Registration No. 333-17669
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
SEPARATE ACCOUNT FP
of
THE EQUITABLE LIFE ASSURANCE James M. Benson, President
SOCIETY OF THE UNITED STATES The Equitable Life Assurance Society of
(Exact Name of Trust) the United States
THE EQUITABLE LIFE ASSURANCE 1290 Avenue of the Americas
SOCIETY OF THE UNITED STATES New York, New York 10104
(Exact Name of Depositor) (Name and Address of Agent for Service)
1290 Avenue of the Americas
New York, New York 10104
(Address of Depositor's Principal
Executive Offices)
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Telephone Number, Including Area Code: (212) 554-1234
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Please send copies of all communications to:
MARY P. BREEN, ESQ. with a copy to:
Vice President and Thomas C. Lauerman
Associate General Counsel Freedman, Levy, Kroll & Simonds
The Equitable Life Assurance 1050 Connecticut Avenue, N.W., Suite 825
Society of the United States Washington, D.C. 20036
1290 Avenue of the Americas
New York, New York 10104
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Securities Being Registered: Units of Interest in Separate Account FP
It is proposed that this filing will become effective (check appropriate line):
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on (May 1, 1997) pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a) of Rule 485
_____ on ( ) pursuant to paragraph (a) of Rule 485
Pursuant to Rule 24f-2(a)(1) under the Investment Company Act of 1940, the
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933. The Registrant filed the 24f-2 Notice for the year ended
December 31, 1996 on February 27, 1997.
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
VARIABLE LIFE INSURANCE POLICIES
FUNDED THROUGH SEPARATE ACCOUNT FP
IL PROTECTOR(SM)
IL COLI II(SM)
IL COLI
INCENTIVE LIFE PLUS(SM)
SURVIVORSHIP 2000
SPECIAL OFFER POLICY
INCENTIVE LIFE 2000
CHAMPION 2000
INCENTIVE LIFE
PROSPECTUS SUPPLEMENT DATED MAY 1, 1997
This supplement updates certain information in the prospectus you received for
your Equitable variable life insurance policy* and any prior supplements to that
prospectus.** Capitalized terms used in this supplement have the same meanings
as in the prospectus. You should keep this supplement with your prospectus and
any previous prospectus supplement. We will send you another copy of any
prospectus or supplement, without charge, on written request.
EQUITABLE. The information under the heading "EQUITABLE" in your prospectus is
updated as follows:
EQUITABLE. The Equitable Life Assurance Society of the United States
(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, the variable life insurance policies listed
above 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.
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*This supplement updates certain information contained in the IL Prospectuses
dated July 25, 1996 and January 1, 1997; IL COLI II Prospectuses dated July 24,
1996 and January 1, 1997; the Incentive Life Plus Prospectuses dated December
19, 1994, May 1, 1995, September 15, 1995, May 1, 1996 and January 1, 1997; the
IL COLI supplements thereto dated September 15, 1995, May 1, 1996 and January 1,
1997, and the Special Offer Policy supplements thereto dated May 1, 1995,
September 15, 1995 and May 1, 1996; the Survivorship 2000 Prospectuses dated
August 18, 1992, May 1, 1993, 1994 and 1995 and January 1, 1997; the Incentive
Life 2000 Prospectuses dated November 27, 1991 and May 1, 1993 and 1994, and the
Special Offer Policy supplements thereto dated November 27, 1991, January 29,
1993, May 1, 1993, 1994 and 1995; the Champion 2000 Prospectuses dated November
27, 1991 and May 1, 1993 and 1994; and the Incentive Life Prospectuses dated
August 29, 1989, February 27, 1991 and May 1, 1990, 1993 and 1994.
**If the date of your prospectus is prior to January 1, 1997, you received a
prospectus supplement dated January 1, 1997. You may have also received a
supplement dated May 1, 1996. These supplements are still relevant and should be
retained with your prospectus.
EVM-116 Copyright 1997 The Equitable Life Assurance Society
of the United States. All rights reserved.
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INVESTMENT PORTFOLIOS. As of May 1, 1997, your policy offers the following
twenty-four investment portfolios, along with the guaranteed interest option.
The twenty-four investment portfolios are as follows:
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIOS
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FIXED INCOME SERIES: EQUITY SERIES: ASSET ALLOCATION SERIES:
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<S> <C> <C> <C>
Domestic Fixed Income Domestic Equity International Equity o Alliance Conservative
o Alliance Money Market o T. Rowe Price Equity o Alliance Global Investors
o Alliance Intermediate Income o Alliance International o EQ/Putnam Balanced
Government Securities o EQ/Putnam Growth & o T. Rowe Price o Alliance Balanced
o Alliance Quality Bond Income Value International Stock o Alliance Growth
Aggressive Fixed Income o Alliance Growth & o Morgan Stanley Investors
o Alliance High Yield Income Emerging Markets o Merrill Lynch World
o Alliance Equity Index Equity (available on Strategy
o Merrill Lynch Basic or about Sept. 2,
Value Equity 1997)
o Alliance Common Stock Aggressive Equity
o MFS Research o Alliance Aggressive
Stock
o Warburg Pincus Small
Company Value
o Alliance Small Cap
Growth
o MFS Emerging Growth
Companies
</TABLE>
PERFORMANCE INFORMATION. The performance information under the heading "HUDSON
RIVER TRUST RATES OF RETURN" in the prospectus and any illustrations of policy
values based on such information are deleted.
THE SEPARATE ACCOUNT AND THE TRUSTS. The information under the heading "THE
TRUST," "THE TRUST'S INVESTMENT ADVISER" and "INVESTMENT POLICIES OF THE TRUST'S
PORTFOLIOS" in your prospectus is replaced with the following sections:
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
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<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
Equity Series: Income Value or about Sept. 2, 1997)
o Alliance Growth & Income o Merrill Lynch o Warburg Pincus Small
o Alliance Equity Index o Alliance International Basic Value Equity Company Value
o Alliance Common Stock o Alliance Aggressive o MFS Research o MFS Emerging Growth
o Alliance Global Stock o T. Rowe Price Companies
o Alliance Small Cap International Stock
Growth Asset Allocation Series:
Asset Allocation Series: o EQ/Putnam Balanced o Merrill Lynch
Investors World Strategy
o Alliance Balanced o Alliance Growth
Investors
</TABLE>
*The names of these portfolios have been amended to include "Alliance" in their
names.
