,570,777,879 $1,146,585,274 $811,006,201 $432,777,304 $333,497,020 $241,838,471
============== ============== ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL FUND AGGRESSIVE STOCK FUND
--------------------------- ----------------------------------------------
1996 1995* 1996 1995 1994
------------ ------------ ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
FROM OPERATIONS:
Net investment income ........ $ 411,375 $ 159,029 $ (2,425,125) $ (1,434,289) $ (1,544,537)
Net realized gain (loss) ..... 709,281 50,951 163,630,203 73,464,436 (6,075,250)
Change in unrealized
appreciation/(depreciation)
on investments ............. 1,189,887 667,906 (33,653,883) 49,509,800 (4,424,670)
----------- ----------- ------------ ------------ ------------
Net increase (decrease)in net
assets from operations ..... 2,310,543 877,886 127,551,195 121,539,947 (12,044,457)
----------- ----------- ------------ ------------ ------------
FROM POLICY RELATED
TRANSACTIONS:
Net premiums (Note 3) ........ 12,055,154 2,028,670 167,830,465 121,962,483 101,932,221
Benefits and other policy
related transactions
(Note 3) ................... (2,295,079) (339,723) (85,246,883) (63,165,185) (48,604,650)
Net transfers among funds ...... 17,095,516 9,885,952 28,481,572 19,367,834 4,346,636
----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net
assets from policy related
transactions ................. 26,855,591 11,574,899 111,065,154 78,165,132 57,674,207
----------- ----------- ------------ ------------ ------------
NET (INCREASE) DECREASE IN
AMOUNT RETAINED BY
EQUITABLE LIFE IN
SEPARATE ACCOUNT FP
(Note 4) ..................... (21,865) (20,847) (205,349) (188,813) 35,791
----------- ----------- ------------ ------------ ------------
INCREASE (DECREASE) IN NET
ASSETS ATTRIBUTABLE TO
POLICYOWNERS ................. 29,144,269 12,431,938 238,411,000 199,516,266 45,665,541
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS,
BEGINNING OF PERIOD .......... 12,431,938 -- 555,188,131 355,671,865 310,006,324
----------- ----------- ------------ ------------ ------------
NET ASSETS ATTRIBUTABLE TO
POLICYOWNERS,
END OF PERIOD ................ $41,576,207 $12,431,938 $793,599,131 $555,188,131 $355,671,865
=========== =========== ============ ============ ============
<FN>
See Notes to Financial Statements.
* Commencement of Operations on April 3, 1995.
+ Formerly known as Separate Account FP of Equitable Variable Life Insurance Company.
</FN>
</TABLE>
FSA-10
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
---------------------------------------------------------------------------------------------
CONSERVATIVE INVESTORS FUND BALANCED FUND
--------------------------------------------- ---------------------------------------------
1996 1995 1994 1996 1995 1994
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ 6,690,887 $ 7,247,815 $ 5,455,410 $ 10,604,542 $ 10,038,346 $ 8,453,977
Net realized gain (loss) ........ 3,677,543 689,721 (421,502) 33,240,237 8,427,606 858,164
Change in unrealized appreciation/
(depreciation) on investments.. (2,661,985) 19,129,817 (10,682,734) (714,363) 45,976,062 (40,839,536)
------------ ------------ ------------ ------------ ------------ ------------
Net increase(decrease)in net
assets from operations ........ 7,706,445 27,067,353 (5,648,826) 43,130,416 64,442,014 (31,527,395)
------------ ------------ ------------ ------------ ------------ ------------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 3) ........... 38,133,118 41,419,959 48,492,315 60,530,048 63,451,955 70,116,900
Benefits and other policy related
transactions (Note 3) ......... (25,456,269) (22,866,003) (21,612,430) (50,274,632) (48,742,571) (45,655,363)
Net transfers among funds ....... (18,095,700) (3,379,296) (2,076,793) (22,122,080) (18,908,540) (19,954,097)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net
assets from policy related
transactions .................. 5,418,851 15,174,660 24,803,092 (11,866,664) (4,199,156) 4,507,440
------------ ------------ ------------ ------------ ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE
IN SEPARATE ACCOUNT FP (Note 4) . (36,213) (95,412) 22,600 (134,906) (93,214) 47,322
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS .... 2,251,381 42,146,601 19,176,866 31,128,846 60,149,644 (26,972,633)
NET ASSETS ATTRIBUTABLE TO POLICY
OWNERS, BEGINNING OF PERIOD ..... 172,087,099 129,940,498 110,763,632 398,565,209 338,415,565 365,388,198
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS ATTRIBUTABLE TO POLICY
OWNERS, END OF PERIOD ........... $174,338,480 $172,087,099 $129,940,498 $429,694,055 $398,565,209 $338,415,565
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
---------------------------------------------
GROWTH INVESTORS FUND
---------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income ........... $ 11,757,729 $ 13,059,547 $ 8,667,457
Net realized gain (loss) ........ 75,274,214 9,174,038 241,591
Change in unrealized appreciation/
(depreciation) on investments.. (14,635,180) 82,556,566 (21,338,297)
------------ ------------ ------------
Net increase (decrease) in net
assets from operations ........ 72,396,763 104,790,151 (12,429,249)
------------ ------------ ------------
FROM POLICY RELATED TRANSACTIONS:
Net premiums (Note 3) ........... 159,654,177 155,616,059 139,140,391
Benefits and other policy related
transactions (Note 3) ......... (81,943,749) (68,357,709) (54,863,821)
Net transfers among funds ....... (7,652,116) (3,269,896) 20,294,785
------------ ------------ ------------
Net increase (decrease) in net
assets from policy related
transactions .................. 70,058,312 83,988,454 104,571,355
------------ ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE LIFE
IN SEPARATE ACCOUNT FP (Note 4) . (93,120) (120,493) 15,372
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO POLICYOWNERS .... 142,361,955 188,658,112 92,157,478
NET ASSETS ATTRIBUTABLE TO POLICY
OWNERS, BEGINNING OF PERIOD ..... 555,877,666 367,219,554 275,062,076
------------ ------------ ------------
NET ASSETS ATTRIBUTABLE TO POLICY
OWNERS, END OF PERIOD ........... $698,239,621 $555,877,666 $367,219,554
============ ============ ============
<FN>
See Notes to Financial Statements.
+ Formerly known as Equitable Variable Life Insurance Company Separate Account FP.
</FN>
</TABLE>
FSA-11
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. General
On September 19, 1996 the Board of Directors of The Equitable Life
Assurance Society of the United States ( "Equitable Life") approved an
Agreement and Plan of Merger by and between Equitable Life and Equitable
Variable Life Insurance Company (the "Merger Agreement"). The merger was
completed on January 1, 1997. On that date, and in accordance with the
provisions of the Merger Agreement, the separate existence of Equitable
Variable Life Insurance Company ("Equitable Variable Life") was ceased and
Equitable Life survived the merger. From January 1, 1997, Equitable Life is
liable in place of Equitable Variable Life for the liabilities and
obligations of Equitable Variable Life, including liabilities under
policies and contracts issued by Equitable Variable Life, and all of
Equitable Variable Life's assets became assets of Equitable Life.
Equitable Variable Life, a wholly-owned subsidiary of Equitable Life,
established Separate Account FP (the Account) as a unit investment trust
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940. The Account consists of thirteen investment funds: the
Money Market Fund, the Intermediate Government Securities Fund, the Quality
Bond Fund, the High Yield Fund, the Growth & Income Fund, the Equity Index
Fund, the Common Stock Fund, the Global Fund, the International Fund, the
Aggressive Stock Fund, the Conservative Investors Fund, the Balanced Fund,
and the Growth Investors Fund. The assets in each Fund are invested in
Class IA shares of a designated portfolio (Portfolio) of a mutual fund, The
Hudson River Trust (the Trust). Each Portfolio has separate investment
objectives.
The Account supports the operations of Incentive Life, flexible premium
variable life insurance policies, Incentive Life 2000, flexible premium
variable life insurance policies, Champion 2000, modified premium variable
whole life insurance policies, Survivorship 2000, flexible premium joint
survivorship variable life insurance policies, Incentive Life Plus,(SM)
flexible premium variable life insurance policies, IL Protector,(SM)
flexible premium variable life insurance policies, IL COLI, flexible premium
variable life insurance policies, IL COLI II, flexible premium variable life
insurance policies, and SP-Flex, variable life insurance policies with
additional premium option, collectively, the Policies, and the Incentive
Life 2000, Champion 2000 and Survivorship 2000 policies are referred to as
the Series 2000 Policies. Incentive Life Plus policies offered with a
prospectus dated on or after September 15, 1995, are referred to as
Incentive Life Plus Second Series. Incentive Life Plus policies issued with
a prior prospectus are referred to as Incentive Life Plus Original Series.
All Policies are issued by Equitable Life. The assets of the Account are the
property of Equitable Life. 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 Life may conduct.
Policyowners may allocate amounts in their individual accounts to the Funds
of the Account and/or (except for SP-Flex policies) to the guaranteed
interest rate account of Equitable Life's General Account. Net transfers to
(from) the guaranteed interest rate account of the General Account and other
Separate Accounts of ($7,511,567), $6,569,672 and $35,120,632 for the years
ended 1996, 1995 and 1993, respectively, are included in Net Transfers Among
Funds. The net assets of any Fund of the Account may not be less than the
aggregate of the policyowners' accounts allocated to that Fund. Additional
assets are set aside in Equitable 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.
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.
+ Formerly known as Equitable Variable Life Insurance Company Separate
Account FP.
FSA-12
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
The operations of the Account are included in the consolidated Federal
income tax return of Equitable Life. Under the provisions of the Policies,
Equitable 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 Life pays no
tax on investment income and capital gains reflected in variable life
insurance policy reserves. However, Equitable 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.
3. Asset Charges
Under the Policies, Equitable Life assumes mortality and expense risks and,
to cover these risks, deducts charges from the assets of the Account
currently at annual rates of 0.60% of the net assets attributable to
Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and
Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship
2000 policyowners, 0.80% for IL Protector policyowners, and 0.85% for
SP-Flex policyowners, Incentive Life Plus Original Series, IL COLI, and IL
COLI II deduct this charge from the Policy Account. Under SP-Flex, Equitable
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, Series 2000, IL Protector and IL
COLI II policies, mortality and administrative charges are assessed in a
different manner than SP-Flex policies.
Before amounts are allocated to the Account for Incentive Life, Incentive
Life Plus, IL COLI, IL COLI II and the Series 2000 Policies, Equitable Life
deducts a charge for taxes and either an initial policy fee (Incentive Life)
or a premium sales charge (Incentive Life Plus, IL COLI II and Series 2000
Policies) from premiums. Under SP-Flex, the entire initial premium is
allocated to the Account. Before any additional premiums under SP-Flex are
allocated to the Account, however, an administrative charge is deducted.
The amounts attributable to Incentive Life, Incentive Life Plus, IL
Protector, IL COLI, IL COLI II and the Series 2000 policyowners' accounts
are assessed monthly by Equitable Life for mortality and administrative
charges. These charges are withdrawn from the Account along with amounts for
additional benefits. Under the Policies, amounts for certain policy-related
transactions (such as policy loans and surrenders) are transferred out of
the Separate Account.
4. Amounts Retained by Equitable Life in Separate Account FP
The amount retained by Equitable Life in the Account arises principally from
(1) contributions from Equitable 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 Life are not subject to charges for mortality and expense risks
or mortality and administrative costs.
Amounts retained by Equitable Life in the Account may be transferred at any
time by Equitable Life to its General Account.
The following table shows the surplus contributions (withdrawals) by
Equitable Life by investment fund:
Years Ended December 31,
-------------------------------------
INVESTMENT FUND 1996 1995 1994
--------------- ---- ---- ----
Money Market -- $ (250,000) --
Intermediate Government Securities -- (165,000) --
Quality Bond $ (125,000) (4,800,000) --
High Yield -- (100,000) --
Growth & Income (75,000) (685,000) --
Equity Index -- -- $ 200,000
Common Stock (185,000) $ (630,000) --
Global -- (130,000) --
International -- 200,000 --
Aggressive Stock (125,000) (350,000) --
Conservative Investors (80,000) -- --
Balanced (90,000) -- --
Growth Investors (175,000) -- --
Short-Term World Income -- -- (5,165,329)
----------- ----------- -----------
$ (855,000) $(6,910,000) $(4,965,329)
=========== =========== ===========
+ Formerly known as Equitable Variable Life Insurance Company Separate
Account FP.
FSA-13
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
5. Distribution and Servicing Agreements
Equitable Life has entered into a Distribution and Servicing Agreement with
EQ Financial Consultants Inc., whereby registered representatives of EQ
Financial Consultants Inc., authorized as variable life insurance agents
under applicable state insurance laws, sell the Policies. The registered
representatives are compensated on a commission basis by Equitable Life.
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 Fund is not available for
future investment.
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, IL Protector, IL COLI, IL COLI II and
to SP-Flex policyowners because asset charges are deducted at different
rates under each policy (see Note 3).
The tables on the following pages show the gross and net investment returns
with respect to the Funds for the periods shown. The net return for each
Fund is based upon net assets for a policy whose policy commences with the
beginning date of such period and is not based on the average net assets in
the Fund during such period. Gross return is equal to the total return
earned by the underlying Trust investment.
+ Formerly known as Equitable Variable Life Insurance Company Separate
Account FP.
FSA-14
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1996
RATES OF RETURN:
INCENTIVE LIFE,
- ---------------
INCENTIVE LIFE 2000,
- --------------------
INCENTIVE LIFE PLUS SECOND SERIES
- ---------------------------------
AND CHAMPION 2000*
- ------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
MONEY MARKET FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.33% 5.74% 4.02% 3.00% 3.56% 6.18% 8.24% 9.18% 7.32% 6.63%
Net return................ 4.70% 5.11% 3.39% 2.35% 2.94% 5.55% 7.59% 8.53% 6.68% 5.99%
<CAPTION>
APRIL 1(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
INTERMEDIATE GOVERNMENT -----------------------------------------------------------
SECURITIES FUND 1996 1995 1994 1993 1992 1991
- --------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gross return.............. 3.78% 13.33% (4.37)% 10.58% 5.60% 12.26%
Net return................ 3.15% 12.65% (4.95)% 9.88% 4.96% 11.60%
YEARS ENDED OCTOBER 1(A) TO
DECEMBER 31, DECEMBER 31,
------------------------------------------------
QUALITY BOND FUND 1996 1995 1994 1993
- ----------------- ---- ---- ---- ----
Gross return.............. 5.36% 17.02% (5.10)% (0.51)%
Net return................ 4.73% 16.32% (5.67)% (0.66)%
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
HIGH YIELD FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 22.89% 19.92% (2.79)% 23.15% 12.31% 24.46% (1.12)% 5.13% 9.73% 4.68%
Net return................ 22.14% 19.20% (3.37)% 22.41% 11.64% 23.72% (1.71)% 4.50% 9.08% 4.05%
YEARS ENDED OCTOBER 1(A) TO
DECEMBER 31, DECEMBER 31,
-------------------------------------------
GROWTH & INCOME FUND 1996 1995 1994 1993
- -------------------- ---- ---- ---- ----
Gross return.............. 20.09% 24.07% (0.58)% (0.25)%
Net return................ 19.36% 23.33% (1.17)% (0.41)%
<CAPTION>
YEARS ENDED SEPTEMBER 30(A)
DECEMBER 31, TO DECEMBER 31,
---------------------------------------------------
EQUITY INDEX FUND 1996 1995 1994
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Gross return.............. 22.39% 36.48% 1.08%
Net return................ 21.65% 35.66% 0.58%
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
COMMON STOCK FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 24.28% 32.45% (2.14)% 24.84% 3.22% 37.88% (8.12)% 25.59% 22.43% 7.49%
Net return................ 23.53% 31.66% (2.73)% 24.08% 2.60% 37.06% (8.67)% 24.84% 21.70% 6.84%
<CAPTION>
AUGUST 31(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
GLOBAL FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 14.60% 18.81% 5.23% 32.09% (0.50)% 30.55% (6.07)% 26.93% 10.88% (13.27)%
Net return................ 13.91% 18.11% 4.60% 31.33% (1.10)% 29.77% (6.63)% 26.17% 10.22% (13.45)%
YEARS ENDED APRIL 3(A) TO
DECEMBER DECEMBER 31,
31,
----------------------------
INTERNATIONAL FUND 1996 1995
- ------------------ ---- ----
Gross return.............. 9.82% 11.29%
Net return................ 9.15% 10.79%
<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 Fund. The gross return and the net return for the
periods indicated are not annual rates of return.
+ Formerly known as Equitable Variable Life Insurance Company Separate Account FP.
</FN>
</TABLE>
FSA-15
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
AGGRESSIVE STOCK FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 22.20% 31.63% (3.81)% 16.77% (3.16)% 86.86% 8.17% 43.50% 1.17% 7.31%
Net return................ 21.46% 30.85% (4.39)% 16.05% (3.74)% 85.75% 7.51% 42.64% 0.53% 6.66%
<CAPTION>
ASSET ALLOCATION SERIES
OCTOBER 2(A)
TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE --------------------------------------------------------------------------------
INVESTORS FUND 1996 1995 1994 1993 1992 1991 1990 1989
- -------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.21% 20.40% (4.10)% 10.76% 5.72% 19.87% 6.37% 3.09%
Net return................ 4.57% 19.68% (4.67)% 10.15% 5.09% 19.16% 5.73% 2.94%
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
BALANCED FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 11.68% 19.75% (8.02)% 12.28% (2.84)% 41.26% 0.24 % 25.83% 13.27% (0.85)%
Net return................ 11.00% 19.03% (8.57)% 11.64% (3.42)% 40.42% (0.36)% 25.08% 12.59% (1.45)%
<CAPTION>
GROWTH INVESTORS FUND 1996 1995 1994 1993 1992 1991 1990 1989
- --------------------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 12.61% 26.37% (3.15)% 15.26% 4.90% 48.89% 10.66% 3.98%
Net return................ 11.93% 25.62% (3.73)% 14.58% 4.27% 48.01% 10.00% 3.82%
</TABLE>
<TABLE>
<CAPTION>
RATES OF RETURN:
SURVIVORSHIP 2000
- -----------------
AUGUST 17(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
-----------------------------------------------------------------
MONEY MARKET FUND 1996 1995 1994 1993 1992
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return.............. 5.33% 5.74% 4.02% 3.00% 1.11%
Net return................ 4.38% 4.80% 3.08% 2.04% 0.77%
<CAPTION>
INTERMEDIATE GOVERNMENT
SECURITIES FUND 1996 1995 1994 1993 1992
- --------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return.............. 3.78% 13.33% (4.37)% 10.58% 0.90%
Net return................ 2.84% 12.31% (5.23)% 9.55% 0.56%
<CAPTION>
OCTOBER 1(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
-----------------------------------------------------
QUALITY BOND FUND 1996 1995 1994 1993
- ----------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return.............. 5.36% 17.02% (5.10)% (0.51)%
Net return................ 4.41% 15.97% (5.95)% (0.73)%
<CAPTION>
AUGUST 17(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
-----------------------------------------------------------------
HIGH YIELD FUND 1996 1995 1994 1993 1992
- --------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return.............. 22.89% 19.92% (2.79)% 23.15% 1.84%
Net return................ 21.77% 18.84% (3.66)% 22.04% 1.50%
<CAPTION>
OCTOBER 1(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
-----------------------------------------------------
GROWTH & INCOME FUND 1996 1995 1994 1993
- -------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross return.............. 20.09% 24.07% (0.58)% (0.25)%
Net return................ 19.00% 22.96% (1.47)% (0.48)%
<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 Fund. The gross return and the net return for the
periods indicated are not annual rates of return.