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.
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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 supplement), the EQAT prospectus (beginning after the
attached 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 supplement.
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:
<TABLE>
<CAPTION>
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PORTFOLIO INVESTMENT POLICY OBJECTIVE
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FIXED INCOME SERIES:
DOMESTIC FIXED INCOME:
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<S> <C> <C>
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 High current income consistent with
GOVERNMENT the U.S. Government, its agencies and relative stability of principal.
SECURITIES.............. instrumentalities. Each investment will have a final
maturity of not more than 10 years or a duration not
exceeding that of a 10-year Treasury note.
ALLIANCE QUALITY BOND... Primarily investment grade fixed-income securities. High current income consistent with
preservation of capital.
AGGRESSIVE FIXED INCOME:
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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."
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</TABLE>
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<TABLE>
<CAPTION>
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PORTFOLIO INVESTMENT POLICY OBJECTIVE
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EQUITY SERIES:
DOMESTIC EQUITY:
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<S> <C> <C>
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 expenses) that approximates the investment
the 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:
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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.
T. ROWE PRICE Primarily common stocks of established non-United Long-term growth of capital.
INTERNATIONAL STOCK..... States companies.
MORGAN STANLEY EMERGING Primarily equity securities of emerging market country Long-term capital appreciation.
MARKETS EQUITY.......... (i.e. foreign) issuers.
AGGRESSIVE EQUITY:
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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 in 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.
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</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
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PORTFOLIO INVESTMENT POLICY OBJECTIVE
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AGGRESSIVE EQUITY (CONT.):
<S> <C> <C>
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.
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ASSET ALLOCATION SERIES:
ALLIANCE CONSERVATIVE Diversified mix of publicly-traded, fixed-income and High total return without, in the
INVESTORS............... equity securities; asset mix and security selection adviser's opinion, undue risk to
are primarily based upon factors expected to reduce principal.
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 excepted 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 of equity and fixed income securities, High total investment return.
STRATEGY................ including convertible securities, of U. S. and foreign
issuers.
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</TABLE>
DEDUCTIONS AND CHARGES
FROM THE TRUSTS. The information under the section "FROM THE TRUST" in your
prospectus is revised as follows:
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 to Alliance 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 on the next page as an annual percentage
of each portfolio's daily average net assets:
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<TABLE>
<CAPTION>
1996 FEES AND EXPENSES RESTATED AS IF SUBJECT TO 1997 ADVISORY AGREEMENT
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RESTATED 1996 RESTATED 1996 RESTATED 1996
HRT PORTFOLIO MANAGEMENT FEE OTHER EXPENSES TOTAL EXPENSES
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<S> <C> <C> <C>
Alliance Money Market 0.35% 0.04% 0.39%
Alliance Intermediate Govt. 0.50% 0.09% 0.59%
Securities
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%
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<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 12B-1 FEES OTHER EXPENSES* TOTAL EXPENSES
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<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 1.15% 0.25% 0.35% 1.75%
Equity
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%
</TABLE>
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* After fee waivers or assumptions by EQAT's Manager pursuant
to an expense limitation agreement. See the attached EQAT
prospectus.
INVESTMENT PERFORMANCE. Footnote 7 to the Separate Account FP financial
statements included herein contains information about the net return for each
Fund which commenced operations prior to December 31, 1996. The attached
prospectus for The Hudson River Trust contains rates of return and other
portfolio performance information of the HRT for various periods ended December
31, 1996. No historical performance information for the EQAT and for the
Alliance Small Cap Growth Portfolio of the HRT is available. Remember, the
changes in the Policy Account value of your policy depend not only on the
performance of the portfolios, but also on the deductions and charges under your
policy. To obtain the current unit values of the Separate Account Funds, call
(212) 314-3310.
The values reported in footnote 7 for all Policies are computed using net rates
of return for the corresponding portfolios of the HRT. The returns reported in
footnote 7 for each of the policy forms are reduced only by any mortality and
expense risk charge deducted from Separate Account assets.
YOUR POLICY ACCOUNT VALUE
HOW WE DETERMINE THE UNIT VALUE. The description of "business day" and the unit
values applicable to different types of transactions is revised as follows:
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
6
<PAGE>
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.
DISTRIBUTION. Certain of the information presented under the caption
"DISTRIBUTION" in your prospectus is revised as follows: EQ Financial
Consultants, Inc. (EQF) is the principal underwriter of the HRT and one of the
principal underwriters of the 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.
ILLUSTRATIONS OF POLICY BENEFITS. Certain of the information under this caption
in your prospectus is revised as follows: The new aggregate expense assumption
for the portfolios is 0.63% per annum (0.59% per annum for investment management
fees and 0.04% per annum for other expenses). The investment management fee
assumption is the average of the advisory fees payable for each HRT Portfolio
(except Alliance Small Cap Growth) based on assets as of December 31, 1996,
restated to reflect certain changes effective May 1, 1997 in the investment
advisory agreement between the HRT and its Investment Adviser, and the maximum
advisory fee payable for the EQAT and the Alliance Small Cap Growth Portfolios.
The other expense assumption is the weighted average of the restated other
expenses of the HRT Portfolios (except Alliance Small Cap Growth) based on
assets as of December 31, 1996, and estimates of the annual other expenses
expected to be paid by the EQAT and Alliance Small Cap Growth Portfolios
(including any applicable 12b-1 distribution fees). The tables under this
caption in your prospectus have not been restated to reflect this new portfolio
expense assumption. For a personalized illustration reflecting the fees and
expenses under your policy, contact your Equitable agent.
MANAGEMENT. A list of our directors and, to the extent they are responsible for
variable life insurance operations, our principal officers and a brief statement
of their business experience for the past five years is contained in Appendix A
to this supplement.
LONG-TERM MARKET TRENDS. Appendix B to this supplement presents historical
return trends for various types of securities which may be useful for
understanding how different investment strategies may affect long-term results.
FINANCIAL STATEMENTS. The financial statements of Separate Account FP and
Equitable included in this prospectus supplement have been audited for the years
ended December 31, 1996, 1995 and 1994 by the accounting firm of Price
Waterhouse LLP, independent accountants, as stated in their reports. The
financial statements of Separate Account FP and Equitable for the years ended
December 31, 1996, 1995 and 1994 included in this prospectus supplement have
been so included in reliance on the reports of Price Waterhouse LLP, given on
the authority of such firm as experts in accounting and auditing.
The financial statements of Equitable contained in this prospectus supplement
should be considered only as bearing upon the ability of Equitable to meet its
obligations under the policies. They should not be considered as bearing upon
the investment experience of the funds in the Separate Account. The financial
statements of Separate Account FP include perniods prior to the merger when
Separate Account FP was part of Equitable Variable Life Insurance Company
("Equitable Variable"). As mentioned in a previously distributed supplement,
Equitable Variable was merged with and into Equitable on January 1, 1997.
7
<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>
MANAGEMENT APPENDIX A
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 Chairman
75008 Paris, France 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. Chief Executive Officer, AXA Equity & Law Life
AXA Equity & Law Assurance Society PLC ("AXA Equity & Law") and various directorships and officerships with
Elbury 9 AXA Equity & Law affiliated companies.
Weedon Lane
Buckinghamshire HP 6505
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 subsidiaries
75008 Paris, France and affiliates of the AXA-UAP Group. Director of the Holding Company and of other Equitable
affiliates. Previously held other 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
- ------------------------------------------------------------------------------------------------------------------------------------
A-1
</TABLE>
<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 the Holding Company.
Melbourne, FL 32919
- ------------------------------------------------------------------------------------------------------------------------------------
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 the Holding Company.
535 Madison Avenue
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 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 the Holding Company.
New York, NY 10036
- ------------------------------------------------------------------------------------------------------------------------------------
Arthur L. Liman Director of Equitable since March 1984. Partner, Paul, Weiss, Rifkind, Wharton & Garrison
Paul, Weiss, Rifkind, 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. Director of AXA-UAP and the Holding Company.
92646 Boulogne-Billancourt Cedex
France
- ------------------------------------------------------------------------------------------------------------------------------------
George J. Sella, Jr. Director of Equitable since May 1987. Retired Chairman and Chief Executive Officer of
P.O. Box 397 American Cyanamid Company (until April 1993); 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
Corporation of Alliance. Director of the Holding Company.
1345 Avenue of the Americas
New York, NY 10105
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-2
<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.
- ------------------------------------------------------------------------------------------------------------------------------------
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. 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.
- ------------------------------------------------------------------------------------------------------------------------------------
Jerry M. de St. Paer Executive Vice President, Equitable. Senior Executive Vice President (since May 1996) and
Chief Financial Officer (since May 1992) of the Holding Company. Executive Vice President
and Chief Operating Officer (since September 1994) of Equitable Investment Corporation.
Director of various Equitable affiliated companies. Previously held various officerships
with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Gordon G. Dinsmore Senior Vice President, Equitable. Executive Vice President, EQF. Vice President, EQAT.
Director of other Equitable affiliated companies. 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 Colorado (since January 1995). 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), 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.
- ------------------------------------------------------------------------------------------------------------------------------------
A-3
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Anthony C. Pasquale Senior Vice President, Equitable. Director of Equitable Agri-Business, Inc. Previously held
other officerships with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Rich Senior Vice President, Equitable. Prior to October 1994, Vice President of Underwriting,
John Hancock Mutual Life Insurance Co.
- ------------------------------------------------------------------------------------------------------------------------------------
Pauline Sherman Company, Vice President, Secretary and Associate General Counsel, Equitable and the Holding
both 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 and 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, Holding Company. Vice President, EQAT. Prior thereto, Chairman,
Insurance Consulting and Actuarial Practice, Coopers & Lybrand.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-4
<PAGE>
COMMUNICATING PERFORMANCE DATA APPENDIX B
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 over 700 variable life and annuity funds, all
of which report their data net of investment management fees, direct operating
expenses and separate account level charges.
LONG-TERM MARKET TRENDS
As a tool for understanding how different investment strategies may affect
long-term results, it may be useful to consider the historical returns on
different types of assets. The following chart presents historical return trends
for various types of securities. The information presented, while not directly
related to the performance of the Funds of the Separate Account or the 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 Incentive Life Plus premiums.
Historically, the investment performance of common stocks over the long term has
generally been superior to that of long or short-term debt securities, although
common stocks have been subject to more dramatic changes in value over short
periods of time. The Common Stock Fund of the Separate Account may, therefore,
be a desirable selection for policyowners who are willing to accept such risks.
Policyowners who have a need to limit short-term risk, may find it preferable to
allocate a smaller percentage of their net premiums to those funds that invest
primarily in common stock. Any investment in securities, whether equity or debt,
involves varying degrees of potential risk, in addition to offering varying
degrees of potential reward.
The chart on page B-2 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 Hudson River Trust, see page B-1 of the HRT
prospectus. For a comparative illustration of performance results of certain
public mutual funds which are similar to the EQAT portfolios and managed by
EQAT's Advisers, see page A-1 of the EQAT prospectus.
B-1
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL RATES OF RETURN
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.
B-2
<PAGE>
INCENTIVE LIFE(TM)
Prospectus Dated May 1, 1994
Incentive Life is a flexible premium variable life insurance policy issued by
Equitable Variable Life Insurance Company (Equitable Variable), a wholly-owned
subsidiary of The Equitable Life Assurance Society of the United States
(Equitable).