+ Formerly known as Equitable Variable Life Insurance Company Separate Account FP.
</FN>
</TABLE>
FSA-16
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
YEARS ENDED MARCH 1(A) TO
DECEMBER 31, DECEMBER 31,
---------------------------------------------
EQUITY INDEX FUND 1996 1995 1994
- ----------------- ---- ---- ----
Gross return.............. 22.39% 36.48% 1.08%
Net return................ 21.28% 35.26% 0.33%
<TABLE>
<CAPTION>
AUGUST 17(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
-----------------------------------------------------------------
COMMON STOCK FUND 1996 1995 1994 1993 1992
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return.............. 24.28% 32.45% (2.14)% 24.84% 5.28%
Net return................ 23.15% 31.26% (3.02)% 23.70% 4.93%
GLOBAL FUND
- -----------
Gross return.............. 14.60% 18.81% 5.23% 32.09% 4.87%
Net return................ 13.56% 17.75% 4.29% 30.93% 4.52%
AGGRESSIVE STOCK FUND
- ---------------------
Gross return.............. 22.20% 31.63% (3.81)% 16.77% 11.49%
Net return................ 21.09% 30.46% (4.68)% 15.70% 11.11%
</TABLE>
YEARS ENDED APRIL 3(A) TO
DECEMBER 31, DECEMBER 31,
----------------------------------
INTERNATIONAL FUND 1996 1995
- ------------------ ---- ----
Gross return.............. 9.82% 11.29%
Net return................ 8.82% 10.55%
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
AUGUST 17(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS -----------------------------------------------------------------
FUND 1996 1995 1994 1993 1992
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Gross return.............. 5.21% 20.40% (4.10)% 10.76% 1.38%
Net return................ 4.26% 19.32% (4.96)% 9.81% 1.04%
BALANCED FUND 1996 1995 1994 1993 1992
- ------------- ---- ---- ---- ---- ----
Gross return.............. 11.68% 19.75% (8.02)% 12.28% 5.37%
Net return................ 10.67% 18.68% (8.84)% 11.30% 5.02%
GROWTH INVESTORS FUND 1996 1995 1994 1993 1992
- --------------------- ---- ---- ---- ---- ----
Gross return.............. 12.61% 26.37% (3.15)% 15.26% 6.89%
Net return................ 11.59% 25.24% (4.02)% 14.24% 6.53%
<FN>
- ----------------
(a) Date as of which net premiums under the policies were first allocated to the Fund. The gross return and the net return for the
periods indicated are not annual rates of return.
+ Formerly known as Equitable Variable Life Insurance Company Separate Account FP.
</FN>
</TABLE>
FSA-17
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
RATES OF RETURN:
INCENTIVE LIFE PLUS ORIGINAL SERIES*(B)
- ---------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1996 1995
---- ----
Money Market Fund.............. 5.33% 5.69%
Intermediate Government
Securities Fund................ 3.78% 13.31%
Quality Bond Fund.............. 5.36% 17.13%
High Yield Fund................ 22.89% 19.95%
Growth & Income Fund........... 20.09% 24.38%
Equity Index Fund.............. 22.38% 36.53%
Common Stock Fund.............. 24.28% 33.07%
Global Fund.................... 14.60% 19.38%
YEAR ENDED DECEMBER 31, APRIL 30 TO DECEMBER 31, (A)
----------------------------------------------------
1996 1995
---- ----
International Fund............. 9.81% 11.29%
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1996 1995
---- ----
Aggressive Stock Fund.......... 22.20% 33.00%
ASSET ALLOCATION SERIES
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995
---- ----
Conservative Investors Fund.... 5.21% 20.59%
Balanced Fund.................. 11.68% 20.32%
Growth Investors Fund.......... 12.61% 26.92%
- ---------------------------
*Sales of Incentive Life Plus Original Series commenced on January 6, 1995.
(a) Date as of which net premiums under the policies were first allocated to
the Fund. The returns for the periods indicated are not annual rates of
return.
(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
year ended December 31, 1995 indicated is not an annual rate of return.
+ Formerly known as Equitable Variable Life Insurance Company Separate
Account FP.
FSA-18
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
RATES OF RETURN:
IL PROTECTOR*(b)
- ----------------
AUGUST 5 TO DECEMBER 31,(A)
----------------------------
1996
----
Money Market Fund..................... 2.98%
Intermediate Government
Securities Fund....................... 4.49%
Quality Bond Fund..................... 7.86%
High Yield Fund....................... 13.90%
Growth & Income Fund.................. 15.63%
Equity Index Fund..................... 16.25%
Common Stock Fund..................... 17.44%
Global Fund........................... 6.78%
Inernational Fund..................... 2.11%
Aggressive Stock Fund................. 6.22%
ASSET ALLOCATION SERIES
AUGUST 5 TO DECEMBER 31,(A)
----------------------------
1996
----
Conservative Investors Fund........... 7.94%
Balanced Fund......................... 8.67%
Growth Investors Fund................. 9.38%
- ----------
*Sales of Incentive Life Protector commenced on August 5, 1996.
(a) Date as of which net premiums under the policies were first allocated to the
Fund. The returns for the periods indicated are not
annual rates of return.
(b) There are no Separate Account asset changes for this policy and therefore
the gross and net rates of return are the same.
+ Formerly known as Equitable Variable Life Insurance Company Separate
Account FP.
FSA-19
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
RATES OF RETURN:
SP-FLEX
- -------
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
-----------------------------------------------------------------------------------------------------
MONEY MARKET FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.33% 5.74% 4.02% 3.00% 3.56% 6.17% 8.24% 9.18% 7.32% 2.15%
Net return................ 3.44% 3.86% 2.17% 1.13% 1.71% 4.29% 6.30% 7.24% 5.41% 1.62%
</TABLE>
APRIL 1(A)
TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
INTERMEDIATE GOVERNMENT --------------------------------------------------
SECURITIES FUND 1996 1995 1994 1993 1992 1991
- --------------- ---- ---- ---- ---- ---- ----
Gross return.............. 3.78% 13.33% (4.37)% 10.58% 5.60% 12.10%
Net return................ 1.91% 11.31% (6.08)% 8.57% 3.71% 10.59%
SEPTEMBER 1(A)
YEARS ENDED TO
DECEMBER 31, DECEMBER 31,
----------------------------------------------
QUALITY BOND FUND 1996 1995 1994
- ----------------- ---- ---- ----
Gross return.............. 5.36% 17.02% (2.20)%
Net return................ 3.47% 14.94% (2.35)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
-----------------------------------------------------------------------------------------------------
HIGH YIELD FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 22.89% 19.92% (2.79)% 23.15% 12.31% 24.46% (1.12)% 5.13% 9.73% 1.95%
Net return................ 20.68% 17.79% (4.52)% 20.96% 10.30% 22.25% (2.89)% 3.26% 7.78% 1.39%
</TABLE>
SEPTEMBER 1(A)
YEARS ENDED TO
DECEMBER 31, DECEMBER 31,
----------------------------------------------
GROWTH & INCOME FUND 1996 1995 1994
- -------------------- ---- ---- ----
Gross return.............. 20.09% 24.07% (3.40)%
Net return................ 17.93% 21.87% (3.55)%
EQUITY INDEX FUND 1996 1995 1994
- ----------------- ---- ---- ----
Gross return.............. 22.39% 36.48% (2.54)%
Net return................ 20.19% 34.06% (2.69)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
-----------------------------------------------------------------------------------------------------
COMMON STOCK FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 24.28% 32.45% (2.14)% 24.84% 3.23% 37.87% (8.12)% 25.59% 22.43% (22.57)%
Net return................ 22.04% 30.10% (3.88)% 22.60% 1.38% 35.43% (9.76)% 23.36% 20.26% (23.00)%
GLOBAL FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Gross return.............. 14.60% 18.81% 5.23% 32.09% (0.50)% 30.55% (6.07)% 26.93% 10.88% (11.40)%
Net return................ 12.54% 16.70% 3.36% 29.77% (2.28)% 28.23% (7.75)% 24.67% 8.90% (11.86)%
</TABLE>
YEARS ENDED APRIL 3(A) TO
DECEMBER 31, DECEMBER 31,
------------------------------
INTERNATIONAL FUND 1996 1995
- ------------------ ---- ----
Gross return.............. 9.82% 11.29%
Net return................ 7.84% 9.82%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
-----------------------------------------------------------------------------------------------------
AGGRESSIVE STOCK FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 22.20% 31.63% (3.81)% 16.77% (3.16)% 86.86% 8.17% 43.50% 1.17 % (24.28)%
Net return................ 20.00% 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 Fund. The gross return and the net return for the
periods indicated are not annual rates of return.
+ Formerly known as Equitable Variable Life Insurance Company Separate Account FP.
</FN>
</TABLE>
FSA-20
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
SEPARATE ACCOUNT FP+
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
YEARS ENDED SEPTEMBER 1(A) TO
ASSET ALLOCATION SERIES DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS ------------------------------------------------------
FUND 1996 1995 1994
- ---- ---- ---- ----
Gross return.......... 5.21% 20.40% (1.83)%
Net return............ 3.32% 18.26% (1.98)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEARS ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------------
BALANCED FUND 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 11.68% 19.75% (8.02)% 12.28% (2.83)% 41.27% 0.24 % 25.83% 13.27% (20.26)%
Net return............ 9.67% 17.62% (9.66)% 10.31% (4.57)% 38.75% (1.56)% 23.59% 11.25% (20.71)%
</TABLE>
YEARS ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
GROWTH INVESTORS ------------------------------------------------------
FUND 1996 1995 1994
- ---- ---- ---- ----
Gross return........... 12.61% 26.37% (3.16)%
Net return............. 10.58% 24.12% (3.31)%
- ----------
(a) Date as of which net premiums under the policies were first allocated to the
Fund. The gross return and the net return for the periods indicated are not
annual rates of return.
+ Formerly known as Equitable Variable Life Insurance Company Separate
Account FP.
FSA-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
The Equitable Life Assurance Society of the United States
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of The
Equitable Life Assurance Society of the United States and its subsidiaries
("Equitable Life") at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of Equitable Life's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 2 to the consolidated financial statements, Equitable Life
changed its methods of accounting for long-duration participating life insurance
contracts and long-lived assets in 1996, for loan impairments in 1995 and for
postemployment benefits in 1994.
Price Waterhouse LLP
New York, New York
February 10, 1997
F-1
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value................. $ 18,077.0 $ 15,899.9
Mortgage loans on real estate................................. 3,133.0 3,638.3
Equity real estate............................................ 3,297.5 3,916.2
Policy loans.................................................. 2,196.1 1,976.4
Investment in and loans to affiliates......................... 685.0 636.6
Other equity investments...................................... 597.3 621.1
Other invested assets......................................... 288.7 706.1
----------------- -----------------
Total investments......................................... 28,274.6 27,394.6
Cash and cash equivalents....................................... 538.8 774.7
Deferred policy acquisition costs............................... 3,104.9 3,075.8
Amounts due from discontinued GIC Segment....................... 996.2 2,097.1
Other assets.................................................... 2,552.2 2,718.1
Closed Block assets............................................. 8,495.0 8,582.1
Separate Accounts assets........................................ 29,646.1 24,566.6
----------------- -----------------
TOTAL ASSETS.................................................... $ 73,607.8 $ 69,209.0
================= =================
LIABILITIES
Policyholders' account balances................................. $ 21,865.6 $ 21,911.2
Future policy benefits and other policyholders' liabilities..... 4,416.6 4,007.3
Short-term and long-term debt................................... 1,766.9 1,899.3
Other liabilities............................................... 2,785.1 3,380.7
Closed Block liabilities........................................ 9,091.3 9,221.4
Separate Accounts liabilities................................... 29,598.3 24,531.0
----------------- -----------------
Total liabilities......................................... 69,523.8 64,950.9
----------------- -----------------
Commitments and contingencies (Notes 10, 12, 13, 14 and 15)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value 2.0 million shares
authorized, issued and outstanding............................ 2.5 2.5
Capital in excess of par value.................................. 3,105.8 3,105.8
Retained earnings............................................... 798.7 788.4
Net unrealized investment gains................................. 189.9 396.5
Minimum pension liability....................................... (12.9) (35.1)
----------------- -----------------
Total shareholder's equity................................ 4,084.0 4,258.1
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY...................... $ 73,607.8 $ 69,209.0
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Universal life and investment-type product policy fee
income................................................ $ 874.0 $ 788.2 $ 715.0
Premiums................................................ 597.6 606.8 625.6
Net investment income................................... 2,175.9 2,088.2 1,998.6
Investment (losses) gains, net.......................... (9.8) 5.3 91.8
Commissions, fees and other income...................... 1,081.8 897.1 847.4
Contribution from the Closed Block...................... 125.0 143.2 137.0
----------------- ----------------- -----------------
Total revenues.................................... 4,844.5 4,528.8 4,415.4
----------------- ----------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances.... 1,270.2 1,248.3 1,201.3
Policyholders' benefits................................. 1,317.7 1,008.6 914.9
Other operating costs and expenses...................... 2,048.0 1,775.8 1,857.7
----------------- ----------------- -----------------
Total benefits and other deductions............... 4,635.9 4,032.7 3,973.9
----------------- ----------------- -----------------
Earnings from continuing operations before Federal
income taxes, minority interest and cumulative
effect of accounting change........................... 208.6 496.1 441.5
Federal income taxes.................................... 9.7 120.5 100.2
Minority interest in net income of consolidated
subsidiaries.......................................... 81.7 62.8 50.4
----------------- ----------------- -----------------
Earnings from continuing operations before
cumulative effect of accounting change................ 117.2 312.8 290.9
Discontinued operations, net of Federal income taxes.... (83.8) - -
Cumulative effect of accounting change, net of Federal
income taxes.......................................... (23.1) - (27.1)
----------------- ----------------- -----------------
Net Earnings............................................ $ 10.3 $ 312.8 $ 263.8
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Common stock, at par value, beginning and end of year......... $ 2.5 $ 2.5 $ 2.5
----------------- ----------------- -----------------
Capital in excess of par value, beginning of year as
previously reported......................................... 2,913.6 2,913.6 2,613.6
Cumulative effect on prior years of retroactive restatement
for accounting change....................................... 192.2 192.2 192.2
----------------- ----------------- -----------------
Capital in excess of par value, beginning of year as restated. 3,105.8 3,105.8 2,805.8
Additional capital in excess of par value..................... - - 300.0
----------------- ----------------- -----------------
Capital in excess of par value, end of year................... 3,105.8 3,105.8 3,105.8
----------------- ----------------- -----------------
Retained earnings, beginning of year as previously reported... 781.6 484.0 217.6
Cumulative effect on prior years of retroactive restatement
for accounting change....................................... 6.8 (8.4) (5.8)
----------------- ----------------- -----------------
Retained earnings, beginning of year as restated.............. 788.4 475.6 211.8
Net earnings.................................................. 10.3 312.8 263.8
----------------- ----------------- -----------------
Retained earnings, end of year................................ 798.7 788.4 475.6
----------------- ----------------- -----------------
Net unrealized investment gains (losses), beginning of year
as previously reported...................................... 338.2 (203.0) 131.9
Cumulative effect on prior years of retroactive restatement
for accounting change....................................... 58.3 (17.5) 12.7
----------------- ----------------- -----------------
Net unrealized investment gains (losses), beginning of
year as restated............................................ 396.5 (220.5) 144.6
Change in unrealized investment (losses) gains................ (206.6) 617.0 (365.1)
----------------- ----------------- -----------------
Net unrealized investment gains (losses), end of year......... 189.9 396.5 (220.5)
----------------- ----------------- -----------------
Minimum pension liability, beginning of year.................. (35.1) (2.7) (15.0)
Change in minimum pension liability........................... 22.2 (32.4) 12.3
----------------- ----------------- -----------------
Minimum pension liability, end of year........................ (12.9) (35.1) (2.7)
----------------- ----------------- -----------------
TOTAL SHAREHOLDER'S EQUITY, END OF YEAR....................... $ 4,084.0 $ 4,258.1 $ 3,360.7
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net earnings.................................................. $ 10.3 $ 312.8 $ 263.8
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Interest credited to policyholders' account balances........ 1,270.2 1,248.3 1,201.3
Universal life and investment-type policy fee income........ (874.0) (788.2) (715.0)
Investment losses (gains)................................... 9.8 (5.3) (91.8)
Change in Federal income taxes payable...................... (197.1) 221.6 38.3
Other, net.................................................. 364.4 127.3 (19.4)
----------------- ----------------- -----------------
Net cash provided by operating activities..................... 583.6 1,116.5 677.2
----------------- ----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................... 2,275.1 1,897.4 2,323.8
Sales....................................................... 8,964.3 8,867.1 5,816.6
Return of capital from joint ventures and limited
partnerships.............................................. 78.4 65.2 39.0
Purchases................................................... (12,559.6) (11,675.5) (7,564.7)
Decrease (increase) in loans to discontinued GIC Segment.... 1,017.0 1,226.9 (40.0)
Other, net.................................................. 56.7 (624.7) (478.1)
----------------- ----------------- -----------------
Net cash (used) provided by investing activities.............. (168.1) (243.6) 96.6
----------------- ----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits.................................................. 1,925.4 2,586.5 2,082.5
Withdrawals............................................... (2,385.2) (2,657.1) (2,864.4)
Net decrease in short-term financings....................... (.3) (16.4) (173.0)
Additions to long-term debt................................. - 599.7 51.8
Repayments of long-term debt................................ (124.8) (40.7) (199.8)
Proceeds from issuance of Alliance units.................... - - 100.0
Payment of obligation to fund accumulated deficit of
discontinued GIC Segment.................................. - (1,215.4) -
Capital contribution from the Holding Company............... - - 300.0
Other, net.................................................. (66.5) (48.4) 26.5
----------------- ----------------- -----------------
Net cash (used) by financing activities....................... (651.4) (791.8) (676.4)
----------------- ----------------- -----------------
Change in cash and cash equivalents........................... (235.9) 81.1 97.4
Cash and cash equivalents, beginning of year.................. 774.7 693.6 596.2
----------------- ----------------- -----------------
Cash and Cash Equivalents, End of Year........................ $ 538.8 $ 774.7 $ 693.6
================= ================= =================
Supplemental cash flow information
Interest Paid............................................... $ 109.9 $ 89.6 $ 34.9
================= ================= =================
Income Taxes (Refunded) Paid................................ $ (10.0) $ (82.7) $ 49.2
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) ORGANIZATION
The Equitable Life Assurance Society of the United States ("Equitable
Life") converted to a stock life insurance company on July 22, 1992 and
became a wholly owned subsidiary of The Equitable Companies Incorporated
(the "Holding Company"). Equitable Life's insurance business is
conducted principally by Equitable Life and its wholly owned life
insurance subsidiary, Equitable Variable Life Insurance Company
("EVLICO"). Effective January 1, 1997, EVLICO was merged into Equitable
Life, which will continue to conduct the Company's insurance business.
Equitable Life's investment management business, which comprises the
Investment Services segment, is conducted principally by Alliance
Capital Management L.P. ("Alliance"), Equitable Real Estate Investment
Management, Inc. ("EREIM") and Donaldson, Lufkin & Jenrette, Inc.
("DLJ"), an investment banking and brokerage affiliate. AXA-UAP ("AXA"),
a French holding company for an international group of insurance and
related financial services companies, is the Holding Company's largest
shareholder, owning approximately 60.8% at December 31, 1996 (63.6%
assuming conversion of Series E Convertible Preferred Stock held by AXA
and 54.4% if all securities convertible into, and options on, common
stock were to be converted or exercised).
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
-----------------------------------------------------
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles ("GAAP").
The accompanying consolidated financial statements include the accounts
of Equitable Life and its wholly owned life insurance subsidiaries
(collectively, the "Insurance Group"); non-insurance subsidiaries,
principally Alliance, an investment advisory subsidiary, and EREIM, a
real estate investment management subsidiary; and those partnerships and
joint ventures in which Equitable Life or its subsidiaries has control
and a majority economic interest (collectively, including its
consolidated subsidiaries, the "Company"). The Company's investment in
DLJ is reported on the equity basis of accounting. Closed Block assets
and liabilities and results of operations are presented in the
consolidated financial statements as single line items (see Note 6).
Unless specifically stated, all disclosures contained herein supporting
the consolidated financial statements exclude the Closed Block related
amounts.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
All significant intercompany transactions and balances have been
eliminated in consolidation other than intercompany transactions and
balances with the Closed Block and the discontinued Guaranteed Interest
Contract ("GIC") Segment (see Note 7).
The years "1996," "1995" and "1994" refer to the years ended December
31, 1996, 1995 and 1994, respectively.
Certain reclassifications have been made in the amounts presented for
prior periods to conform these periods with the 1996 presentation.
F-6
<PAGE>
Closed Block
------------
As of July 22, 1992, Equitable Life established the Closed Block for the
benefit of certain classes of individual participating policies for
which Equitable Life had a dividend scale payable in 1991 and which were
in force on that date. Assets were allocated to the Closed Block in an
amount which, together with anticipated revenues from policies included
in the Closed Block, was reasonably expected to be sufficient to support
such business, including provision for payment of claims, certain
expenses and taxes, and for continuation of dividend scales payable in
1991, assuming the experience underlying such scales continues.
Assets allocated to the Closed Block inure solely to the benefit of the
holders of policies included in the Closed Block and will not revert to
the benefit of the Holding Company. The plan of demutualization
prohibits the reallocation, transfer, borrowing or lending of assets
between the Closed Block and other portions of Equitable Life's General
Account, any of its Separate Accounts or to any affiliate of Equitable
Life without the approval of the New York Superintendent of Insurance
(the "Superintendent"). Closed Block assets and liabilities are carried
on the same basis as similar assets and liabilities held in the General
Account. The excess of Closed Block liabilities over Closed Block assets
represents the expected future post-tax contribution from the Closed
Block which would be recognized in income over the period the policies
and contracts in the Closed Block remain in force.
Discontinued Operations
-----------------------
In 1991, the Company's management adopted a plan to discontinue the
business operations of the GIC Segment, consisting of the Group
Non-Participating Wind-Up Annuities ("Wind-Up Annuities") and Guaranteed
Interest Contract ("GIC") lines of business. The Company established a
pre-tax provision for the estimated future losses of the GIC line of
business and a premium deficiency reserve for the Wind-Up Annuities.
Subsequent losses incurred have been charged to the two loss provisions.
Management reviews the adequacy of the allowance and reserve each
quarter. During the fourth quarter 1996 review, management determined it
was necessary to increase the allowance for expected future losses of
the GIC Segment. Management believes the loss provisions for GIC
contracts and Wind-Up Annuities at December 31, 1996 are adequate to
provide for all future losses; however, the determination of loss
provisions continues to involve numerous estimates and subjective
judgments regarding the expected performance of discontinued operations
investment assets. There can be no assurance the losses provided for
will not differ from the losses ultimately realized (See Note 7).
Accounting Changes
------------------
In 1996, the Company changed its method of accounting for long-duration
participating life insurance contracts, primarily within the Closed
Block, in accordance with the provisions prescribed by Statement of
Financial Accounting Standards ("SFAS") No. 120, "Accounting and
Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts". The
effect of this change, including the impact on the Closed Block, was to
increase earnings from continuing operations before cumulative effect of
accounting change by $19.2 million, net of Federal income taxes of $10.3
million for 1996. The financial statements for 1995 and 1994 have been
retroactively restated for the change which resulted in an increase
(decrease) in earnings before cumulative effect of accounting change of
$15.2 million, net of Federal income taxes of $8.2 million, and $(2.6)
million, net of Federal income tax benefit of $1.0 million,
respectively. Shareholder's equity increased $199.1 million as of
January 1, 1994 for the effect of retroactive application of the new
method. (See "Deferred Policy Acquisition Costs," "Policyholders'
Account Balances and Future Policy Benefits" and Note 6.)
The Company implemented SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," as of
January 1, 1996. The statement requires long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances
F-7
<PAGE>
indicate the carrying value of such assets may not be recoverable.
Effective with SFAS No. 121's adoption, impaired real estate is written
down to fair value with the impairment loss being included in investment
gains (losses), net. Before implementing SFAS No. 121, valuation
allowances on real estate held for the production of income were
computed using the forecasted cash flows of the respective properties
discounted at a rate equal to the Company's cost of funds. The adoption
of the statement resulted in the release of valuation allowances of
$152.4 million and recognition of impairment losses of $144.0 million on
real estate held and used. Real estate which management has committed to
disposing of by sale or abandonment is classified as real estate to be
disposed of. Valuation allowances on real estate to be disposed of
continue to be computed using the lower of estimated fair value or
depreciated cost, net of disposition costs. Implementation of the SFAS
No. 121 impairment requirements relative to other assets to be disposed
of resulted in a charge for the cumulative effect of an accounting
change of $23.1 million, net of a Federal income tax benefit of $12.4
million, due to the writedown to fair value of building improvements
relating to facilities being vacated beginning in 1996.
In the first quarter of 1995, the Company adopted SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan". This statement
applies to all loans, including loans restructured in a troubled debt
restructuring involving a modification of terms. This statement
addresses the accounting for impairment of a loan by specifying how
allowances for credit losses should be determined. Impaired loans within
the scope of this statement are measured based on the present value of
expected future cash flows discounted at the loan's effective interest
rate, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. The Company provides for
impairment of loans through an allowance for possible losses. The
adoption of this statement did not have a material effect on the level
of these allowances or on the Company's consolidated statements of
earnings and shareholder's equity.
Beginning coincident with issuance of SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," implementation
guidance in November 1995, the Financial Accounting Standards Board
("FASB") permitted companies a one-time opportunity, through December
31, 1995, to reassess the appropriateness of the classification of all
securities held at that time. On December 1, 1995, the Company
transferred $4,794.9 million of securities classified as held to
maturity to the available for sale portfolio. As a result, consolidated
shareholder's equity increased by $149.4 million, net of deferred policy
acquisition costs ("DAC"), amounts attributable to participating group
annuity contracts and deferred Federal income taxes.
In the fourth quarter of 1994 (effective as of January 1, 1994), the
Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," which required employers to recognize the obligation to
provide postemployment benefits. Implementation of this statement
resulted in a charge for the cumulative effect of accounting change of
$27.1 million, net of a Federal income tax benefit of $14.6 million.
New Accounting Pronouncements
-----------------------------
The FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation,"
which permits entities to recognize as expense over the vesting period
the fair value of all stock-based awards on the date of grant or,
alternatively, to continue to apply the provisions of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Companies which elect to
continue to apply APB Opinion No. 25 must provide pro forma net income
disclosures for employee stock option grants made in 1995 and future
years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company accounts for stock option plans sponsored by the
Holding Company, DLJ and Alliance in accordance with the provisions of
APB Opinion No. 25 (see Note 21).
F-8
<PAGE>
In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities".
SFAS No. 125 specifies the accounting and reporting requirements for
transfers of financial assets, the recognition and measurement of
servicing assets and liabilities and extinguishments of liabilities.
SFAS No. 125 is effective for transactions occurring after December 31,
1996 and is to be applied prospectively. In December 1996, the FASB
issued SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125," which defers for one year the
effective date of provisions relating to secured borrowings and
collateral and transfers of financial assets that are part of repurchase
agreements, dollar-roll, securities lending and similar transactions.
Management has not yet determined the effect of implementing SFAS No.
125.
Valuation of Investments
------------------------
Fixed maturities identified as available for sale are reported at
estimated fair value. The amortized cost of fixed maturities is adjusted
for impairments in value deemed to be other than temporary.
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. Impaired real
estate is written down to fair value with the impairment loss being
included in investment gains (losses) net. Valuation allowances on real
estate available for sale are computed using the lower of current
estimated fair value or depreciated cost, net of disposition costs.
Prior to the adoption of SFAS No. 121, valuation allowances on real
estate held for the production of income were computed using the
forecasted cash flows of the respective properties discounted at a rate
equal to the Company's cost of funds.
Policy loans are stated at unpaid principal balances.
Partnerships and joint venture interests in which the Company does not
have control and a majority economic interest are reported on the equity
basis of accounting and are included either with equity real estate or
other equity investments, as appropriate.
Common stocks are carried at estimated fair value and are included in
other equity investments.
Short-term investments are stated at amortized cost which approximates
fair value and are included with other invested assets.
Cash and cash equivalents includes cash on hand, amounts due from banks
and highly liquid debt instruments purchased with an original maturity
of three months or less.
All securities are recorded in the consolidated financial statements on
a trade date basis.
Investment Results and Unrealized Investment Gains (Losses)
-----------------------------------------------------------
Net investment income and realized investment gains and losses
(collectively, "investment results") related to certain participating
group annuity contracts which are passed through to the contractholders
are reflected as interest credited to policyholders' account balances.
F-9
<PAGE>
Realized investment gains and losses are determined by specific
identification and are presented as a component of revenue. Valuation
allowances are netted against the asset categories to which they apply
and changes in the valuation allowances are included in investment gains
or losses.
Unrealized investment gains and losses on fixed maturities available for
sale and equity securities held by the Company are accounted for as a
separate component of shareholder's equity, net of related deferred
Federal income taxes, amounts attributable to the discontinued GIC
Segment, participating group annuity contracts, and DAC related to
universal life and investment-type products and participating
traditional life contracts.
Recognition of Insurance Income and Related Expenses
----------------------------------------------------
Premiums from universal life and investment-type contracts are reported
as deposits to policyholders' account balances. Revenues from these
contracts consist of amounts assessed during the period against
policyholders' account balances for mortality charges, policy
administration charges and surrender charges. Policy benefits and claims
that are charged to expense include benefit claims incurred in the
period in excess of related policyholders' account balances.
Premiums from participating and non-participating traditional life and
annuity policies with life contingencies generally are recognized as
income when due. Benefits and expenses are matched with such income so
as to result in the recognition of profits over the life of the
contracts. This match is accomplished by means of the provision for
liabilities for future policy benefits and the deferral and subsequent
amortization of policy acquisition costs.
For contracts with a single premium or a limited number of premium
payments due over a significantly shorter period than the total period
over which benefits are provided, premiums are recorded as income when
due with any excess profit deferred and recognized in income in a
constant relationship to insurance in force or, for annuities, the
amount of expected future benefit payments.
Premiums from individual health contracts are recognized as income over
the period to which the premiums relate in proportion to the amount of
insurance protection provided.
Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
underwriting, agency and policy issue expenses, all of which vary with
and are primarily related to the production of new business, are
deferred. DAC is subject to recoverability testing at the time of policy
issue and loss recognition testing at the end of each accounting period.
For universal life products and investment-type products, DAC is
amortized over the expected total life of the contract group (periods
ranging from 15 to 35 years and 5 to 17 years, respectively) as a
constant percentage of estimated gross profits arising principally from
investment results, mortality and expense margins and surrender charges
based on historical and anticipated future experience, updated at the
end of each accounting period. The effect on the amortization of DAC of
revisions to estimated gross profits is reflected in earnings in the
period such estimated gross profits are revised. The effect on the DAC
asset that would result from realization of unrealized gains (losses) is
recognized with an offset to unrealized gains (losses) in consolidated
shareholder's equity as of the balance sheet date.
For participating traditional life policies (substantially all of which
are in the Closed Block), DAC is amortized over the expected total life
of the contract group (40 years) as a constant percentage based on the
present value of the estimated gross margin amounts expected to be
realized over the life of the contracts using the expected investment
yield. At December 31, 1996, the expected investment yield ranged from
7.30% grading to 7.68% over 13 years. Estimated gross margin includes
anticipated premiums and investment results less claims and
administrative expenses, changes in the net level premium reserve and
expected annual policyholder dividends. Deviations of actual results
from estimated experience are reflected in earnings in the period such
deviations occur. The effect on the DAC asset that would result from
realization of unrealized gains (losses) is recognized with an offset to
unrealized gains (losses) in consolidated shareholder's equity as of the
balance sheet date.
F-10
<PAGE>
For non-participating traditional life and annuity policies with life
contingencies, DAC is amortized in proportion to anticipated premiums.
Assumptions as to anticipated premiums are estimated at the date of
policy issue and are consistently applied during the life of the
contracts. Deviations from estimated experience are reflected in
earnings in the period such deviations occur. For these contracts, the
amortization periods generally are for the total life of the policy.
For individual health benefit insurance, DAC is amortized over the
expected average life of the contracts (10 years for major medical
policies and 20 years for disability income ("DI") products) in
proportion to anticipated premium revenue at time of issue. In the
fourth quarter of 1996, the DAC related to DI contracts issued prior to
July 1993 was written off.
Policyholders' Account Balances and Future Policy Benefits
----------------------------------------------------------
Policyholders' account balances for universal life and investment-type
contracts are equal to the policy account values. The policy account
values represent an accumulation of gross premium payments plus credited
interest less expense and mortality charges and withdrawals.
For participating traditional life policies, future policy benefit
liabilities are calculated using a net level premium method on the basis
of actuarial assumptions equal to guaranteed mortality and dividend fund
interest rates. The liability for annual dividends represents the
accrual of annual dividends earned. Terminal dividends are accrued in
proportion to gross margins over the life of the contract.
For non-participating traditional life insurance policies, future policy
benefit liabilities are estimated using a net level premium method on
the basis of actuarial assumptions as to mortality, persistency and
interest established at policy issue. Assumptions established at policy
issue as to mortality and persistency are based on the Insurance Group's
experience which, together with interest and expense assumptions,
include a margin for adverse deviation. When the liabilities for future
policy benefits plus the present value of expected future gross premiums
for a product are insufficient to provide for expected future policy
benefits and expenses for that product, DAC is written off and
thereafter, if required, a premium deficiency reserve is established by
a charge to earnings. Benefit liabilities for traditional annuities
during the accumulation period are equal to accumulated contractholders'
fund balances and after annuitization are equal to the present value of
expected future payments. Interest rates used in establishing such
liabilities range from 2.25% to 11.5% for life insurance liabilities and
from 2.25% to 13.5% for annuity liabilities.
During the fourth quarter of 1996, a loss recognition study on
participating group annuity contracts and conversion annuities ("Pension
Par") was completed which included management's revised estimate of
assumptions, including expected mortality and future investment returns.
The study's results prompted management to establish a premium
deficiency reserve which decreased earnings from continuing operations
and net earnings by $47.5 million ($73.0 million pre-tax).
Individual health benefit liabilities for active lives are estimated
using the net level premium method, and assumptions as to future
morbidity, withdrawals and interest. Benefit liabilities for disabled
lives are estimated using the present value of benefits method and
experience assumptions as to claim terminations, expenses and interest.
During the fourth quarter of 1996, the Company completed a loss
recognition study of the DI business which incorporated management's
revised estimates of future experience with regard to morbidity,
investment returns, claims and administration expenses and other
factors. The study indicated DAC was not recoverable and the reserves
were not sufficient. Earnings from continuing operations and net
earnings decreased by $208.0 million ($320.0 million pre-tax) as a
result of strengthening DI reserves by $175.0 million and writing off
unamortized DAC of $145.0 million. The determination of DI reserves
requires making assumptions and estimates relating to a variety of
factors, including morbidity and interest rates, claims experience and
lapse
F-11
<PAGE>
rates based on then known facts and circumstances. Such factors as claim
incidence and termination rates can be affected by changes in the
economic, legal and regulatory environments and work ethic. While
management believes its DI reserves have been calculated on a reasonable
basis and are adequate, there can be no assurance reserves will be
sufficient to provide for future liabilities.
Claim reserves and associated liabilities for individual disability
income and major medical policies were $711.8 million and $639.6 million
at December 31, 1996 and 1995, respectively (excluding $175.0 million of
reserve strengthening in 1996). Incurred benefits (benefits paid plus
changes in claim reserves) and benefits paid for individual DI and major
medical policies (excluding $175.0 million of reserve strengthening in
1996) are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Incurred benefits related to current year.......... $ 189.0 $ 176.0 $ 188.6
Incurred benefits related to prior years........... 69.1 67.8 28.7
----------------- ---------------- -----------------
Total Incurred Benefits............................ $ 258.1 $ 243.8 $ 217.3
================= ================ =================
Benefits paid related to current year.............. $ 32.6 $ 37.0 $ 43.7
Benefits paid related to prior years............... 153.3 137.8 132.3
----------------- ---------------- -----------------
Total Benefits Paid................................ $ 185.9 $ 174.8 $ 176.0
================= ================ =================
</TABLE>
Policyholders' Dividends
------------------------
The amount of policyholders' dividends to be paid (including those on
policies included in the Closed Block) is determined annually by
Equitable Life's Board of Directors. The aggregate amount of
policyholders' dividends is related to actual interest, mortality,
morbidity and expense experience for the year and judgment as to the
appropriate level of statutory surplus to be retained by Equitable Life.
Equitable Life is subject to limitations on the amount of statutory
profits which can be retained with respect to certain classes of
individual participating policies that were in force on July 22, 1992
which are not included in the Closed Block and with respect to
participating policies issued subsequent to July 22, 1992. Excess
statutory profits, if any, will be distributed over time to such
policyholders and will not be available to Equitable Life's shareholder.