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 credited interest and reflect
certain deductions and charges. You may allocate your Policy Account value to a
guaranteed fixed return and variable return investment strategies. The Hudson
River Trust (Trust) is the mutual fund which provides the underlying basis for
the variable return investment strategies. The Trust is a series fund with
twelve different investment portfolios:
<TABLE>
<C> <C> <C>
o Money Market o Growth & Income Asset Allocation Series:
o Intermediate Government Securities o Equity Index o Conservative Investors
o Quality Bond o Common Stock o Growth Investors
o High Yield o Global
o Balanced o Aggressive Stock
</TABLE>
You may draw upon the Policy Account value through loans, partial withdrawals or
policy surrender, within limits. A charge will apply if the policy is
surrendered during the first ten policy years. The charge may also apply if you
reduce the Face Amount or if the policy lapses.
Incentive Life provides a death benefit if the 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 value. You can change the Face Amount and death benefit option,
within limits. The policy will lapse if the Net Cash Surrender Value (Policy
Account value less any applicable Surrender Charge and any loan and accrued loan
interest) is insufficient to pay the policy's monthly deductions and you do not
make the required payment.
Ask your Equitable agent to determine if changing, or adding to, your existing
insurance coverage with Incentive Life 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
INCENTIVE LIFE. THIS PROSPECTUS IS NOT VALID UNLESS IT IS ATTACHED TO A CURRENT
PROSPECTUS FOR THE HUDSON RIVER TRUST.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Copyright 1994 Equitable Variable Life Insurance Company. All rights reserved.
VM 485
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF INCENTIVE LIFE FEATURES.................................. 1
PART 1 -- DETAILED INFORMATION ABOUT EQUITABLE VARIABLE AND
INCENTIVE LIFE INVESTMENT CHOICES......................... 4
THE COMPANY THAT ISSUES INCENTIVE LIFE.................... 4
Equitable Variable...................................... 4
Our Parent, Equitable................................... 4
THE SEPARATE ACCOUNT AND THE TRUST........................ 4
The Separate Account.................................... 4
The Trust............................................... 4
The Trust's Investment Adviser.......................... 4
Investment Policies Of The Trust's Portfolios........... 5
THE GUARANTEED INTEREST DIVISION.......................... 6
Amounts In The Guaranteed Interest Division............. 6
Adding Interest In The Guaranteed Interest Division..... 6
Transfers From The Guaranteed Interest Division......... 6
PART 2 -- DETAILED INFORMATION ABOUT INCENTIVE LIFE................. 7
FLEXIBLE PREMIUMS......................................... 7
DEATH BENEFITS............................................ 7
CHANGES IN INSURANCE PROTECTION........................... 8
Changing The Face Amount................................ 8
Changing The Death Benefit Option....................... 8
Substitution Of Insured Person.......................... 8
When Policy Changes Go Into Effect...................... 9
MATURITY BENEFITS......................................... 9
LIVING BENEFIT OPTION..................................... 9
ADDITIONAL BENEFITS MAY BE AVAILABLE...................... 9
YOUR POLICY ACCOUNT VALUE................................. 9
Amounts In The Separate Account......................... 9
How We Determine The Unit Value......................... 9
Transfers Of Policy Account Value...................... 10
Automatic Transfer Service............................. 10
Telephone Transfers.................................... 10
Charge For Transfers................................... 10
BORROWING FROM YOUR POLICY ACCOUNT....................... 11
How To Request A Loan.................................. 11
Policy Loan Interest................................... 11
When Interest Is Due................................... 11
Repaying The Loan...................................... 11
The Effects Of A Policy Loan........................... 11
PARTIAL WITHDRAWALS FROM YOUR POLICY ACCOUNT............. 11
Partial Withdrawal Charges............................. 12
Allocation Of Withdrawals And Charges.................. 12
The Effects Of A Partial Withdrawal.................... 12
Surrender For Net Cash Surrender Value................. 12
DEDUCTIONS AND CHARGES................................... 12
Deductions From Your Premiums.......................... 12
Deductions From Your Policy Account.................... 12
How Policy Account Charges Are Allocated............... 13
Charges Against The Separate Account................... 13
Trust Charges.......................................... 13
Surrender Charge....................................... 13
ADDITIONAL INFORMATION ABOUT INCENTIVE LIFE.............. 14
Your Policy Can Lapse.................................. 14
You May Reinstate The Policy........................... 14
Policy Periods, Anniversaries, Dates And Ages.......... 14
TAX EFFECTS.............................................. 15
Policy Proceeds........................................ 15
Diversification........................................ 16
Policy Changes......................................... 16
Tax Changes............................................ 17
Estate And Generation Skipping Taxes................... 17
Pension And Profit-Sharing Plans....................... 17
Other Employee Benefit Programs........................ 17
Our Taxes.............................................. 17
When We Withhold Income Taxes.......................... 17
PART 3 -- ADDITIONAL INFORMATION................................... 18
YOUR VOTING PRIVILEGES................................... 18
Trust Voting Privileges................................ 18
How We Determine Your Voting Shares.................... 18
Separate Account Voting Rights......................... 18
OUR RIGHT TO CHANGE HOW WE OPERATE....................... 18
OUR REPORTS TO POLICYOWNERS.............................. 18
LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY.............. 18
YOUR PAYMENT OPTIONS..................................... 19
YOUR BENEFICIARY......................................... 19
ASSIGNING YOUR POLICY.................................... 19
WHEN WE PAY POLICY PROCEEDS.............................. 19
DIVIDENDS................................................ 20
REGULATION............................................... 20
SPECIAL CIRCUMSTANCES.................................... 20
DISTRIBUTION............................................. 21
LEGAL PROCEEDINGS........................................ 21
ACCOUNTING AND ACTUARIAL EXPERTS......................... 21
ADDITIONAL INFORMATION................................... 22
MANAGEMENT............................................... 22
PART 4 -- ILLUSTRATIONS OF POLICY BENEFITS......................... 24
SEPARATE ACCOUNT FP FINANCIAL STATEMENTS........................ FSA-1
EQUITABLE VARIABLE FINANCIAL STATEMENTS............................ F-1
APPENDIX A -- COMMUNICATING PERFORMANCE DATA....................... A-1
LONG-TERM MARKET TRENDS.............................. A-1
- --------------------------------------------------------------------------------
In this prospectus "we," "our" and "us" mean Equitable Variable Life Insurance
Company (Equitable Variable), a New York stock life insurance company. "You" and
"your" mean the owner of the policy. We refer to the person who is covered by
the policy as the "insured person" because the insured person and the
policyowner may not be the same. Unless indicated otherwise, the discussion in
this prospectus assumes that there is no policy loan outstanding and that the
policy is not in a grace period.