Earnings in excess of limitations, if any, would be accrued as
policyholders' dividends.
At December 31, 1996, participating policies, including those in the
Closed Block, represent approximately 24.2% ($52.3 billion) of directly
written life insurance in force, net of amounts ceded.
Federal Income Taxes
--------------------
The Company files a consolidated Federal income tax return with the
Holding Company and its non-life insurance subsidiaries. Current Federal
income taxes were charged or credited to operations based upon amounts
estimated to be payable or recoverable as a result of taxable operations
for the current year. Deferred income tax assets and liabilities were
recognized based on the difference between financial statement carrying
amounts and income tax bases of assets and liabilities using enacted
income tax rates and laws.
Separate Accounts
-----------------
Separate Accounts are established in conformity with the New York State
Insurance Law and generally are not chargeable with liabilities that
arise from any other business of the Insurance Group. Separate Accounts
assets are subject to General Account claims only to the extent the
value of such assets exceeds the Separate Accounts liabilities.
F-12
<PAGE>
Assets and liabilities of the Separate Accounts, representing net
deposits and accumulated net investment earnings less fees, held
primarily for the benefit of contractholders, and for which the
Insurance Group does not bear the investment risk, are shown as separate
captions in the consolidated balance sheets. The Insurance Group bears
the investment risk on assets held in one Separate Account, therefore,
such assets are carried on the same basis as similar assets held in the
General Account portfolio. Assets held in the other Separate Accounts
are carried at quoted market values or, where quoted values are not
available, at estimated fair values as determined by the Insurance
Group.
The investment results of Separate Accounts on which the Insurance Group
does not bear the investment risk are reflected directly in Separate
Accounts liabilities. For 1996, 1995 and 1994, investment results of
such Separate Accounts were $2,970.6 million, $1,963.2 million and
$665.2 million, respectively.
Deposits to Separate Accounts are reported as increases in Separate
Accounts liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges on all Separate Accounts are
included in revenues.
F-13
<PAGE>
3) INVESTMENTS
The following tables provide additional information relating to fixed
maturities and equity securities:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------------- ----------------- ---------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1996
-----------------
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 13,645.2 $ 451.5 $ 121.0 $ 13,975.7
Mortgage-backed.................... 2,015.9 11.2 20.3 2,006.8
U.S. Treasury securities and
U.S. government and
agency securities................ 1,539.4 39.2 19.3 1,559.3
States and political subdivisions.. 77.0 4.5 - 81.5
Foreign governments................ 302.6 18.0 2.2 318.4
Redeemable preferred stock......... 139.1 3.3 7.1 135.3
----------------- ----------------- ---------------- ---------------
Total Available for Sale............... $ 17,719.2 $ 527.7 $ 169.9 $ 18,077.0
================= ================= ================ ===============
Equity Securities:
Common stock......................... $ 98.7 $ 49.3 $ 17.7 $ 130.3
================= ================= ================ ===============
December 31, 1995
-----------------
Fixed Maturities:
Available for Sale:
Corporate.......................... $ 10,910.7 $ 617.6 $ 118.1 $ 11,410.2
Mortgage-backed.................... 1,838.0 31.2 1.2 1,868.0
U.S. Treasury securities and
U.S. government and
agency securities................ 2,257.0 77.8 4.1 2,330.7
States and political subdivisions.. 45.7 5.2 - 50.9
Foreign governments................ 124.5 11.0 .2 135.3
Redeemable preferred stock......... 108.1 5.3 8.6 104.8
----------------- ----------------- ---------------- ---------------
Total Available for Sale............... $ 15,284.0 $ 748.1 $ 132.2 $ 15,899.9
================= ================= ================ ===============
Equity Securities:
Common stock......................... $ 97.3 $ 49.1 $ 18.0 $ 128.4
================= ================= ================ ===============
</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, the Company has
determined an estimated fair value using a discounted cash flow
approach, including provisions for credit risk, generally based upon the
assumption such securities will be held to maturity. Estimated fair
value for equity securities, substantially all of which do not have a
readily ascertainable market value, has been determined by the Company.
Such estimated fair values do not necessarily represent the values for
which these securities could have been sold at the dates of the
consolidated balance sheets. At December 31, 1996 and 1995, securities
without a readily ascertainable market value having an amortized cost of
$3,915.7 million and $3,748.9 million, respectively, had estimated fair
values of $4,024.6 million and $3,981.8 million, respectively.
F-14
<PAGE>
The contractual maturity of bonds at December 31, 1996 is shown below:
AVAILABLE FOR SALE
------------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
---------------- -----------------
(IN MILLIONS)
Due in one year or less........... $ 539.6 $ 542.5
Due in years two through five..... 2,776.2 2,804.0
Due in years six through ten...... 6,044.7 6,158.1
Due after ten years............... 6,203.7 6,430.3
Mortgage-backed securities........ 2,015.9 2,006.8
---------------- -----------------
Total............................. $ 17,580.1 $ 17,941.7
================ =================
Bonds not due at a single maturity date have been included in the above
table in the year of final maturity. Actual maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
The Insurance Group's fixed maturity investment portfolio includes
corporate high yield securities consisting of public high yield bonds,
redeemable preferred stocks and directly negotiated debt in leveraged
buyout transactions. The Insurance Group seeks to minimize the higher
than normal credit risks associated with such securities by monitoring
the total investments in any single issuer or total investment in a
particular industry group. Certain of these corporate high yield
securities are classified as other than investment grade by the various
rating agencies, i.e., a rating below Baa or National Association of
Insurance Commissioners ("NAIC") designation of 3 (medium grade), 4 or 5
(below investment grade) or 6 (in or near default). At December 31,
1996, approximately 14.20% of the $17,563.7 million aggregate amortized
cost of bonds held by the Insurance Group were considered to be other
than investment grade.
In addition to its holdings of corporate high yield securities, the
Insurance Group is an equity investor in limited partnership interests
which primarily invest in securities considered to be other than
investment grade.
The Company has restructured or modified the terms of certain fixed
maturity investments. The fixed maturity portfolio includes amortized
costs of $5.5 million and $15.9 million at December 31, 1996 and 1995,
respectively, of such restructured securities. These amounts include
fixed maturities which are in default as to principal and/or interest
payments, are to be restructured pursuant to commenced negotiations or
where the borrowers went into bankruptcy subsequent to acquisition
(collectively, "problem fixed maturities") of $2.2 million and $1.6
million as of December 31, 1996 and 1995, respectively. Gross interest
income that would have been recorded in accordance with the original
terms of restructured fixed maturities amounted to $1.4 million, $3.0
million and $7.5 million in 1996, 1995 and 1994, respectively. Gross
interest income on these fixed maturities included in net investment
income aggregated $1.3 million, $2.9 million and $6.8 million in 1996,
1995 and 1994, respectively.
F-15
<PAGE>
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balances, beginning of year........................ $ 325.3 $ 284.9 $ 355.6
SFAS No. 121 release............................... (152.4) - -
Additions charged to income........................ 125.0 136.0 51.0
Deductions for writedowns and
asset dispositions............................... (160.8) (95.6) (121.7)
----------------- ---------------- -----------------
Balances, End of Year.............................. $ 137.1 $ 325.3 $ 284.9
================= ================ =================
Balances, end of year comprise:
Mortgage loans on real estate.................... $ 50.4 $ 65.5 $ 64.2
Equity real estate............................... 86.7 259.8 220.7
----------------- ---------------- -----------------
Total.............................................. $ 137.1 $ 325.3 $ 284.9
================= ================ =================
</TABLE>
At December 31, 1996, 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 $25.0 million
of fixed maturities and $2.6 million of mortgage loans on real estate.
At December 31, 1996 and 1995, 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 $12.4 million (0.4% of total
mortgage loans on real estate) and $87.7 million (2.4% of total mortgage
loans on real estate), respectively.
The payment terms of mortgage loans on real estate may from time to time
be restructured or modified. The investment in restructured mortgage
loans on real estate, based on amortized cost, amounted to $388.3
million and $531.5 million at December 31, 1996 and 1995, respectively.
These amounts include $1.0 million and $3.8 million of problem mortgage
loans on real estate at December 31, 1996 and 1995, 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 $35.5 million, $52.1 million and $44.9 million in 1996, 1995
and 1994, respectively. Gross interest income on these loans included in
net investment income aggregated $28.2 million, $37.4 million and $32.8
million in 1996, 1995 and 1994, respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1996 1995
------------------- -------------------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with provision for losses.................. $ 340.0 $ 310.1
Impaired mortgage loans with no provision for losses............... 122.3 160.8
------------------- -------------------
Recorded investment in impaired mortgage loans..................... 462.3 470.9
Provision for losses............................................... 46.4 62.7
------------------- -------------------
Net Impaired Mortgage Loans........................................ $ 415.9 $ 408.2
=================== ===================
</TABLE>
Impaired mortgage loans with no provision for losses are loans where the
fair value of the collateral or the net present value of the expected
future cash flows related to the loan equals or exceeds the recorded
investment. Interest income earned on loans where the collateral value
is used to measure impairment is recorded on a
F-16
<PAGE>
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 1996 and 1995, respectively, the Company's average recorded
investment in impaired mortgage loans was $552.1 million and $429.0
million. Interest income recognized on these impaired mortgage loans
totaled $38.8 million and $27.9 million for 1996 and 1995, respectively,
including $17.9 million and $13.4 million recognized on a cash basis.
The Insurance Group's investment in equity real estate is through direct
ownership and through investments in real estate joint ventures. At
December 31, 1996 and 1995, the carrying value of equity real estate
available for sale amounted to $345.6 million and $255.5 million,
respectively. For 1996, 1995 and 1994, respectively, real estate of
$58.7 million, $35.3 million and $189.8 million was acquired in
satisfaction of debt. At December 31, 1996 and 1995, the Company owned
$771.7 million and $862.7 million, respectively, of real estate acquired
in satisfaction of debt.
Depreciation of real estate is computed using the straight-line method
over the estimated useful lives of the properties, which generally range
from 40 to 50 years. Accumulated depreciation on real estate was $587.5
million and $662.4 million at December 31, 1996 and 1995, respectively.
Depreciation expense on real estate totaled $91.8 million, $121.7
million and $117.0 million for 1996, 1995 and 1994, respectively. As a
result of the implementation of SFAS No. 121, during 1996 no
depreciation expense has been recorded on real estate available for
sale.
F-17
<PAGE>
4) JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information of real estate joint ventures
(34 and 38 individual ventures as of December 31, 1996 and 1995,
respectively) and of limited partnership interests accounted for under
the equity method, in which the Company has an investment of $10.0
million or greater and an equity interest of 10% or greater is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
FINANCIAL POSITION
Investments in real estate, at depreciated cost........................ $ 1,883.7 $ 2,684.1
Investments in securities, generally at estimated fair value........... 2,430.6 2,459.8
Cash and cash equivalents.............................................. 98.0 489.1
Other assets........................................................... 427.0 270.8
---------------- -----------------
Total assets........................................................... 4,839.3 5,903.8
---------------- -----------------
Borrowed funds - third party........................................... 1,574.3 1,782.3
Borrowed funds - the Company........................................... 137.9 220.5
Other liabilities...................................................... 415.8 593.9
---------------- -----------------
Total liabilities...................................................... 2,128.0 2,596.7
---------------- -----------------
Partners' Capital...................................................... $ 2,711.3 $ 3,307.1
================ =================
Equity in partners' capital included above............................. $ 806.8 $ 902.2
Equity in limited partnership interests not included above............. 201.8 212.8
Other.................................................................. 9.8 8.9
---------------- -----------------
Carrying Value......................................................... $ 1,018.4 $ 1,123.9
================ =================
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures............. $ 348.9 $ 463.5 $ 537.7
Revenues of other limited partnership interests.... 386.1 242.3 103.4
Interest expense - third party..................... (111.0) (135.3) (114.9)
Interest expense - the Company..................... (30.0) (41.0) (36.9)
Other expenses..................................... (282.5) (397.7) (430.9)
----------------- ---------------- -----------------
Net Earnings....................................... $ 311.5 $ 131.8 $ 58.4
================= ================ =================
Equity in net earnings included above.............. $ 73.9 $ 49.1 $ 18.9
Equity in net earnings of limited partnerships
interests not included above..................... 35.8 44.8 25.3
Other.............................................. .9 1.0 1.8
----------------- ---------------- -----------------
Total Equity in Net Earnings....................... $ 110.6 $ 94.9 $ 46.0
================= ================ =================
</TABLE>
F-18
<PAGE>
5) NET INVESTMENT INCOME AND INVESTMENT GAINS (LOSSES)
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities.................... $ 1,307.4 $ 1,151.1 $ 1,036.5
Mortgage loans on real estate....... 303.0 329.0 385.7
Equity real estate.................. 442.4 560.4 561.8
Other equity investments............ 94.3 76.9 36.1
Policy loans........................ 160.3 144.4 122.7
Other investment income............. 217.4 273.0 322.4
----------------- ---------------- -----------------
Gross investment income........... 2,524.8 2,534.8 2,465.2
----------------- ---------------- -----------------
Investment expenses............... 348.9 446.6 466.6
----------------- ---------------- -----------------
Net Investment Income............... $ 2,175.9 $ 2,088.2 $ 1,998.6
================= ================ =================
Investment gains (losses), net, including changes in the valuation
allowances, are summarized as follows:
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................... $ 60.5 $ 119.9 $ (14.3)
Mortgage loans on real estate...................... (27.3) (40.2) (43.1)
Equity real estate................................. (79.7) (86.6) 20.6
Other equity investments........................... 18.9 12.8 75.9
Issuance and sales of Alliance Units............... 20.6 - 52.4
Other.............................................. (2.8) (.6) .3
----------------- ---------------- -----------------
Investment (Losses) Gains, Net..................... $ (9.8) $ 5.3 $ 91.8
================= ================ =================
</TABLE>
Writedowns of fixed maturities amounted to $29.9 million, $46.7 million
and $30.8 million for 1996, 1995 and 1994, respectively, and writedowns
of equity real estate subsequent to the adoption of SFAS No. 121
amounted to $23.7 million for the year ended December 31, 1996.
For 1996, 1995 and 1994, respectively, proceeds received on sales of
fixed maturities classified as available for sale amounted to $8,353.5
million, $8,206.0 million and $5,253.9 million. Gross gains of $154.2
million, $211.4 million and $65.2 million and gross losses of $92.7
million, $64.2 million and $50.8 million, respectively, were realized on
these sales. The change in unrealized investment (losses) gains related
to fixed maturities classified as available for sale for 1996, 1995 and
1994 amounted to $(258.0) million, $1,077.2 million and $(742.2)
million, respectively.
During each of 1995 and 1994, one security classified as held to
maturity was sold. During the eleven months ended November 30, 1995 and
the year ended December 31, 1994, respectively, twelve and six
securities so classified were transferred to the available for sale
portfolio. All actions were taken as a result of a significant
deterioration in creditworthiness. The aggregate amortized costs of the
securities sold were $1.0 million and $19.9 million with a related
investment gain of $-0- million and $.8 million recognized in 1995 and
1994, respectively; the aggregate amortized cost of the securities
transferred was $116.0 million and $42.8 million with gross unrealized
investment losses of $3.2 million and $3.1 million charged to
consolidated shareholder's equity for the eleven months ended November
30, 1995 and the year ended December 31,
F-19
<PAGE>
1994, respectively. On December 1, 1995, the Company transferred
$4,794.9 million of securities classified as held to maturity to the
available for sale portfolio. As a result, unrealized gains on fixed
maturities increased $395.6 million, offset by DAC of $126.5 million,
amounts attributable to participating group annuity contracts of $39.2
million and deferred Federal income taxes of $80.5 million.
For 1996, 1995 and 1994, investment results passed through to certain
participating group annuity contracts as interest credited to
policyholders' account balances amounted to $136.7 million, $131.2
million and $175.8 million, respectively.
In 1996, Alliance acquired the business of Cursitor-Eaton Asset
Management Company and Cursitor Holdings Limited (collectively,
"Cursitor") for approximately $159.0 million. The purchase price
consisted of $94.3 million in cash, 1.8 million of Alliance's publicly
traded units ("Alliance Units"), 6% notes aggregating $21.5 million
payable ratably over four years, and substantial additional
consideration which will be determined at a later date. The excess of
the purchase price, including acquisition costs and minority interest,
over the fair value of Cursitor's net assets acquired resulted in the
recognition of intangible assets consisting of costs assigned to
contracts acquired and goodwill of approximately $122.8 million and
$38.3 million, respectively, which are being amortized over the
estimated useful lives of 20 years. The Company recognized an investment
gain of $20.6 million as a result of the issuance of Alliance Units in
this transaction. At December 31, 1996, the Company's ownership of
Alliance Units was approximately 57.3%.
In 1994, Alliance sold 4.96 million newly issued Alliance Units to third
parties at prevailing market prices. The Company continues to hold its
1% general partnership interest in Alliance. The Company recognized an
investment gain of $52.4 million as a result of these transactions.
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>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year as restated............. $ 396.5 $ (220.5) $ 144.6
Changes in unrealized investment (losses) gains.... (297.6) 1,198.9 (856.7)
Changes in unrealized investment losses
(gains) attributable to:
Participating group annuity contracts.......... - (78.1) 40.8
DAC............................................ 42.3 (216.8) 273.6
Deferred Federal income taxes.................. 48.7 (287.0) 177.2
----------------- ---------------- -----------------
Balance, End of Year............................... $ 189.9 $ 396.5 $ (220.5)
================= ================ =================
Balance, end of year comprises:
Unrealized investment gains (losses) on:
Fixed maturities............................... $ 357.8 $ 615.9 $ (461.3)
Other equity investments....................... 31.6 31.1 7.7
Other, principally Closed Block................ 53.1 93.1 (5.1)
----------------- ---------------- -----------------
Total........................................ 442.5 740.1 (458.7)
Amounts of unrealized investment (gains)
losses attributable to:
Participating group annuity contracts........ (72.2) (72.2) 5.9
DAC.......................................... (52.0) (94.3) 122.4
Deferred Federal income taxes................ (128.4) (177.1) 109.9
----------------- ---------------- -----------------
Total.............................................. $ 189.9 $ 396.5 $ (220.5)
================= ================ =================
</TABLE>
F-20
<PAGE>
6) CLOSED BLOCK
Summarized financial information of the Closed Block follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1995
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Fixed Maturities:
Available for sale, at estimated fair value (amortized cost,
$3,820.7 and $3,662.8)...................................... $ 3,889.5 $ 3,896.2
Mortgage loans on real estate................................... 1,380.7 1,368.8
Policy loans.................................................... 1,765.9 1,797.2
Cash and other invested assets.................................. 336.1 440.9
DAC............................................................. 876.5 792.6
Other assets.................................................... 246.3 286.4
----------------- -----------------
Total Assets.................................................... $ 8,495.0 $ 8,582.1
================= =================
Liabilities
Future policy benefits and policyholders' account balances...... $ 8,999.7 $ 8,923.5
Other liabilities............................................... 91.6 297.9
----------------- -----------------
Total Liabilities............................................... $ 9,091.3 $ 9,221.4
================= =================
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Premiums and other revenue......................... $ 724.8 $ 753.4 $ 798.1
Investment income (net of investment
expenses of $27.3, $26.7 and $19.0).............. 546.6 538.9 523.0
Investment losses, net............................. (5.5) (20.2) (24.0)
----------------- ---------------- -----------------
Total revenues............................... 1,265.9 1,272.1 1,297.1
----------------- ---------------- -----------------
Benefits and Other Deductions
Policyholders' benefits and dividends.............. 1,106.3 1,077.6 1,121.6
Other operating costs and expenses................. 34.6 51.3 38.5
----------------- ---------------- -----------------
Total benefits and other deductions.......... 1,140.9 1,128.9 1,160.1
----------------- ---------------- -----------------
Contribution from the Closed Block................. $ 125.0 $ 143.2 $ 137.0
================= ================ =================
</TABLE>
In the fourth quarter of 1996, the Company adopted SFAS No. 120, which
prescribes the accounting for individual participating life insurance
contracts, most of which are included in the Closed Block. The
implementation of SFAS No. 120 resulted in an increase (decrease) in the
contribution from the Closed Block of $27.5 million, $18.8 million and
$(14.0) million in 1996, 1995 and 1994, respectively.
The fixed maturity portfolio, based on amortized cost, includes $.4
million and $4.3 million at December 31, 1996 and 1995, respectively, of
restructured securities which includes problem fixed maturities of $.3
million and $1.9 million, respectively.
F-21
<PAGE>
During the eleven months ended November 30, 1995, one security
classified as held to maturity was sold and ten securities classified as
held to maturity were transferred to the available for sale portfolio.
All actions resulted from significant deterioration in creditworthiness.
The amortized cost of the security sold was $4.2 million. The aggregate
amortized cost of the securities transferred was $81.3 million with
gross unrealized investment losses of $.1 million transferred to equity.
At December 1, 1995, $1,750.7 million of securities classified as held
to maturity were transferred to the available for sale portfolio. As a
result, unrealized gains of $88.5 million on fixed maturities were
recognized, offset by DAC amortization of $52.6 million.
At December 31, 1996 and 1995, problem mortgage loans on real estate had
an amortized cost of $4.3 million and $36.5 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had an amortized cost of $114.2 million and $137.7 million,
respectively. At December 31, 1996 and 1995, the restructured mortgage
loans on real estate amount included $.7 million and $8.8 million,
respectively, of problem mortgage loans on real estate.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with provision for losses......... $ 128.1 $ 106.8
Impaired mortgage loans with no provision for losses...... .6 10.1
---------------- -----------------
Recorded investment in impaired mortgages................. 128.7 116.9
Provision for losses...................................... 12.9 17.9
---------------- -----------------
Net Impaired Mortgage Loans............................... $ 115.8 $ 99.0
================ =================
</TABLE>
During 1996 and 1995, respectively, the Closed Block's average recorded
investment in impaired mortgage loans was $153.8 million and $146.9
million, respectively. Interest income recognized on these impaired
mortgage loans totaled $10.9 million and $5.9 million for 1996 and 1995,
respectively, including $4.7 million and $1.3 million recognized on a
cash basis.
Valuation allowances amounted to $13.8 million and $18.4 million on
mortgage loans on real estate and $3.7 million and $4.3 million on
equity real estate at December 31, 1996 and 1995, respectively.
Writedowns of fixed maturities amounted to $12.8 million, $16.8 million
and $15.9 million for 1996, 1995 and 1994, respectively. As of January
1, 1996, the adoption of SFAS No. 121 resulted in the recognition of
impairment losses of $5.6 million on real estate held and used.
Many expenses related to Closed Block operations are charged to
operations outside of the Closed Block; accordingly, the contribution
from the Closed Block does not represent the actual profitability of the
Closed Block operations. Operating costs and expenses outside of the
Closed Block are, therefore, disproportionate to the business outside of
the Closed Block.
F-22
<PAGE>
7) DISCONTINUED OPERATIONS
Summarized financial information of the GIC Segment follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1995
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets
Mortgage loans on real estate........... $ 1,111.1 $ 1,485.8
Equity real estate...................... 925.6 1,122.1
Other invested assets................... 474.0 665.2
Other assets............................ 226.1 579.3
----------------- -----------------
Total Assets............................ $ 2,736.8 $ 3,852.4
================= =================
Liabilities
Policyholders' liabilities.............. $ 1,335.9 $ 1,399.8
Allowance for future losses............. 262.0 164.2
Amounts due to continuing operations.... 996.2 2,097.1
Other liabilities....................... 142.7 191.3
----------------- -----------------
Total Liabilities....................... $ 2,736.8 $ 3,852.4
================= =================
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Investment income (net of investment expenses
of $127.5, $153.1 and $183.3).................... $ 245.4 $ 323.6 $ 394.3
Investment (losses) gains, net..................... (18.9) (22.9) 26.8
Policy fees, premiums and other income............. .2 .7 .4
----------------- ---------------- -----------------
Total revenues..................................... 226.7 301.4 421.5
Benefits and other deductions...................... 250.4 326.5 443.2
Losses charged to allowance for future losses...... (23.7) (25.1) (21.7)
----------------- ---------------- -----------------
Pre-tax loss from operations....................... - - -
Pre-tax loss from strengthening of the
allowance for future losses...................... (129.0) - -
Federal income tax benefit......................... 45.2 - -
----------------- ---------------- -----------------
Loss from Discontinued Operations.................. $ (83.8) $ - $ -
================= ================ =================
</TABLE>
In 1991, management adopted a plan to discontinue the business
operations of the GIC Segment consisting of group non-participating
Wind-Up Annuities and the GIC lines of business. The loss allowance and
premium deficiency reserve of $569.6 million provided for in 1991 were
based on management's best judgment at that time.
The Company's quarterly process for evaluating the loss provisions
applies the current period's results of the discontinued operations
against the allowance, re-estimates future losses, and adjusts the
provisions, if appropriate. Additionally, as part of the Company's
annual planning process which takes place in the fourth quarter of each
year, investment and benefit cash flow projections are prepared. These
updated assumptions and estimates resulted in the need to strengthen the
loss provisions by $129.0 million, resulting in a post-tax charge of
$83.8 million to discontinued operations' results in the fourth quarter
of 1996.
F-23
<PAGE>
Management believes the loss provisions for Wind-Up Annuities and GIC
contracts at December 31, 1996 are adequate to provide for all future
losses; however, the determination of loss provisions continues to
involve numerous estimates and subjective judgments regarding the
expected performance of discontinued operations investment assets. There
can be no assurance the losses provided for will not differ from the
losses ultimately realized. To the extent actual results or future
projections of the discontinued operations differ from management's
current best estimates and assumptions underlying the loss provisions,
the difference would be reflected in the consolidated statements of
earnings in discontinued operations. In particular, to the extent
income, sales proceeds and holding periods for equity real estate differ
from management's previous assumptions, periodic adjustments to the loss
provisions are likely to result.
In January 1995, continuing operations transferred $1,215.4 million in
cash to the GIC Segment in settlement of its obligation to provide
assets to fund the accumulated deficit of the GIC Segment. Subsequently,
the GIC Segment remitted $1,155.4 million in cash to continuing
operations in partial repayment of borrowings by the GIC Segment. No
gains or losses were recognized on these transactions. Amounts due to
continuing operations at December 31, 1996, consisted of $1,080.0
million borrowed by the discontinued GIC Segment offset by $83.8 million
representing an obligation of continuing operations to provide assets to
fund the accumulated deficit of the GIC Segment.
Investment income included $88.2 million of interest income for 1994 on
amounts due from continuing operations. Benefits and other deductions
include $114.3 million, $154.6 million and $219.7 million of interest
expense related to amounts borrowed from continuing operations in 1996,
1995 and 1994, respectively.
Valuation allowances amounted to $9.0 million and $19.2 million on
mortgage loans on real estate and $20.4 million and $77.9 million on
equity real estate at December 31, 1996 and 1995, respectively. As of
January 1, 1996, the adoption of SFAS No. 121 resulted in a release of
existing valuation allowances of $71.9 million on equity real estate and
recognition of impairment losses of $69.8 million on real estate held
and used. Writedowns of fixed maturities amounted to $1.6 million, $8.1
million and $17.8 million for 1996, 1995 and 1994, respectively and
writedowns of equity real estate subsequent to the adoption of SFAS No.
121 amounted to $12.3 million for 1996.
The fixed maturity portfolio, based on amortized cost, includes $6.2
million and $15.1 million at December 31, 1996 and 1995, respectively,
of restructured securities. These amounts include problem fixed
maturities of $.5 million and $6.1 million at December 31, 1996 and
1995, respectively.
At December 31, 1996 and 1995, problem mortgage loans on real estate had
amortized costs of $7.9 million and $35.4 million, respectively, and
mortgage loans on real estate for which the payment terms have been
restructured had amortized costs of $208.1 million and $289.3 million,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Impaired mortgage loans with provision for losses....... $ 83.5 $ 105.1
Impaired mortgage loans with no provision for losses.... 15.0 18.2
---------------- -----------------
Recorded investment in impaired mortgages............... 98.5 123.3
Provision for losses.................................... 8.8 17.7
---------------- -----------------
Net Impaired Mortgage Loans............................. $ 89.7 $ 105.6
================ =================
</TABLE>
F-24
<PAGE>
During 1996 and 1995, the GIC Segment's average recorded investment in
impaired mortgage loans was $134.8 million and $177.4 million,
respectively. Interest income recognized on these impaired mortgage
loans totaled $10.1 million and $4.5 million for 1996 and 1995,
respectively, including $7.5 million and $.4 million recognized on a
cash basis.
At December 31, 1996 and 1995, the GIC Segment had $263.0 million and
$310.9 million, respectively, of real estate acquired in satisfaction of
debt.
8) SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1995
----------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Short-term debt.................................... $ 174.1 $ -
----------------- -----------------
Long-term debt:
Equitable Life:
6.95% surplus notes scheduled to mature 2005..... 399.4 399.3
7.70% surplus notes scheduled to mature 2015..... 199.6 199.6
Eurodollar notes, 10.5% due 1997................. - 76.2
Zero coupon note, 11.25% due 1997................ - 120.1
Other............................................ .5 16.3
----------------- -----------------
Total Equitable Life......................... 599.5 811.5
----------------- -----------------
Wholly Owned and Joint Venture Real Estate:
Mortgage notes, 4.92% - 12.50% due through 2006.. 968.6 1,084.4
----------------- -----------------
Alliance:
Other............................................ 24.7 3.4
----------------- -----------------
Total long-term debt............................... 1,592.8 1,899.3
----------------- -----------------
Total Short-term and Long-term Debt................ $ 1,766.9 $ 1,899.3
================= =================
</TABLE>
Short-term Debt
---------------
Equitable Life has a $350.0 million bank credit facility available to
fund short-term working capital needs and to facilitate the securities
settlement process. The credit facility consists of two types of
borrowing options with varying interest rates. The interest rates are
based on external indices dependent on the type of borrowing and at
December 31, 1996 range from 5.73% (the London Interbank Offering Rate
("LIBOR") plus 22.5 basis points) to 8.25% (the prime rate). There were
no borrowings outstanding under this bank credit facility at December
31, 1996.
F-25
<PAGE>
Equitable Life has a commercial paper program with an issue limit of
$500.0 million. This program is available for general corporate purposes
used to support Equitable Life's liquidity needs and is supported by
Equitable Life's existing $350.0 million five-year bank credit facility.
There were no borrowings outstanding under this program at December 31,
1996.
In February 1996, Alliance entered into a new $250.0 million five-year
revolving credit facility with a group of banks which replaced its
$100.0 million revolving credit facility and its $100.0 million
commercial paper back-up revolving credit facility. Under the new
revolving credit facility, the interest rate, at the option of Alliance,
is a floating rate generally based upon a defined prime rate, a rate
related to the LIBOR or the Federal Funds rate. A facility fee is
payable on the total facility. The revolving credit facility will be
used to provide back-up liquidity for commercial paper to be used under
Alliance's $100.0 million commercial paper program, to fund commission
payments to financial intermediaries for the sale of Class B and C
shares under Alliance's mutual fund distribution system, and for general
working capital purposes. As of December 31, 1996, Alliance had not
issued any commercial paper under its $100.0 million commercial paper
program and there were no borrowings outstanding under Alliance's
revolving credit facility.
At December 31, 1996, long-term debt expected to mature in 1997 totaling
$174.1 million was reclassified as short-term debt.
Long-term Debt
--------------
Several of the long-term debt agreements have restrictive covenants
related to the total amount of debt, net tangible assets and other
matters. The Company is in compliance with all debt covenants.
On December 18, 1995, Equitable Life issued, in accordance with Section
1307 of the New York Insurance Law, $400.0 million of surplus notes
having an interest rate of 6.95% scheduled to mature in 2005 and $200.0
million of surplus notes having an interest rate of 7.70% scheduled to
mature in 2015 (together, the "Surplus Notes"). Proceeds from the
issuance of the Surplus Notes were $596.6 million, net of related
issuance costs. The unamortized discount on the Surplus Notes was $1.0
million at December 31, 1996. Payments of interest on or principal of
the Surplus Notes are subject to prior approval by the Superintendent.
The Company has pledged real estate, mortgage loans, cash and securities
amounting to $1,406.4 million and $1,629.7 million at December 31, 1996
and 1995, respectively, as collateral for certain long-term debt.
At December 31, 1996, aggregate maturities of the long-term debt based
on required principal payments at maturity for 1997 and the succeeding
four years are $494.9 million, $316.7 million, $19.7 million, $5.4
million, $0 million, respectively, and $946.7 million thereafter.
9) FEDERAL INCOME TAXES
A summary of the Federal income tax expense (benefit) in the
consolidated statements of earnings is shown below:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current............................... $ 97.9 $ (11.7) $ 4.0
Deferred.............................. (88.2) 132.2 96.2
----------------- ---------------- -----------------
Total................................... $ 9.7 $ 120.5 $ 100.2
================= ================ =================
</TABLE>
F-26
<PAGE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings before
Federal income taxes and minority interest by the expected Federal
income tax rate of 35%. The sources of the difference and the tax
effects of each are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Expected Federal income tax expense..... $ 73.0 $ 173.7 $ 154.5
Non-taxable minority interest........... (28.6) (22.0) (17.6)
Differential earnings amount............ - - (16.8)
Adjustment of tax audit reserves........ 6.9 4.1 (4.6)
Equity in unconsolidated subsidiaries... (32.3) (19.4) (12.5)
Other................................... (9.3) (15.9) (2.8)
----------------- ---------------- -----------------
Federal Income Tax Expense.............. $ 9.7 $ 120.5 $ 100.2
================= ================ =================
</TABLE>
Prior to the date of demutualization, Equitable Life reduced its
deduction for policyholder dividends by the differential earnings
amount. This amount was computed, for each tax year, by multiplying
Equitable Life's average equity base, as determined for tax purposes, by
an estimate of the excess of an imputed earnings rate for stock life
insurance companies over the average mutual life insurance companies'
earnings rate. The differential earnings amount for each tax year was
subsequently recomputed when actual earnings rates were published by the
Internal Revenue Service. As a stock life insurance company, Equitable
Life no longer is required to reduce its policyholder dividend deduction
by the differential earnings amount, but differential earnings amounts
for pre-demutualization years were still being recomputed in 1994.
The components of the net deferred Federal income tax account are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 December 31, 1995
--------------------------------- ---------------------------------
ASSETS LIABILITIES Assets Liabilities
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
DAC, reserves and reinsurance.......... $ - $ 166.0 $ - $ 304.4
Investments............................ - 328.6 - 326.9
Compensation and related benefits...... 259.2 - 293.0 -
Other.................................. - 1.8 - 32.3
--------------- ---------------- --------------- ---------------
Total.................................. $ 259.2 $ 496.4 $ 293.0 $ 663.6
=============== ================ =============== ===============
</TABLE>
The deferred Federal income taxes impacting operations reflect the net
tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for income tax purposes. The sources of these temporary differences
and the tax effects of each are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
DAC, reserves and reinsurance......... $ (156.2) $ 63.3 $ 12.0
Investments........................... 78.6 13.0 89.3
Compensation and related benefits..... 22.3 30.8 10.0
Other................................. (32.9) 25.1 (15.1)
----------------- ---------------- -----------------
Deferred Federal Income Tax
(Benefit) Expense................... $ (88.2) $ 132.2 $ 96.2
================= ================ =================
</TABLE>
F-27
<PAGE>
The Internal Revenue Service is in the process of examining the Holding
Company's consolidated Federal income tax returns for the years 1989
through 1991. Management believes these audits will have no material
adverse effect on the Company's results of operations.
10) REINSURANCE AGREEMENTS
The Insurance Group assumes and cedes reinsurance with other insurance
companies. The Insurance Group evaluates the financial condition of its
reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies. The effect of reinsurance (excluding group life and
health) is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Direct premiums.................................... $ 461.4 $ 474.2 $ 476.7
Reinsurance assumed................................ 177.5 171.3 180.5
Reinsurance ceded.................................. (41.3) (38.7) (31.6)
----------------- ---------------- -----------------
Premiums........................................... $ 597.6 $ 606.8 $ 625.6
================= ================ =================
Universal Life and Investment-type Product
Policy Fee Income Ceded.......................... $ 48.2 $ 44.0 $ 27.5
================= ================ =================
Policyholders' Benefits Ceded...................... $ 54.1 $ 48.9 $ 20.7
================= ================ =================
Interest Credited to Policyholders' Account
Balances Ceded................................... $ 32.3 $ 28.5 $ 25.4
================= ================ =================
</TABLE>
Effective January 1, 1994, all in force business above $5.0 million was
reinsured. During 1996, the Company's retention limit on joint
survivorship policies was increased to $15.0 million. The Insurance
Group also reinsures the entire risk on certain substandard underwriting
risks as well as in certain other cases.
The Insurance Group cedes 100% of its group life and health business to
a third party insurance company. Premiums ceded totaled $2.4 million,
$260.6 million and $241.0 million for 1996, 1995 and 1994, respectively.
Ceded death and disability benefits totaled $21.2 million, $188.1
million and $235.5 million for 1996, 1995 and 1994, respectively.
Insurance liabilities ceded totaled $652.4 million and $724.2 million at
December 31, 1996 and 1995, respectively.
11) EMPLOYEE BENEFIT PLANS
The Company sponsors qualified and non-qualified defined benefit plans
covering substantially all employees (including certain qualified
part-time employees), managers and certain agents. The pension plans are
non-contributory. Equitable Life's and EREIM's benefits are based on a
cash balance formula or years of service and final average earnings, if
greater, under certain grandfathering rules in the plans. Alliance's
benefits are based on years of credited service, average final base
salary and primary social security benefits. The Company's funding
policy is to make the minimum contribution required by the Employee
Retirement Income Security Act of 1974.