THE POLICY IS NOT AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. EQUITABLE VARIABLE DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN
AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED SUPPLEMENT THERETO OR IN ANY
SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY EQUITABLE VARIABLE.
<PAGE>
SUMMARY OF INCENTIVE LIFE 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).
POLICY ACCOUNT
o Net premiums are put in your Policy Account and can be allocated to a
Guaranteed Interest Division and to one or more of the divisions of Equitable
Variable's Separate Account FP (the Separate Account). The Separate Account
divisions invest in corresponding portfolios of the Trust. You may adjust
this allocation by changing your allocation percentages or by transfers among
the Separate Account divisions and the Guaranteed Interest Division.
o REQUESTS FOR TRANSFERS OUT OF THE GUARANTEED INTEREST DIVISION 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 DIVISION AND AMONG
ALL SEPARATE ACCOUNT DIVISIONS MAY BE MADE AT ANY TIME. Transfers are subject
to the rules discussed under TRANSFERS FROM THE GUARANTEED INTEREST DIVISION
on page 6 and TRANSFERS OF POLICY ACCOUNT VALUE on page 10.
o There is no minimum guaranteed cash value for amounts allocated to the
Separate Account divisions. The value of amounts allocated to the Guaranteed
Interest Division will depend on the interest rates declared and guaranteed
each year by Equitable Variable (4 1/2% minimum).
REDEMPTION
o Loans may be taken against 90% of a policy's Cash Surrender Value (Policy
Account value less any applicable surrender charge) subject to certain
conditions. Loan interest accrues daily at a rate determined annually.
Currently, amounts set aside to secure the loan earn interest at a rate 1%
lower than the rate charged for policy loan interest. See BORROWING FROM YOUR
POLICY ACCOUNT on page 11.
o Partial Withdrawals of Net Cash Surrender Value (Cash Surrender Value less
any loan and accrued loan interest) may be taken after the first policy year,
subject to our approval and certain conditions. See PARTIAL WITHDRAWALS FROM
YOUR POLICY ACCOUNT on page 11.
o The policy may be surrendered for its Net Cash Surrender Value, less any lien
securing a Living Benefit payment, at which time insurance coverage will end.
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 value.
o In some cases a higher death benefit may apply in order to meet Federal
income tax law requirements.
o After the first year, you can change the Face Amount and death benefit
option, within limits. The minimum Face Amount is $50,000.
MATURITY BENEFITS
o A maturity benefit equal to the amount in your Policy Account less any policy
loan, any lien securing a Living Benefit payment and accrued interest, is
payable on the policy anniversary nearest the insured person's 95th birthday
(Final Policy Date), if the insured person is still living on that date.
LIVING BENEFIT
o The Living Benefit rider enables the policyowner to receive a portion of the
policy's death benefit (excluding death benefits payable under certain
riders) if the insured has a terminal illness. The Living Benefit rider will
be added to most policies at issue for no additional cost. The Living Benefit
rider is not available in certain states, including New Jersey.
ADDITIONAL BENEFITS
o Disability waiver, accidental death, term insurance on an additional insured
person, children's term insurance and substitution of insured person riders
are available.
DEDUCTIONS AND CHARGES
FROM PREMIUMS
o Applicable charges for taxes imposed by states and other jurisdictions. Such
taxes currently range between .75% and 5%.
o Administrative charge of $250 from the first premium if you select annual
planned premiums.
1
<PAGE>
FROM THE POLICY ACCOUNT
o Administrative charge during the first policy year that is currently $31 per
month if you selected semi-annual or more frequent planned premiums ($6 per
month if you selected annual planned premiums), and during subsequent policy
years, $6 per month regardless of the planned premium schedule you selected
(subject to $8 per month maximum).
o Monthly cost of insurance charge and monthly charge for any additional
benefits.
o Transaction charges (for partial withdrawals, Face Amount increases and
certain investment division transfers).
o During the first ten policy years, a surrender charge applies if the policy
lapses or is surrendered for its Net Cash Surrender Value or if the Face
Amount is reduced. The maximum charge is equivalent to 50% of one annual
premium for a comparable traditional life insurance policy; after the first
six policy years, the charge declines 20% per year.
FROM THE SEPARATE ACCOUNT
o 60% per annum charge for certain mortality and expense risks.
FROM THE TRUST
o Trust shares are purchased at net asset value which reflects investment
management fees and other direct expenses. Investment management fees are
charged at the maximum annual rates of .35% of net assets for the Equity
Index Portfolio, .40% of net assets for Common Stock, Money Market and
Balanced Portfolios; .50% for Aggressive Stock and Intermediate Government
Securities Portfolios and .55% for High Yield, Global, Conservative
Investors, Growth Investors, Quality Bond and the Growth & Income Portfolios.
VARIATIONS
o Equitable Variable is subject to the insurance laws and regulations in every
jurisdiction in which Incentive Life is sold. As a result, the terms of
Incentive Life may vary from jurisdiction to jurisdiction. The terms of
Incentive Life may also vary where special circumstances result in a
reduction in our costs.
o A modified version of Incentive Life may be offered where certain conditions
are met.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
o You have a right to examine the policy. If for any reason you are not
satisfied with it, you may cancel the policy within the time limits 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 the latest
of the following three dates: (i) 10 days after you receive the policy, (ii)
10 days after we mail a written notice telling you about your rights to
cancel (Notice of Withdrawal Right); or (iii) 45 days after you sign Part I
of the policy application.
o If you cancel the policy, we will refund the premiums you paid. In certain
cases where the policy was purchased as a result of an exchange of 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.