Components of net periodic pension cost (credit) for the qualified and
non-qualified plans are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost....................................... $ 33.8 $ 30.0 $ 30.3
Interest cost on projected benefit obligations..... 120.8 122.0 111.0
Actual return on assets............................ (181.4) (309.2) 24.4
Net amortization and deferrals..................... 43.4 155.6 (142.5)
----------------- ---------------- -----------------
Net Periodic Pension Cost (Credit)................. $ 16.6 $ (1.6) $ 23.2
================= ================ =================
</TABLE>
F-28
<PAGE>
The funded status of the qualified and non-qualified pension plans is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of obligations:
Vested.................................................. $ 1,672.2 $ 1,642.4
Non-vested.............................................. 10.1 10.9
---------------- -----------------
Accumulated Benefit Obligation............................ $ 1,682.3 $ 1,653.3
================ =================
Plan assets at fair value................................. $ 1,626.0 $ 1,503.8
Projected benefit obligation.............................. 1,765.5 1,743.0
---------------- -----------------
Projected benefit obligation in excess of plan assets..... (139.5) (239.2)
Unrecognized prior service cost........................... (17.9) (25.5)
Unrecognized net loss from past experience different
from that assumed....................................... 280.0 368.2
Unrecognized net asset at transition...................... 4.7 (7.3)
Additional minimum liability.............................. (19.3) (51.9)
---------------- -----------------
Prepaid Pension Cost...................................... $ 108.0 $ 44.3
================ =================
</TABLE>
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of projected benefit
obligations were 7.5% and 4.25%, respectively, at December 31, 1996 and
7.25% and 4.50%, respectively, at December 31, 1995. As of January 1,
1996 and 1995, the expected long-term rate of return on assets for the
retirement plan was 10.25% and 11%, respectively.
The Company recorded, as a reduction of shareholder's equity, an
additional minimum pension liability of $12.9 million and $35.1 million,
net of Federal income taxes, at December 31, 1996 and 1995,
respectively, representing the excess of the accumulated benefit
obligation over the fair value of plan assets and accrued pension
liability.
The pension plan's assets include corporate and government debt
securities, equity securities, equity real estate and shares of Group
Trusts managed by Alliance.
Prior to 1987, the qualified plan funded participants' benefits through
the purchase of non-participating annuity contracts from Equitable Life.
Benefit payments under these contracts were approximately $34.7 million,
$36.4 million and $38.1 million for 1996, 1995 and 1994, respectively.
The Company provides certain medical and life insurance benefits
(collectively, "postretirement benefits") for qualifying employees,
managers and agents retiring from the Company on or after attaining age
55 who have at least 10 years of service. The life insurance benefits
are related to age and salary at retirement. The costs of postretirement
benefits are recognized in accordance with the provisions of SFAS No.
106. The Company continues to fund postretirement benefits costs on a
pay-as-you-go basis and, for 1996, 1995 and 1994, the Company made
estimated postretirement benefits payments of $18.9 million, $31.1
million and $29.8 million, respectively.
F-29
<PAGE>
The following table sets forth the postretirement benefits plan's
status, reconciled to amounts recognized in the Company's consolidated
financial statements:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost....................................... $ 5.3 $ 4.0 $ 3.9
Interest cost on accumulated postretirement
benefits obligation.............................. 34.6 34.7 28.6
Net amortization and deferrals..................... 2.4 (2.3) (3.9)
----------------- ---------------- -----------------
Net Periodic Postretirement Benefits Costs......... $ 42.3 $ 36.4 $ 28.6
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefits obligation:
Retirees................................................ $ 381.8 $ 391.8
Fully eligible active plan participants................. 50.7 50.4
Other active plan participants.......................... 60.7 64.2
---------------- -----------------
493.2 506.4
Unrecognized prior service cost........................... 50.5 56.3
Unrecognized net loss from past experience different
from that assumed and from changes in assumptions....... (150.5) (181.3)
---------------- -----------------
Accrued Postretirement Benefits Cost...................... $ 393.2 $ 381.4
================ =================
</TABLE>
At January 1, 1994, medical benefits available to retirees under age 65
are the same as those offered to active employees and medical benefits
will be limited to 200% of 1993 costs for all participants.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefits obligation was 9.5% in 1996,
gradually declining to 3.5% in the year 2009 and in 1995 was 10%,
gradually declining to 3.5% in the year 2008. The discount rate used in
determining the accumulated postretirement benefits obligation was 7.50%
and 7.25% at December 31, 1996 and 1995, respectively.
If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefits obligation as of December 31, 1996
would be increased 7%. The effect of this change on the sum of the
service cost and interest cost would be an increase of 8%.
12) DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives
-----------
The Insurance Group primarily uses derivatives for asset/liability risk
management and for hedging individual securities. Derivatives mainly are
utilized to reduce the Insurance Group's exposure to interest rate
fluctuations. Accounting for interest rate swap transactions is on an
accrual basis. Gains and losses related to interest rate swap
transactions are amortized as yield adjustments over the remaining life
of the underlying hedged security. Income and expense resulting from
interest rate swap activities are reflected in net investment income.
The notional amount of matched interest rate swaps outstanding at
December 31, 1996 was $649.9 million. The average unexpired terms at
December 31, 1996 range from 2.2 to 2.7 years. At December 31, 1996, the
cost of terminating outstanding matched swaps in a loss position was
$8.3 million and the unrealized gain on outstanding matched swaps in a
gain position was $11.4 million. The Company has no intention of
terminating these contracts prior to maturity. During 1996, 1995 and
1994, net gains (losses) of $.2 million, $1.4 million and $(.2) million,
respectively, were recorded in connection with
F-30
<PAGE>
interest rate swap activity. Equitable Life has implemented an interest
rate cap program designed to hedge crediting rates on interest-sensitive
individual annuities contracts. The outstanding notional amounts at
December 31, 1996 of contracts purchased and sold were $5,050.0 million
and $500.0 million, respectively. The net premium paid by Equitable Life
on these contracts was $22.5 million and is being amortized ratably over
the contract periods ranging from 3 to 5 years. Income and expense
resulting from this program are reflected as an adjustment to interest
credited to policyholders' account balances.
Substantially all of DLJ's business related to derivatives is by its
nature trading activities which are primarily for the purpose of
customer accommodations. DLJ's derivative activities consist primarily
of option writing and trading in forward and futures contracts.
Derivative financial instruments have both on-and-off balance sheet
implications depending on the nature of the contracts. DLJ's involvement
in swap contracts is not significant.
Fair Value of Financial Instruments
-----------------------------------
The Company defines fair value as the quoted market prices for those
instruments that are actively traded in financial markets. In cases
where quoted market prices are not available, fair values are estimated
using present value or other valuation techniques. The fair value
estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument,
including estimates of timing, amount of expected future cash flows and
the credit standing of counterparties. Such estimates do not reflect any
premium or discount that could result from offering for sale at one time
the Company's entire holdings of a particular financial instrument, nor
do they consider the tax impact of the realization of unrealized gains
or losses. In many cases, the fair value estimates cannot be
substantiated by comparison to independent markets, nor can the
disclosed value be realized in immediate settlement of the instrument.
Certain financial instruments are excluded, particularly insurance
liabilities other than financial guarantees and investment contracts.
Fair market value of off-balance-sheet financial instruments of the
Insurance Group was not material at December 31, 1996 and 1995.
Fair value for mortgage loans on real estate are estimated by
discounting future contractual cash flows using interest rates at which
loans with similar characteristics and credit quality would be made.
Fair values for foreclosed mortgage loans and problem mortgage loans are
limited to the estimated fair value of the underlying collateral if
lower.
The estimated fair values for the Company's liabilities under GIC and
association plan contracts are estimated using contractual cash flows
discounted based on the T. Rowe Price GIC Index Rate for the appropriate
duration. For durations in excess of the published index rate, the
appropriate Treasury rate is used plus a spread equal to the longest
duration GIC rate spread published.
The estimated fair values for those group annuity contracts which are
classified as universal life type contracts are measured at the
estimated fair value of the underlying assets. The estimated fair values
for single premium deferred annuities ("SPDA") are estimated using
projected cash flows discounted at current offering rates. The estimated
fair values for supplementary contracts not involving life contingencies
("SCNILC") and annuities certain are derived using discounted cash flows
based upon the estimated current offering rate.
Fair value for long-term debt is determined using published market
values, where available, or contractual cash flows discounted at market
interest rates. The estimated fair values for non-recourse mortgage debt
are determined by discounting contractual cash flows at a rate which
takes into account the level of current market interest rates and
collateral risk. The estimated fair values for recourse mortgage debt
are determined by discounting contractual cash flows at a rate based
upon current interest rates of other companies with credit ratings
similar to the Company. The Company's fair value of short-term
borrowings approximates their carrying value.
F-31
<PAGE>
The following table discloses carrying value and estimated fair value
for financial instruments not otherwise disclosed in Notes 3, 6 and 7:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1996 1995
--------------------------------- ---------------------------------
CARRYING ESTIMATED Carrying Estimated
VALUE FAIR VALUE Value Fair Value
--------------- ---------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Consolidated Financial Instruments:
-----------------------------------
Mortgage loans on real estate.......... $ 3,133.0 $ 3,394.6 $ 3,638.3 $ 3,973.6
Other joint ventures................... 467.0 467.0 492.7 492.7
Policy loans........................... 2,196.1 2,221.6 1,976.4 2,057.5
Policyholders' account balances:
Association plans.................... 78.1 77.3 101.0 100.0
Group annuity contracts.............. 2,141.0 1,954.0 2,335.0 2,395.0
SPDA................................. 1,062.7 1,065.7 1,265.8 1,272.0
Annuities certain and SCNILC......... 654.9 736.2 646.4 716.7
Long-term debt......................... 1,592.8 1,557.7 1,899.3 1,962.9
Closed Block Financial Instruments:
-----------------------------------
Mortgage loans on real estate.......... 1,380.7 1,425.6 1,368.8 1,461.4
Other equity investments............... 105.0 105.0 151.6 151.6
Policy loans........................... 1,765.9 1,798.0 1,797.2 1,891.4
SCNILC liability....................... 30.6 34.9 34.8 39.6
GIC Segment Financial Instruments:
----------------------------------
Mortgage loans on real estate.......... 1,111.1 1,220.3 1,485.8 1,666.1
Fixed maturities....................... 42.5 42.5 107.4 107.4
Other equity investments............... 300.5 300.5 455.9 455.9
Guaranteed interest contracts.......... 290.7 300.5 329.0 352.0
Long-term debt......................... 102.1 102.2 135.1 136.0
</TABLE>
13) COMMITMENTS AND CONTINGENT LIABILITIES
The Company has provided, from time to time, certain guarantees or
commitments to affiliates, investors and others. These arrangements
include commitments by the Company, under certain conditions: to make
capital contributions of up to $244.9 million to affiliated real estate
joint ventures; to provide equity financing to certain limited
partnerships of $205.8 million at December 31, 1996, under existing loan
or loan commitment agreements; and to provide short-term financing loans
which at December 31, 1996 totaled $14.6 million. Management believes
the Company will not incur any material losses as a result of these
commitments.
Equitable Life is the obligor under certain structured settlement
agreements which it had entered into with unaffiliated insurance
companies and beneficiaries. To satisfy its obligations under these
agreements, Equitable Life owns single premium annuities issued by
previously wholly owned life insurance subsidiaries. Equitable Life has
directed payment under these annuities to be made directly to the
beneficiaries under the structured settlement agreements. A contingent
liability exists with respect to these agreements should the previously
wholly owned subsidiaries be unable to meet their obligations.
Management believes the satisfaction of those obligations by Equitable
Life is remote.
At December 31, 1996, the Insurance Group had $51.6 million of letters
of credit outstanding.
F-32
<PAGE>
14) LITIGATION
A number of lawsuits has been filed against life and health insurers in
the jurisdictions in which Equitable Life and its subsidiaries do
business involving insurers' sales practices, alleged agent misconduct,
failure to properly supervise agents, and other matters. Some of the
lawsuits have resulted in the award of substantial judgments against
other insurers, including material amounts of punitive damages, or in
substantial settlements. In some states, juries have substantial
discretion in awarding punitive damages. Equitable Life, EVLICO and The
Equitable of Colorado, Inc. ("EOC"), like other life and health
insurers, from time to time are involved in such litigation. To date, no
such lawsuit has resulted in an award or settlement of any material
amount against the Company. Among litigations pending against Equitable
Life, EVLICO and EOC of the type referred to in this paragraph are the
litigations described in the following eight paragraphs.
An action entitled Golomb et al. v. The Equitable Life Assurance Society
of the United States was filed on January 20, 1995 in New York County
Supreme Court. The action purports to be brought on behalf of a class of
persons insured after 1983 under Lifetime Guaranteed Renewable Major
Medical Insurance Policies issued by Equitable Life (the "policies").
The complaint alleges that premium increases for these policies after
1983, all of which were filed with and approved by the New York State
Insurance Department and certain other state insurance departments,
breached the terms of the policies, and that statements in the policies
and elsewhere concerning premium increases constituted fraudulent
concealment, misrepresentations in violation of New York Insurance Law
Section 4226 and deceptive practices under New York General Business Law
Section 349. The complaint seeks a declaratory judgment, injunctive
relief restricting the methods by which Equitable Life increases
premiums on the policies in the future, a refund of premiums, and
punitive damages. Plaintiffs also have indicated that they will seek
damages in an unspecified amount. Equitable Life moved to dismiss the
complaint in its entirety on the grounds that it fails to state a claim
and that uncontroverted documentary evidence establishes a complete
defense to the claims. On May 29, 1996, the New York County Supreme
Court entered a judgment dismissing the complaint with prejudice.
Plaintiffs have filed a notice of appeal of that judgment.
In January 1996, separate actions were filed in Pennsylvania and Texas
state courts (entitled, respectively, Malvin et al. v. The Equitable
Life Assurance Society of the United States and Bowler et al. v. The
Equitable Life Assurance Society of the United States), making claims
similar to those in the New York action described above. The Texas
action also claims that Equitable Life misrepresented to Texas
policyholders that the Texas Insurance Department had approved Equitable
Life's rate increases. These actions are asserted on behalf of proposed
classes of Pennsylvania issued or renewed policyholders and Texas issued
or renewed policyholders, insured under the policies. The Pennsylvania
and Texas actions seek compensatory and punitive damages and injunctive
relief restricting the methods by which Equitable Life increases
premiums in the future based on the common law and statutes of those
states. On February 9, 1996, Equitable Life removed the Pennsylvania
action, Malvin, to the United States District Court for the Middle
District of Pennsylvania. Following the decision granting Equitable
Life's motion to dismiss the New York action (Golomb), on the consent of
the parties the District Court ordered an indefinite stay of all
proceedings in the Pennsylvania action, pending either party's right to
reinstate the proceeding, and ordered that for administrative purposes
the case be deemed administratively closed. On February 2, 1996,
Equitable Life removed the Texas action, Bowler, to the United States
District Court for the Northern District of Texas. On May 20, 1996, the
plaintiffs in Bowler amended their complaint by adding allegations of
misrepresentation regarding premium increases on other types of
guaranteed renewable major medical insurance policies issued by
Equitable Life up to and including 1983. On July 1, 1996, Equitable Life
filed a motion for summary judgment dismissing the first amended
complaint in its entirety. In August, 1996, the court granted plaintiffs
leave to file a supplemental complaint on behalf of a proposed class of
Texas policyholders claiming unfair discrimination, breach of contract
and other claims arising out of alleged differences between premiums
charged to Texas policyholders and premiums charged to similarly
situated policyholders in New York and certain other states. Plaintiffs
seek refunds of alleged overcharges, exemplary or additional damages
citing
F-33
<PAGE>
Texas statutory provisions which among other things, permit two times
the amount of actual damage plus additional penalties if the acts
complained of are found to be knowingly committed, and injunctive
relief. Equitable Life has also filed a motion for summary judgment
dismissing the supplemental complaint in its entirety. Plaintiffs also
obtained permission to add another plaintiff to the first amended and
supplemental complaints. Plaintiffs have opposed both motions for
summary judgment and requested that certain issues be found in their
favor. Equitable Life is in the process of replying.
On May 22, 1996, a separate action entitled Bachman v. The Equitable
Life Assurance Society of the United States, was filed in Florida state
court making claims similar to those in the previously reported Golomb
action. The Florida action is asserted on behalf of a proposed class of
Florida issued or renewed policyholders insured after 1983 under
Lifetime Guaranteed Renewable Major Medical Insurance Policies issued by
Equitable Life. The Florida action seeks compensatory and punitive
damages and injunctive relief restricting the methods by which Equitable
Life increases premiums in the future based on various common law
claims. On June 20, 1996, Equitable Life removed the Florida action to
Federal court. Equitable Life has answered the complaint, denying the
material allegations and asserting certain affirmative defenses. On
December 6, 1996, Equitable Life filed a motion for summary judgment and
plaintiff is expected to file its response to that motion shortly.
On November 6, 1996, a proposed class action entitled Fletcher, et al.
v. The Equitable Life Assurance Society of the United States, was filed
in California Superior Court for Fresno County, making substantially the
same allegations concerning premium rates and premium rate increases on
guaranteed renewable policies made in the Bowler action. The complaint
alleges, among other things, that differentials between rates charged
California policyholders and policyholders in New York and certain other
states, and the methods used by Equitable Life to calculate premium
increases, breached the terms of its policies, that Equitable Life
misrepresented and concealed the facts pertaining to such differentials
and methods in violation of California law, and that Equitable Life also
misrepresented that its rate increases were approved by the California
Insurance Department. Plaintiffs seek compensatory damages in an
unspecified amount, rescission, injunctive relief and attorneys' fees.
Equitable Life removed the action to Federal court; plaintiff has moved
to remand the case to state court. Although the outcome of any
litigation cannot be predicted with certainty, particularly in the early
stages of an action, the Company's management believes that the ultimate
resolution of the Golomb, Malvin, Bowler, Bachman and Fletcher
litigations should not have a material adverse effect on the financial
position of the Company. Due to the early stage of such litigations, the
Company's management cannot make an estimate of loss, if any, or predict
whether or not such litigations will have a material adverse effect on
the Company's results of operations in any particular period.
An action was instituted on April 6, 1995 against Equitable Life and its
wholly owned subsidiary, EOC, in New York state court, entitled Sidney
C. Cole et al. v. The Equitable Life Assurance Society of the United
States and The Equitable of Colorado, Inc., No. 95/108611 (N. Y.
County). The action is brought by the holders of a joint survivorship
whole life policy issued by EOC. The action purports to be on behalf of
a class consisting of all persons who from January 1, 1984 purchased
life insurance policies sold by Equitable Life and EOC based upon their
allegedly uniform sales presentations and policy illustrations. The
complaint puts in issue various alleged sales practices that plaintiffs
assert, among other things, misrepresented the stated number of years
that the annual premium would need to be paid. Plaintiffs seek damages
in an unspecified amount, imposition of a constructive trust, and seek
to enjoin Equitable Life and EOC from engaging in the challenged sales
practices. On June 28, 1996, the court issued a decision and order
dismissing with prejudice plaintiff's causes of action for fraud,
constructive fraud, breach of fiduciary duty, negligence, and unjust
enrichment, and dismissing without prejudice plaintiff's cause of action
under the New York State consumer protection statute. The only remaining
causes of action are for breach of contract and negligent
misrepresentation. Plaintiffs made a motion for reargument with respect
to this order, which was submitted to the court in October 1996. This
motion was denied by the court on December 16, 1996.
F-34
<PAGE>
On May 21, 1996, an action entitled Elton F. Duncan, III v. The
Equitable Life Assurance Society of the United States, was commenced
against Equitable Life in the Civil District Court for the Parish of
Orleans, State of Louisiana. The action is brought by an individual who
purchased a whole life policy. Plaintiff alleges misrepresentations
concerning the extent to which the policy was a proper replacement
policy and the number of years that the annual premium would need to be
paid. Plaintiff purports to represent a class consisting of all persons
who purchased whole life or universal life insurance policies from
Equitable Life from January 1, 1982 to the present. Plaintiff seeks
damages, including punitive damages, in an unspecified amount. On July
26, 1996, an action entitled Michael Bradley v. Equitable Variable Life
Insurance Company, was commenced in New York state court. The action is
brought by the holder of a variable life insurance policy issued by
EVLICO. The plaintiff purports to represent a class consisting of all
persons or entities who purchased one or more life insurance policies
issued by EVLICO from January 1, 1980. The complaint puts at issue
various alleged sales practices and alleges misrepresentations
concerning the extent to which the policy was a proper replacement
policy and the number of years that the annual premium would need to be
paid. Plaintiff seeks damages, including punitive damages, in an
unspecified amount and also seeks injunctive relief prohibiting EVLICO
from canceling policies for failure to make premium payments beyond the
alleged stated number of years that the annual premium would need to be
paid. On September 21, 1996 Equitable Life, EVLICO and EOC made a motion
to have this proceeding moved from Kings County Supreme Court to New
York County for joint trial or consolidation with the Cole action. The
motion was denied by the court on January 9, 1997. On January 10, 1997,
plaintiffs moved for certification of a nationwide class consisting of
all persons or entities who were sold one or more life insurance
products on a "vanishing premium" basis and/or were allegedly induced to
purchase additional policies from EVLICO, using the cash value
accumulated in existing policies, from January 1, 1980 through and
including December 31, 1996. Plaintiffs further moved to have Michael
Bradley designated as the class representative. Discovery regarding
class certification is underway.
On December 12, 1996, an action entitled Robert E. Dillon v. The
Equitable Life Assurance Society of the United States and The Equitable
of Colorado, was commenced in the United States District Court for the
Southern District of Florida. The action is brought by an individual who
purchased a joint whole life policy from EOC. The complaint puts at
issue various alleged sales practices and alleges misrepresentations
concerning the alleged impropriety of replacement policies issued by
Equitable Life and EOC and alleged misrepresentations regarding the
number of years premiums would have to be paid on the defendants'
policies. Plaintiff brings claims for breach of contract, fraud,
negligent misrepresentation, money had and received, unjust enrichment
and imposition of a constructive trust. Plaintiff purports to represent
two classes of persons. The first is a "contract class," consisting of
all persons who purchased whole or universal life insurance policies
from Equitable Life and EOC and from whom Equitable Life and EOC have
sought additional payments beyond the number of years allegedly promised
by Equitable Life and EOC. The second is a "fraud class," consisting of
all persons with an interest in policies issued by Equitable Life and
EOC at any time since October 1, 1986. Plaintiff seeks damages in an
unspecified amount, and also seeks injunctive relief attaching Equitable
Life's and EOC's profits from their alleged sales practices. Equitable
Life's and EOC's time to answer or move with respect to the complaint
has been extended until February 24, 1997. Although the outcome of
litigation cannot be predicted with certainty, particularly in the early
stages of an action, the Company's management believes that the ultimate
resolution of the Cole, Duncan, Bradley and Dillon litigations should
not have a material adverse effect on the financial position of the
Company. Due to the early stages of such litigations, the Company's
management cannot make an estimate of loss, if any, or predict whether
or not any such litigation will have a material adverse effect on the
Company's results of operations in any particular period.
On January 3, 1996, an amended complaint was filed in an action entitled
Frank Franze Jr. and George Busher, individually and on behalf of all
others similarly situated v. The Equitable Life Assurance Society of the
United States, and Equitable Variable Life Insurance Company, No.
94-2036 in the United States District Court for the Southern District of
Florida. The action was brought by two individuals who purchased
variable life insurance policies. The plaintiffs purport to represent a
nationwide class consisting of all persons who purchased variable life
insurance policies from Equitable Life and EVLICO since September 30,
1991. The basic allegation of the amended complaint is that Equitable
Life's and EVLICO's agents were trained not to
F-35
<PAGE>
disclose fully that the product being sold was life insurance.
Plaintiffs allege violations of the Federal securities laws and seek
rescission of the contracts or compensatory damages and attorneys' fees
and expenses. The court denied Equitable Life and EVLICO's motion to
dismiss the amended complaint on September 24, 1996. Equitable Life and
EVLICO have answered the amended complaint, denying the material
allegations and asserting certain affirmative defenses. Currently, the
parties are conducting discovery in connection with plaintiffs' attempt
to certify a class. On January 9, 1997, an action entitled Rosemarie
Chaviano, individually and on behalf of all others similarly situated v.
The Equitable Life Assurance Society of the United States, and Equitable
Variable Life Insurance Company, was filed in Massachusetts state court
making claims similar to those in the Franze action and alleging
violations of the Massachusetts securities laws. The plaintiff purports
to represent all persons in Massachusetts who purchased variable life
insurance contracts from Equitable Life and EVLICO from January 9, 1993
to the present. The Massachusetts action seeks rescission of the
contracts or compensatory damages, attorneys' fees, expenses and
injunctive relief. Although the outcome of any litigation cannot be
predicted with certainty, particularly in the early stages of an action,
the Company's management believes that the ultimate resolution of the
litigations discussed in this paragraph should not have a material
adverse effect on the financial position of the Company. Due to the
early stages of such litigation, the Company's management cannot make an
estimate of loss, if any, or predict whether or not any such litigation
will have a material adverse effect on the Company's results of
operations in any particular period.
Equitable Life recently responded to a subpoena from the U.S. Department
of Labor ("DOL") requesting copies of any third-party appraisals in
Equitable Life's possession relating to the ten largest properties (by
value) in the Prime Property Fund ("PPF"). PPF is an open-end,
commingled real estate separate account of Equitable Life for pension
clients. Equitable Life serves as investment manager in PPF and has
retained EREIM as advisor. In early 1995, the DOL commenced a national
investigation of commingled real estate funds with pension investors,
including PPF. The investigation now appears to be focused principally
on appraisal and valuation procedures in respect of fund properties. The
most recent request from the DOL seems to reflect, at least in part, an
interest in the relationship between the valuations for those properties
reflected in appraisals prepared for local property tax proceedings and
the valuations used by PPF for other purposes. At no time has the DOL
made any specific allegation that Equitable Life or EREIM has acted
improperly and Equitable Life and EREIM believe that any such allegation
would be without foundation. While the outcome of this investigation
cannot be predicted with certainty, in the opinion of management, the
ultimate resolution of this matter should not have a material adverse
effect on the Company's consolidated financial position or results of
operations in any particular period.
Equitable Casualty Insurance Company ("Casualty"), an indirect wholly
owned subsidiary of Equitable Life, is party to an arbitration
proceeding that commenced in August 1995. The proceeding relates to a
dispute among Casualty, Houston General Insurance Company ("Houston
General") and GEICO General Insurance Company ("GEICO General")
regarding the interpretation of a reinsurance agreement. The arbitration
panel issued a final award in favor of Casualty and GEICO General on
June 17, 1996. Casualty and GEICO General moved in the pending Texas
state court action, with Houston General's consent, for an order
confirming the arbitration award and entering judgment dismissing the
action. The motion was granted on January 29, 1997. The parties have
also stipulated to the dismissal without prejudice of a related Texas
Federal court action brought by Houston General against GEICO General
and Equitable Life. In connection with confirmation of the arbitration
award, Houston General paid to Casualty approximately $839,600 in
settlement of certain reimbursement claims by Casualty against Houston
General.
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Complaint") was filed against the Alliance North American Government
Income Trust, Inc. (the "Fund"), Alliance and certain other defendants
affiliated with Alliance, including the Holding Company, alleging
violations of Federal securities laws, fraud and breach of fiduciary
duty in connection with the Fund's investments in Mexican and Argentine
securities. The Complaint, which seeks certification of a plaintiff
class of persons who purchased or owned Class A, B or C shares of the
Fund from March 27, 1992 through December 23, 1994, seeks an unspecified
amount of damages, costs, attorneys' fees and punitive damages. The
principal allegations of the Complaint are that the Fund purchased debt
securities issued by the Mexican and Argentine governments in amounts
that
F-36
<PAGE>
were not permitted by the Fund's investment objective, and that there
was no shareholder vote to change the investment objective to permit
purchases in such amounts. The Complaint further alleges that the
decline in the value of the Mexican and Argentine securities held by the
Fund caused the Fund's net asset value to decline to the detriment of
the Fund's shareholders. On September 26, 1996, the United States
District Court for the Southern District of New York granted the
defendants' motion to dismiss all counts of the complaint. On October
11, 1996, plaintiffs filed a motion for reconsideration of the court's
decision granting defendants' motion to dismiss the Complaint. On
November 25, 1996, the court denied plaintiffs' motion for
reconsideration. On October 29, 1996, plaintiffs filed a motion for
leave to file an amended complaint. The principal allegations of the
proposed amended complaint are that the Fund did not properly disclose
that it planned to invest in mortgage-backed derivative securities and
that two advertisements used by the Fund misrepresented the risks of
investing in the Fund. Plaintiffs also reiterated allegations in the
Complaint that the Fund failed to hedge against the risks of investing
in foreign securities despite representations that it would do so.
Alliance believes that the allegations in the Complaint are without
merit and intends to vigorously defend against these claims. While the
ultimate outcome of this matter cannot be determined at this time,
management of Alliance does not expect that it will have a material
adverse effect on Alliance's results of operations or financial
condition.
On January 26, 1996, a purported purchaser of certain notes and warrants
to purchase shares of common stock of Rickel Home Centers, Inc.
("Rickel") filed a class action complaint against Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC") and certain other defendants
for unspecified compensatory and punitive damages in the United States
District Court for the Southern District of New York. The suit was
brought on behalf of the purchasers of 126,457 units consisting of
$126,457,000 aggregate principal amount of 13 1/2% senior notes due 2001
and 126,457 warrants to purchase shares of common stock of Rickel issued
by Rickel in October 1994. The complaint alleges violations of Federal
securities laws and common law fraud against DLJSC, as the underwriter
of the units and as an owner of 7.3% of the common stock of Rickel, Eos
Partners, L.P., and General Electric Capital Corporation, each as owners
of 44.2% of the common stock of Rickel, and members of the Board of
Directors of Rickel, including a DLJSC Managing Director. The complaint
seeks to hold DLJSC liable for alleged misstatements and omissions
contained in the prospectus and registration statement filed in
connection with the offering of the units, alleging that the defendants
knew of financial losses and a decline in value of Rickel in the months
prior to the offering and did not disclose such information. The
complaint also alleges that Rickel failed to pay its semi-annual
interest payment due on the units on December 15, 1995 and that Rickel
filed a voluntary petition for reorganization pursuant to Chapter 11 of
the United States Bankruptcy Code on January 10, 1996. DLJSC intends to
defend itself vigorously against all of the allegations contained in the
complaint. Although there can be no assurance, DLJ does not believe the
outcome of this litigation will have a material adverse effect on its
financial condition. Due to the early stage of this litigation, based on
the information currently available to it, DLJ's management cannot make
an estimate of loss, if any, or predict whether or not such litigation
will have a material adverse effect on DLJ's results of operations in
any particular period.
In October 1995, DLJSC was named as a defendant in a purported class
action filed in a Texas State Court on behalf of the holders of $550.0
million principal amount of subordinated redeemable discount debentures
of National Gypsum Corporation ("NGC") canceled in connection with a
Chapter 11 plan of reorganization for NGC consummated in July 1993. The
named plaintiff in the State Court action also filed an adversary
proceeding in the Bankruptcy Court for the Northern District of Texas
seeking a declaratory judgment that the confirmed NGC plan of
reorganization does not bar the class action claims. Subsequent to the
consummation of NGC's plan of reorganization, NGC's shares traded for
values substantially in excess of, and in 1995 NGC was acquired for a
value substantially in excess of, the values upon which NGC's plan of
reorganization was based. The two actions arise out of DLJSC's
activities as financial advisor to NGC in the course of NGC's Chapter 11
reorganization proceedings. The class action complaint alleges that the
plan of reorganization submitted by NGC was based upon projections by
NGC and DLJSC which intentionally understated forecasts, and provided
misleading and incorrect information in order to hide NGC's true value
and that defendants breached their fiduciary duties by, among other
things, providing false, misleading or incomplete information to
deliberately understate the value of NGC. The class action complaint
seeks compensatory and punitive damages purportedly sustained by the
class. The Texas State Court action, which
F-37
<PAGE>
had been removed to the Bankruptcy Court, has been remanded back to the
state court, which remand is being opposed by DLJSC. DLJSC intends to
defend itself vigorously against all of the allegations contained in the
complaint. Although there can be no assurance, DLJ does not believe that
the ultimate outcome of this litigation will have a material adverse
effect on its financial condition. Due to the early stage of such
litigation, based upon the information currently available to it, DLJ's
management cannot make an estimate of loss, if any, or predict whether
or not such litigation will have a material adverse effect on DLJ's
results of operations in any particular period.
In November and December 1995, DLJSC, along with various other parties,
was named as a defendant in a number of purported class actions filed in
the U.S. District Court for the Eastern District of Louisiana. The
complaints allege violations of the Federal securities laws arising out
of a public offering in 1994 of $435.0 million of first mortgage notes
of Harrah's Jazz Company and Harrah's Jazz Finance Corp. The complaints
seek to hold DLJSC liable for various alleged misstatements and
omissions contained in the prospectus dated November 9, 1994. DLJSC
intends to defend itself vigorously against all of the allegations
contained in the complaints. Although there can be no assurance, DLJ
does not believe that the ultimate outcome of this litigation will have
a material adverse effect on its financial condition. Due to the early
stage of this litigation, based upon the information currently available
to it, DLJ's management cannot make an estimate of loss, if any, or
predict whether or not such litigation will have a material adverse
effect on DLJ's results of operations in any particular period.
In addition to the matters described above, Equitable Life and its
subsidiaries and DLJ and its subsidiaries are involved in various legal
actions and proceedings in connection with their businesses. Some of the
actions and proceedings have been brought on behalf of various alleged
classes of claimants and certain of these claimants seek damages of
unspecified amounts. While the ultimate outcome of such matters cannot
be predicted with certainty, in the opinion of management no such matter
is likely to have a material adverse effect on the Company's
consolidated financial position or results of operations.
15) LEASES
The Company has entered into operating leases for office space and
certain other assets, principally data processing equipment and office
furniture and equipment. Future minimum payments under noncancelable
leases for 1997 and the succeeding four years are $113.7 million, $110.6
million, $100.3 million, $72.3 million, $59.3 million and $427.3 million
thereafter. Minimum future sublease rental income on these noncancelable
leases for 1997 and the succeeding four years are $9.8 million, $6.0
million, $4.5 million, $2.4 million, $.8 million and $.1 million
thereafter.
At December 31, 1996, the minimum future rental income on noncancelable
operating leases for wholly owned investments in real estate for 1997
and the succeeding four years are $263.0 million, $242.1 million, $219.8
million, $194.3 million, $174.6 million and $847.1 million thereafter.
F-38
<PAGE>
16) OTHER OPERATING COSTS AND EXPENSES
Other operating costs and expenses consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Compensation costs................................. $ 647.3 $ 595.9 $ 687.5
Commissions........................................ 329.5 314.3 313.0
Short-term debt interest expense................... 8.0 11.4 19.0
Long-term debt interest expense.................... 137.3 108.1 98.3
Amortization of policy acquisition costs........... 405.2 317.8 313.4
Capitalization of policy acquisition costs......... (391.9) (391.0) (410.9)
Rent expense, net of sub-lease income.............. 113.7 109.3 116.0
Other.............................................. 798.9 710.0 721.4
----------------- ---------------- -----------------
Total.............................................. $ 2,048.0 $ 1,775.8 $ 1,857.7
================= ================ =================
</TABLE>
During 1996, 1995 and 1994, the Company restructured certain operations
in connection with cost reduction programs and recorded pre-tax
provisions of $24.4 million, $32.0 million and $20.4 million,
respectively. The amounts paid during 1996, associated with cost
reduction programs, totaled $17.7 million. At December 31, 1996, the
liabilities associated with cost reduction programs amounted to $44.5
million. The 1996 cost reduction program included restructuring costs
related to the consolidation of insurance operations' service centers.
The 1995 cost reduction program included relocation expenses, including
the accelerated amortization of building improvements associated with
the relocation of the home office. The 1994 cost reduction program
included costs associated with the termination of operating leases and
employee severance benefits in connection with the consolidation of 16
insurance agencies. Amortization of DAC included $145.0 million writeoff
of DAC related to DI contracts in the fourth quarter of 1996.
17) INSURANCE GROUP STATUTORY FINANCIAL INFORMATION
Equitable Life is restricted as to the amounts it may pay as dividends
to the Holding Company. Under the New York Insurance Law, the
Superintendent has broad discretion to determine whether the financia1
condition of a stock life insurance company would support the payment of
dividends to its shareholders. For 1996, 1995 and 1994, statutory net
(loss) earnings totaled $(351.1) million, $(352.4) million and $67.5
million, respectively. No amounts are expected to be available for
dividends from Equitable Life to the Holding Company in 1997.
At December 31, 1996, the Insurance Group, in accordance with various
government and state regulations, had $21.9 million of securities
deposited with such government or state agencies.
F-39
<PAGE>
Accounting practices used to prepare statutory financial statements for
regulatory filings of stock life insurance companies differ in certain
instances from GAAP. The New York Insurance Department (the
"Department") recognizes only statutory accounting practices for
determining and reporting the financial condition and results of
operations of an insurance company, for determining its solvency under
the New York Insurance Law, and for determining whether its financial
condition warrants the payment of a dividend to its stockholders. No
consideration is given by the Department to financial statements
prepared in accordance with GAAP in making such determinations. The
following reconciles the Company's statutory change in surplus and
capital stock and statutory surplus and capital stock determined in
accordance with accounting practices prescribed by the Department with
net earnings and equity on a GAAP basis.