LAPSE
o The policy will lapse if the Net Cash Surrender Value is insufficient to
cover monthly charges. If this occurs, you will be notified and given the
opportunity to maintain the policy in force by paying additional premiums.
You may be able to reinstate a lapsed policy within a limited time period,
but this will require additional evidence of insurability.
TAX EFFECTS
o Generally, under current Federal income tax law, death benefits are not
subject to income tax and Policy Account earnings are not subject to income
tax as long as they remain in the Policy Account. Loans, partial withdrawals,
surrender, maturity, lapse or a substitution of insured may result in
recognition of income for tax purposes.
2
<PAGE>
RATES OF RETURN
The rates of return shown below are based on the actual investment performance
of The Hudson River Trust portfolios, after deduction for investment management
fees and direct Trust operating expenses, for periods ending December 31, 1993.
The historical performance of the Common Stock and Money Market Portfolios for
periods prior to March 22, 1985 has been adjusted to reflect current investment
management fees of .40% per annum and estimated direct operating expenses of the
Trust of .10% per annum. The Common Stock Portfolio and its predecessors have
been in existence since 1976. No return information is provided for the Equity
Index Portfolio, since it received its initial funding on March 1, 1994.
These rates of return are not illustrative of how actual investment performance
will affect the benefits under your policy. Moreover, these rates of return are
not an estimate or guarantee of future performance.
THESE RATES OF RETURN ARE FOR THE TRUST ONLY AND DO NOT REFLECT THE
ADMINISTRATIVE AND COST OF INSURANCE CHARGES, THE MORTALITY AND EXPENSE RISK
CHARGE AND THE SURRENDER CHARGE APPLICABLE UNDER AN INCENTIVE LIFE POLICY.
<TABLE>
<CAPTION>
PERIODS ENDING 12/31/93
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS 15 YEARS SINCE INCEPTION(a)
--------- ------ ------- ------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market.......................... 3.00% 4.23% 6.00% 6.95% -- 7.83%
Intermediate Gov't. Securities........ 10.58 -- -- -- -- 10.25
Quality Bond (b)...................... -- -- -- -- -- (0.51)
High Yield............................ 23.15 19.85 12.35 -- -- 10.84
Balanced.............................. 12.28 15.52 14.42 -- -- 13.95
Growth & Income (b)................... -- -- -- -- -- (0.25)
Common Stock.......................... 24.84 21.12 15.44 15.27 17.52% 14.87
Global................................ 32.09 19.73 15.36 -- -- 11.22
Aggressive Stock...................... 16.77 28.32 26.81 -- -- 21.97
The Asset Allocation Series:
Conservative Investors................ 10.76 11.98 -- -- -- 10.69
Growth Investors...................... 15.26 21.67 -- -- -- 18.69
----------
<FN>
(a) The Growth & Income and Quality Bond Portfolios received their initial
funding on October 1, 1993; the Intermediate Government Securities Portfolio
on April 1, 1991; the Conservative Investors and the Growth Investors
Portfolios on October 2, 1989; the Global Portfolio on August 27, 1987; the
High Yield Portfolio on January 2, 1987; the Aggressive Stock and Balanced
Portfolios on January 27, 1986; the predecessor of the Money Market
Portfolio on July 13, 1981; and the predecessor of the Common Stock
Portfolio on January 13, 1976.
(b) Unannualized.
</FN>
</TABLE>
Additional investment performance information appears in the attached Trust
prospectus.
3
<PAGE>
PART 1: DETAILED INFORMATION ABOUT EQUITABLE VARIABLE AND
INCENTIVE LIFE INVESTMENT CHOICES
THE COMPANY THAT ISSUES INCENTIVE LIFE
EQUITABLE VARIABLE. Equitable Variable was organized in 1972 in New York State
as a stock life insurance company. We are a wholly-owned subsidiary of The
Equitable Life Assurance Society of the United States. We are licensed to do
business in all 50 states, Puerto Rico, the Virgin Islands and the District of
Columbia. At December 31, 1993, we had approximately $81.6 billion face amount
of variable life insurance in force.
We sell both traditional and innovative forms of life insurance designed to give
policyowners maximum choice and flexibility. Additional forms of life insurance
are available through our parent, Equitable. Your Equitable agent can provide
information about all forms of life insurance available from us and Equitable
and help you decide which may best meet your objectives.
OUR PARENT, EQUITABLE. Equitable, a New York stock life insurance company, has
been in business since 1859. Equitable and its subsidiaries managed
approximately $174 billion as of December 31, 1993. Equitable's assets do not
back the benefits that we pay under our policies. Equitable's home office is 787
Seventh Avenue, New York, New York 10019.
Equitable is a wholly-owned subsidiary of The Equitable Companies Incorporated
(the Holding Company). The largest stockholder of the Holding Company is AXA, a
French insurance holding company. AXA currently owns 49% of the outstanding
shares of common stock of the Holding Company plus convertible preferred stock
and redeemable preferred stock. Under its investment arrangements with Equitable
and the Holding Company, AXA is able to exercise significant influence over the
operations and capital structure of the Holding Company, Equitable and their
subsidiaries. After September 19, 1994 (or earlier under certain circumstances)
AXA will be able to increase its ownership of the Holding Company's common stock
by converting certain convertible securities it currently owns or through
purchases. AXA is the principal holding company for most of the companies in one
of the largest insurance groups in Europe. The majority of AXA's stock is
controlled by a group of five French mutual insurance companies.