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net change in statutory surplus and capital stock.. $ 56.0 $ 78.1 $ 292.4
Change in asset valuation reserves................. (48.4) 365.7 (285.2)
----------------- ---------------- -----------------
Net change in statutory surplus, capital stock
and asset valuation reserves..................... 7.6 443.8 7.2
Adjustments:
Future policy benefits and policyholders'
account balances............................... (298.5) (66.0) (5.3)
DAC.............................................. (13.3) 73.2 97.5
Deferred Federal income taxes.................... 108.0 (158.1) (58.7)
Valuation of investments......................... 289.8 189.1 45.2
Valuation of investment subsidiary............... (117.7) (188.6) 396.6
Limited risk reinsurance......................... 92.5 416.9 74.9
Contribution from the Holding Company............ - - (300.0)
Issuance of surplus notes........................ - (538.9) -
Postretirement benefits.......................... 28.9 (26.7) 17.1
Other, net....................................... 12.4 115.1 (44.0)
GAAP adjustments of Closed Block................. (9.8) 15.7 (9.5)
GAAP adjustments of discontinued GIC
Segment........................................ (89.6) 37.3 42.8
----------------- ---------------- -----------------
Net Earnings of the Insurance Group................ $ 10.3 $ 312.8 $ 263.8
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Statutory surplus and capital stock................ $ 2,258.9 $ 2,202.9 $ 2,124.8
Asset valuation reserves........................... 1,297.5 1,345.9 980.2
----------------- ---------------- -----------------
Statutory surplus, capital stock and asset
valuation reserves............................... 3,556.4 3,548.8 3,105.0
Adjustments:
Future policy benefits and policyholders'
account balances............................... (1,305.0) (1,006.5) (940.5)
DAC.............................................. 3,104.9 3,075.8 3,219.4
Deferred Federal income taxes.................... (306.1) (452.0) (29.4)
Valuation of investments......................... 286.8 417.7 (794.1)
Valuation of investment subsidiary............... (782.8) (665.1) (476.5)
Limited risk reinsurance......................... (336.5) (429.0) (845.9)
Issuance of surplus notes........................ (539.0) (538.9) -
Postretirement benefits.......................... (314.4) (343.3) (316.6)
Other, net....................................... 126.3 4.4 (79.2)
GAAP adjustments of Closed Block................. 783.7 830.8 740.4
GAAP adjustments of discontinued GIC
Segment........................................ (190.3) (184.6) (221.9)
----------------- ---------------- -----------------
Equity of the Insurance Group...................... $ 4,084.0 $ 4,258.1 $ 3,360.7
================= ================ =================
</TABLE>
F-40
<PAGE>
18) BUSINESS SEGMENT INFORMATION
The Company has two major business segments: Insurance Operations and
Investment Services. Interest expense related to debt not specific to
either business segment is presented as Corporate interest expense.
Information for all periods is presented on a comparable basis.
The Insurance Operations segment offers a variety of traditional,
variable and interest-sensitive life insurance products, disability
income, annuity products, mutual fund and other investment products to
individuals and small groups and administers traditional participating
group annuity contracts with conversion features, generally for
corporate qualified pension plans, and association plans which provide
full service retirement programs for individuals affiliated with
professional and trade associations. This segment includes Separate
Accounts for individual insurance and annuity products.
The Investment Services segment provides investment fund management,
primarily to institutional clients. This segment includes the Company's
equity interest in DLJ and Separate Accounts which provide various
investment options for group clients through pooled or single group
accounts.
Intersegment investment advisory and other fees of approximately $127.5
million, $124.1 million and $135.3 million for 1996, 1995 and 1994,
respectively, are included in total revenues of the Investment Services
segment. These fees, excluding amounts related to the discontinued GIC
Segment of $15.7 million, $14.7 million and $27.4 million for 1996, 1995
and 1994, respectively, are eliminated in consolidation.
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues
Insurance operations............................... $ 3,742.9 $ 3,614.6 $ 3,507.4
Investment services................................ 1,126.1 949.1 935.2
Consolidation/elimination.......................... (24.5) (34.9) (27.2)
----------------- ---------------- -----------------
Total.............................................. $ 4,844.5 $ 4,528.8 $ 4,415.4
================= ================ =================
Earnings (loss) from continuing operations
before Federal income taxes, minority interest
and cumulative effect of accounting change
Insurance operations............................... $ (36.6) $ 303.1 $ 327.5
Investment services................................ 311.9 224.0 227.9
Consolidation/elimination.......................... .2 (3.1) .3
----------------- ---------------- -----------------
Subtotal..................................... 275.5 524.0 555.7
Corporate interest expense......................... (66.9) (27.9) (114.2)
----------------- ---------------- -----------------
Total.............................................. $ 208.6 $ 496.1 $ 441.5
================= ================ =================
</TABLE>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
Assets
Insurance operations........... $ 60,464.9 $ 56,720.5
Investment services............ 13,542.5 12,842.9
Consolidation/elimination...... (399.6) (354.4)
---------------- -----------------
Total.......................... $ 73,607.8 $ 69,209.0
================ =================
F-41
<PAGE>
19) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations for 1996 and 1995, are summarized
below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------------- ----------------- ------------------ ------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1996
----
Total Revenues................ $ 1,169.7 $ 1,193.6 $ 1,193.6 $ 1,287.6
================= ================= ================== ==================
Earnings (Loss) from
Continuing Operations
before Cumulative Effect
of Accounting Change........ $ 94.8 $ 87.1 $ 93.2 $ (157.9)
================= ================= ================== ==================
Net Earnings (Loss)........... $ 71.7 $ 87.1 $ 93.2 $ (241.7)
================= ================= ================== ==================
1995
----
Total Revenues................ $ 1,079.1 $ 1,164.0 $ 1,138.8 $ 1,146.9
================= ================= ================== ==================
Net Earnings.................. $ 66.3 $ 101.7 $ 100.2 $ 44.6
================= ================= ================== ==================
</TABLE>
The quarterly results of operations for 1996 and 1995 have been restated
to reflect the Company's accounting change adopted in the fourth quarter
of 1996 for long-duration participating life contracts in accordance
with the provisions prescribed by SFAS No. 120. Net earnings for the
three months ended December 31, 1996 includes a charge of $339.3 million
related to writeoffs of DAC on DI contracts of $94.3 million, reserve
strengthening on DI business of $113.7 million, pension par of $47.5
million and the discontinued GIC Segment of $83.8 million.
20) INVESTMENT IN DLJ
On December 15, 1993, the Company sold a 61% interest in DLJ to the
Holding Company for $800.0 million in cash and securities. The excess of
the proceeds over the book value in DLJ at the date of sale of $340.2
million has been reflected as a capital contribution. In 1995, DLJ
completed the initial public offering ("IPO") of 10.58 million shares of
its common stock, which included 7.28 million of the Holding Company's
shares in DLJ, priced at $27 per share. Concurrent with the IPO, the
Company contributed equity securities to DLJ having a market value of
$21.2 million. Upon completion of the IPO, the Company's ownership
percentage was reduced to 36.1%. The Company's ownership interest will
be further reduced upon the issuance of common stock after the vesting
of forfeitable restricted stock units acquired by and/or the exercise of
options granted to certain DLJ employees. DLJ restricted stock units
represents forfeitable rights to receive approximately 5.2 million
shares of DLJ common stock through February 2000.
The results of operations of DLJ are accounted for on the equity basis
and are included in commissions, fees and other income in the
consolidated statements of earnings. The Company's carrying value of DLJ
is included in investment in and loans to affiliates in the consolidated
balance sheets.
F-42
<PAGE>
Summarized balance sheets information for DLJ, reconciled to the
Company's carrying value of DLJ, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Assets:
Trading account securities, at market value............................ $ 15,728.1 $ 10,821.3
Securities purchased under resale agreements........................... 20,598.7 18,748.2
Broker-dealer related receivables...................................... 16,525.9 13,023.7
Other assets........................................................... 2,651.0 1,983.3
---------------- -----------------
Total Assets........................................................... $ 55,503.7 $ 44,576.5
================ =================
Liabilities:
Securities sold under repurchase agreements............................ $ 29,378.3 $ 26,744.8
Broker-dealer related payables......................................... 19,409.7 12,915.5
Short-term and long-term debt.......................................... 2,704.5 1,742.0
Other liabilities...................................................... 2,164.0 1,750.5
---------------- -----------------
Total liabilities...................................................... 53,656.5 43,152.8
Cumulative exchangeable preferred stock................................ - 225.0
DLJ's company-obligated mandatorily redeemed preferred
securities of subsidiary trust holding solely debentures of DLJ...... 200.0 -
Total shareholders' equity............................................. 1,647.2 1,198.7
---------------- -----------------
Total Liabilities, Cumulative Exchangeable Preferred Stock and
Shareholders' Equity................................................. $ 55,503.7 $ 44,576.5
================ =================
DLJ's equity as reported............................................... $ 1,647.2 $ 1,198.7
Unamortized cost in excess of net assets acquired in 1985
and other adjustments................................................ 23.9 40.5
The Holding Company's equity ownership in DLJ.......................... (590.2) (499.0)
Minority interest in DLJ............................................... (588.6) (324.3)
---------------- -----------------
The Company's Carrying Value of DLJ.................................... $ 492.3 $ 415.9
================ =================
</TABLE>
Summarized statements of earnings information for DLJ reconciled to the
Company's equity in earnings of DLJ is as follows:
<TABLE>
<CAPTION>
1996 1995
---------------- -----------------
(IN MILLIONS)
<S> <C> <C>
Commission, fees and other income...................................... $ 1,818.2 $ 1,325.9
Net investment income.................................................. 1,074.2 904.1
Dealer, trading and investment gains, net.............................. 598.4 528.6
---------------- -----------------
Total revenues......................................................... 3,490.8 2,758.6
Total expenses including income taxes.................................. 3,199.5 2,579.5
---------------- -----------------
Net earnings........................................................... 291.3 179.1
Dividends on preferred stock........................................... 18.7 19.9
---------------- -----------------
Earnings Applicable to Common Shares................................... $ 272.6 $ 159.2
================ =================
DLJ's earnings applicable to common shares as reported................. $ 272.6 $ 159.2
Amortization of cost in excess of net assets acquired in 1985.......... (3.1) (3.9)
The Holding Company's equity in DLJ's earnings......................... (107.8) (90.4)
Minority interest in DLJ............................................... (73.4) (6.5)
---------------- -----------------
The Company's Equity in DLJ's Earnings................................. $ 88.3 $ 58.4
================ =================
</TABLE>
F-43
<PAGE>
21) ACCOUNTING FOR STOCK-BASED COMPENSATION
The Holding Company sponsors a stock option plan for employees of
Equitable Life. DLJ and Alliance each sponsor their own stock option
plans for certain employees. The Company elected to continue to account
for stock-based compensation using the intrinsic value method prescribed
in APB Opinion No. 25. Had compensation expense of the Company's stock
option incentive plans for options granted after December 31, 1994 been
determined based on the estimated fair value at the grant dates for
awards under those plans, the Company's pro forma net earnings for 1996
and 1995 would have been as follows:
1996 1995
--------------- ---------------
(IN MILLIONS)
Net Earnings
As Reported......... $ 10.3 $ 312.8
Pro Forma........... $ 3.2 $ 311.3
The fair value of options and units granted after December 31, 1994,
used as a basis for the above pro forma disclosures, was estimated as of
the date of grants using Black-Scholes option pricing models. The option
and unit pricing assumptions for 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
HOLDING COMPANY DLJ ALLIANCE
------------------------- -------------------------- -----------------------------
1996 1995 1996 1995 1996 1995
----------- ----------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dividend yield........... 0.80% 0.96% 1.54% 1.85% 8.0% 8.0%
Expected volatility...... 20.00% 20.00% 25.00% 25.00% 23.00% 23.00%
Risk-free interest rate.. 5.92% 6.83% 6.07% 5.86% 5.80% 6.00%
Expected Life............ 5 YEARS 5 years 5 YEARS 5 years 7.43 YEARS 7.43 years
Weighted fair value
per option granted..... $6.94 $5.90 $9.35 - $2.69 $2.24
</TABLE>
F-44
<PAGE>
A summary of the Holding Company and DLJ stock option plans and
Alliance's Unit option plans are as follows:
<TABLE>
<CAPTION>
HOLDING COMPANY DLJ ALLIANCE
----------------------------- ----------------------------- -----------------------------
Options Options Options
Outstanding Outstanding Outstanding
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Units Exercise
(In Millions) Price (In Millions) Price (In Millions) Price
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1994........ 6.1 - 3.2
Granted................ .7 - 1.2
Exercised.............. - - (.5)
Forfeited.............. - - (.1)
------------- ------------- -------------
Balance as of
December 31, 1994...... 6.8 - 3.8
Granted................ .4 9.2 1.8
Exercised.............. (.1) - (.5)
Expired................ (.1) - -
Forfeited.............. (.3) - (.3)
------------- ------------- -------------
Balance as of
December 31, 1995...... 6.7 $20.27 9.2 $27.00 4.8 $17.72
Granted................ .7 $24.94 2.1 $32.54 .7 $25.12
Exercised.............. (.1) $19.91 - - (.4) $13.64
Expired................ (.6) $20.21 - - - -
Forfeited.............. - - (.2) $27.00 (.1) $19.32
------------- ------------- -------------
Balance as of
December 31, 1996...... 6.7 $20.79 11.1 $28.06 5.0 $19.07
============= ============= ============= ============= ============= =============
</TABLE>
F-45
<PAGE>
Information with respect to stock and unit options outstanding and
exercisable at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------------------------------- --------------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices (In Millions) Life (Years) Price (In Millions) Price
--------------------- ----------------- --------------- ----------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Holding
Company
---------------------
$18.125-$27.75 6.7 7.00 $20.79 3.4 $20.18
================= =============== ================= =================== ================
DLJ
---------------------
$27.00-$33.50 11.1 9.00 $28.06 - -
================= =============== ================= =================== ================
Alliance
---------------------
$ 6.0625-$15.9375 1.3 4.76 $12.97 1.2 $12.58
$16.3125-$19.75 1.1 8.19 $19.13 .2 $18.69
$19.875 -$19.875 1.0 7.36 $19.88 .4 $19.88
$20.75 -$24.375 .9 8.46 $22.05 .3 $21.84
$24.375 -$25.125 .7 9.96 $25.13 - -
----------------- -------------------
$ 6.0625-$25.125 5.0 7.43 $19.07 2.1 $15.84
================= =============== ================= =================== ================
</TABLE>
F-46
<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 Trusts and may compare the performance or ranking of the
Separate Account Funds and the Trusts' portfolios with (1) that of other
insurance company separate accounts or mutual funds included in the rankings
prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or similar
investment services that monitor the performance of insurance company separate
accounts or mutual funds, (2) other appropriate indices of investment securities
and averages for peer universes of funds, or (3) data developed by us derived
from such indices or averages. Advertisements or other communications furnished
to present or prospective policyowners may also include evaluations of a
Separate Account Fund or Trust portfolio by financial publications that are
nationally recognized such as Barron's, Morningstar's Variable Annuities / Life,
Business Week, Forbes, Fortune, Institutional Investor, Money, Kiplinger's
Personal Finance, Financial Planning, Investment Adviser, Investment Management
Weekly, Money Management Letter, Investment Dealers Digest, National
Underwriter, Pension & Investments, USA Today, Investor's Daily, The New York
Times, The Wall Street Journal, the Los Angeles Times and the Chicago Tribune.
Performance data for peer universes of funds with similar investment objectives
are compiled by Lipper Analytical Services, Inc. (Lipper) in its Lipper Variable
Insurance Products Performance Analysis Service (Lipper Survey) and Morningstar,
Inc. in the Morningstar Variable Annuity / Life Report (Morningstar Report).
The Lipper Survey records performance data as reported to it by over 800 funds
underlying variable annuity and life insurance products. The Lipper Survey
divides these actively managed funds into 25 categories by portfolio objectives.
The Lipper Survey contains two different universes, which differ in terms of the
types of fees reflected in performance data. The "Separate Account" universe
reports performance data net of investment management fees, direct operating
expenses and asset-based charges applicable under variable insurance and annuity
contracts. The "Mutual Fund" universe reports performance net only of investment
management fees and direct operating expenses, and therefore reflects
asset-based charges that relate only to the underlying mutual fund.
The Morningstar Report consists of nearly 700 variable life and annuity funds,
all of which report their data net of investment management fees, direct
operating expenses and separate account level charges.
LONG-TERM MARKET TRENDS
As a tool for understanding how different investment strategies may affect
long-term results, it may be useful to consider the historical returns on
different types of assets. The following chart presents historical return trends
for various types of securities. The information presented, while not directly
related to the performance of the Funds of the Separate Account or the Trusts'
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 Survivorship 2000 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 of this prospectus illustrates the average annual compound
rates of return over selected time periods between December 31, 1926 and
December 31, 1996 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 Trusts and do not constitute a representation that the performance of the
Separate Account Funds or the Trusts' portfolios will correspond to rates of
return such as those illustrated in the chart. For a comparative illustration of
performance results of the portfolios of The Hudson River Trust, plus
performance of other Alliance funds with investment policies and objectives
similar to those of the Alliance Small Cap Growth portfolio, see page B-1 of the
HRT prospectus. For a comparative illustration of performance results of certain
public mutual funds which are similar to EQAT portfolios and are managed by
EQAT's Advisers, see page A-1 of the EQAT 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
12/31/96: STOCKS BONDS BONDS BONDS BILLS INDEX
- -------- ------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
1 year.................. 23.07% -0.93% 1.40% 2.10% 5.21% 3.58%
3 years................. 19.66 6.36 6.72 4.19 4.90 2.93
5 years................. 15.20 8.98 8.52 6.17 4.22 2.89
10 years................. 15.28 9.39 9.48 7.77 5.46 3.70
20 years................. 14.55 9.54 9.71 9.14 7.28 5.15
30 years................. 11.85 7.75 8.24 8.27 6.73 5.39
40 years................. 11.18 6.51 6.99 7.08 5.80 4.47
50 years................. 12.59 5.33 5.76 5.89 4.89 4.08
60 years................. 11.19 5.06 5.38 5.32 4.10 4.13
Since 1926............... 10.71 5.08 5.64 5.21 3.74 3.12
Inflation Adjusted
Since 1926............... 7.36 1.90 2.44 2.02 0.60
- ----------------------------
</TABLE>
*Source: Ibbotson, Roger G. and Rex A. Sinquefield, STOCKS, BONDS, BILLS, AND
INFLATION (SBBI), 1982, updated in STOCKS, BONDS, BILLS, AND INFLATION 1997
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 1969-1996, 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
1969-1996; for the period 1926-1945, the Standard and Poor's monthly High-Grade
Corporate Composite yield data were used, assuming a 4 percent coupon and a
twenty-year maturity.
Intermediate-term Government Bonds -- Measured by a one-bond portfolio
constructed each year containing a bond with approximately a five-year
maturity.
U.S. Treasury Bills -- Measured by rolling over each month a one-bill portfolio
containing, at the beginning of each month, the bill having the shortest
maturity not less than one month.
Inflation -- Measured by the Consumer Price Index for all Urban Consumers
(CPI-U), not seasonally adjusted.
A-2