THE SEPARATE ACCOUNT AND THE TRUST
THE SEPARATE ACCOUNT. The Separate Account was established on April 19, 1985
under the Insurance Law of the State of New York. The Separate Account is a type
of investment company called a unit investment trust and is registered with the
Securities and Exchange Commission (SEC) under the Investment Company Act of
1940. This registration does not involve any supervision by the SEC of the
management or investment policies of the Separate Account.
Under New York law, we own the assets of the Separate Account and use them to
support your policy and other variable life insurance policies. The portion of
the Separate Account's assets supporting these policies may not be used to
satisfy liabilities arising out of any other business we may conduct. This means
that the assets supporting Policy Account values maintained in the Separate
Account are not subject to the claims of our other creditors. We may also retain
in the Separate Account amounts owed to us for charges or other permitted
allocations. Because such retained amounts do not support Policy Account values,
we may transfer them from the Separate Account to our general account.
THE TRUST. The Separate Account has several divisions, each of which invests in
shares of a corresponding portfolio of the Trust. The Trust is an open-end
diversified management investment company, more commonly called a mutual fund.
As a "series" type of mutual fund, it issues several different "series" of
stock, each of which relates to a different Trust portfolio with a different
investment policy. The Trust does not impose a sales charge or "load" for buying
and selling its shares. The Trust's shares are bought and sold by our Separate
Account at net asset value. The Trust's custodian is The Chase Manhattan Bank,
N.A.
The Trust sells its shares to separate accounts of insurance companies, both
affiliated and not affiliated with Equitable. We currently do not foresee any
disadvantages to our policyowners arising out of this. However, the Trust's
Board of Trustees intends to monitor events in order to identify any material
irreconcilable conflicts that possibly may arise and to determine what action,
if any, should be taken in response. If we believe that the Trust's response to
any of those events insufficiently protects our policyowners, we will see to it
that appropriate action is taken to protect our policyowners. Also, if we ever
believe that any of the Trust's portfolios is so large as to impair materially
the investment performance of a portfolio or the Trust, we will examine other
investment options.
THE TRUST'S INVESTMENT ADVISER. The Trust is advised by Alliance Capital
Management L.P. (Alliance). Alliance is registered as an investment adviser
under the Investment Advisers Act of 1940 (the Advisers Act). Alliance, a
publicly-traded limited partnership, is indirectly majority-owned by Equitable.
Alliance acts as an investment adviser to various separate accounts and general
accounts of Equitable and other affiliated insurance companies. Alliance also
provides management and consulting services to mutual funds, endowment funds,
insurance companies, foreign entities, qualified and non-tax qualified corporate
funds, public and private pension and profit-sharing plans, foundations and
tax-exempt organizations. As of December 31, 1993, Alliance was managing
approximately $115 billion in assets.
Alliance's main office is 1345 Avenue of the Americas, New York, New York 10105.
4
<PAGE>
The advisory fee payable by the Trust is based on the following annual
percentages of the value of each portfolio's daily average net assets:
<TABLE>
<CAPTION>
DAILY AVERAGE NET ASSETS
----------------------------------------
FIRST NEXT OVER
PORTFOLIO $350 MILLION $400 MILLION $750 MILLION
- --------- ------------ ------------ ------------
<S> <C> <C> <C>
Common Stock, Money Market and Balanced.......................................... .400% .375% .350%
Aggressive Stock and Intermediate Gov't. Securities.............................. .500% .475% .450%
High Yield, Global, Conservative Investors and
Growth Investors............................................................. .550% .525% .500%
</TABLE>
<TABLE>
<CAPTION>
FIRST NEXT OVER
PORTFOLIO $500 MILLION $500 MILLION $1 BILLION
- --------- ------------ ------------ ----------
<S> <C> <C> <C>
Quality Bond and Growth & Income................................................. .550% .525% .500%
</TABLE>
<TABLE>
<CAPTION>
FIRST NEXT OVER
PORTFOLIO $750 MILLION $750 MILLION $1.5 BILLION
- --------- ------------ ------------ ------------
<S> <C> <C> <C>
Equity Index..................................................................... .350% .300% .250%
</TABLE>
INVESTMENT POLICIES OF THE TRUST'S PORTFOLIOS. Each portfolio has a different
investment objective which it tries to achieve by following separate investment
policies. The objectives and policies of each portfolio will affect its return
and its risks. There is no guarantee that these objectives will be achieved. The
policies and objectives of the Trust's portfolios are as follows:
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT POLICY OBJECTIVE
- --------- ----------------- ---------
<S> <C> <C>
MONEY MARKET............... Primarily high quality short-term money market High level of current income while
instruments. preserving assets and maintaining
liquidity.
INTERMEDIATE............... Primarily debt securities issued or guaranteed by High current income consistent with
GOVERNMENT the U.S. Government, its agencies and relative stability of capital.
SECURITIES instrumentalities. Each investment will have a
final maturity of not more than 10 years or a
duration not exceeding that of a 10-year
Treasury note.
QUALITY BOND............... Primarily investment grade fixed-income securities. High current income consistent with
preservation of capital.
HIGH YIELD................. Primarily a diversified mix of high yield, High return by maximizing current
fixed-income securities involving greater income and, to the extent consistent
volatility of price and risk of principal and with that objective, capital apprecia-
income than high quality fixed-income securities. tion.
The medium and lower quality debt securities in
which the portfolio may invest are known as "junk
bonds."
BALANCED................... Primarily common stocks, publicly-traded debt High return through a combination of
securities and high quality money market current income and capital
instruments. appreciation.
GROWTH & INCOME............ Primarily common stocks and securities convertible High return through a combination of
into common stocks. current income and capital
appreciation.
EQUITY INDEX............... Selected securities in the Standard & Poor's 500 Total return before Trust expenses
Index which the advisor believes will, in the that approximates the total return
aggregate, approximate the performance results of performance of the Standard & Poor's
the Index. 500 Index, including reinvestment of
dividends, at a risk level consistent
with that of the Index.
COMMON STOCK............... Primarily common stock and other equity-type Long-term growth of capital and
instruments. increasing income.
GLOBAL..................... Primarily equity securities of non-United States Long-term growth of capital.
as well as United States companies.
AGGRESSIVE STOCK........... Primarily common stocks and other equity-type Long-term growth of capital.
securities issued by medium and other smaller
sized companies with strong growth potential.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT POLICY OBJECTIVE
- --------- ----------------- ---------
<S> <C> <C>
ASSET ALLOCATION SERIES:
CONSERVATIVE............... Diversified mix of publicly-traded, fixed-income High total return without, in the
INVESTORS and equity securities; asset mix and security adviser's opinion, undue risk to
selection are primarily based upon factors principal.
expected to reduce risk.
GROWTH INVESTORS........... Diversified mix of publicly-traded, fixed-income High total return consistent with the
and equity securities; asset mix and security adviser's determination of reasonable
selection based upon factors expected to increase risk.
possibility of high long-term return.
</TABLE>
Because Policy Account values may be invested in mutual fund options, Incentive
Life offers an opportunity for the Cash Surrender Value to appreciate more
rapidly than it would under comparable fixed-benefit whole-life insurance. You
must, however, accept the risk that if investment performance is unfavorable,
the Cash Surrender Value may not appreciate as rapidly and, indeed, may decrease
in value.
More detailed information about the Trust, its investment policies, risks,
expenses and all other aspects of its operations, appears in its prospectus,
which is attached to this prospectus, and in its Statement of Additional
Information referred to therein.
THE GUARANTEED INTEREST DIVISION
YOU MAY ALLOCATE SOME OR ALL OF YOUR POLICY ACCOUNT TO THE GUARANTEED INTEREST
DIVISION, 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 OBLIGATIONS,
INCLUDING THE GUARANTEED INTEREST DIVISION. BECAUSE OF APPLICABLE EXEMPTIVE AND
EXCLUSIONARY PROVISIONS, PARTICIPATIONS IN THE GUARANTEED INTEREST DIVISION HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER THE GUARANTEED
INTEREST DIVISION NOR THE GENERAL ACCOUNT HAS BEEN REGISTERED AS AN INVESTMENT
COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940. ACCORDINGLY, NEITHER THE
GENERAL ACCOUNT, THE GUARANTEED INTEREST DIVISION 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 RELATING TO THE
GENERAL ACCOUNT AND THE GUARANTEED INTEREST DIVISION. SUCH DISCLOSURES ARE
INCLUDED IN THIS PROSPECTUS FOR YOUR INFORMATION. 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 DIVISION. You may accumulate amounts in the
Guaranteed Interest Division by allocating net premium and loan repayments to
that Division, transferring amounts from the divisions of the Separate Account
to the Guaranteed Interest Division or earning interest on amounts you already
have in the Guaranteed Interest Division. A Living Benefit payment will also
result in amounts being transferred to the Guaranteed Interest Division. See
LIVING BENEFIT OPTION on page 9. 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 Division.
We refer to this amount as the loaned amount in the Guaranteed Interest
Division.
The amount you have in the Guaranteed Interest Division at any time is the sum
of all net premiums and loan repayments allocated to that Division, all
transfers into that Division (including amounts securing any policy loan or
Living Benefit payment) plus earned interest, less amounts transferred out or
withdrawn, and monthly deductions allocated to, this Division.
ADDING INTEREST IN THE GUARANTEED INTEREST DIVISION. We pay a declared interest
rate on all amounts that you have in the Guaranteed Interest Division. At policy
issuance, and prior to each policy anniversary, we declare the rates that will
apply to amounts in the Guaranteed Interest Division 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 1/2%. Different rates are also paid on
unloaned and loaned amounts in the Guaranteed Interest Division. See POLICY LOAN
INTEREST on page 11. 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 Division at the end of each policy month. Interest is
credited on any loaned amount in the Guaranteed Interest Division 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 Separate Account divisions and to the
unloaned portion of the Guaranteed Interest Division in accordance with your
premium allocation percentages.
TRANSFERS FROM THE GUARANTEED INTEREST DIVISION. Once during each policy year,
you may request a transfer from your unloaned amount in the Guaranteed Interest
Division to one or more of the divisions of the Separate Account. 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 Division as of the transfer date or the minimum
transfer amount, whichever is more. The minimum transfer amount is the minimum
transfer amount shown on the Information Page of your policy (the Policy
Information Page) or your total unloaned value in the Guaranteed Interest
Division on the transfer date, whichever is less. Amounts securing a Living
Benefit payment may not be transferred from the Guaranteed Interest Division.
6
<PAGE>
PART 2: DETAILED INFORMATION ABOUT INCENTIVE LIFE
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 the
insured person, the initial Face Amount of the policy (the minimum Face Amount
is $50,000) and any additional benefits selected. In certain situations,
however, no distinction is made based on the sex of the insured person. See COST
OF INSURANCE CHARGE on page 12. You may choose to pay a higher initial premium.
The full initial premium you indicated on your application 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 full initial
premium is paid while the person proposed to be insured is living and (b) unless
the information in the application continues to be true and complete, without
material change, as of the time the initial premium is paid.
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 Variable. 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
insured. 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 Separate Account
divisions and the Guaranteed Interest Division. Allocation percentages may be
any whole number from zero to 100, but the sum must equal 100. These allocations
will go into effect on the first business day that follows the 20th calendar day
after the Issue Date of your policy. The Issue Date is shown on the Policy
Information Page and is the date we actually issue your policy. The date your
allocation instructions take effect is known as the Allocation Date. Our
business days are described in HOW WE DETERMINE THE UNIT VALUE on page 9.
Until the Allocation Date, any net premiums credited to your Policy Account will
be allocated to the Separate Account's Money Market Division, and any monthly
charges incurred will be deducted from the Money Market Division. On the
Allocation Date, all amounts then in your Policy Account will be allocated in
accordance with the directions contained in your policy application. We
establish the interest rate applicable to amounts in the Guaranteed Interest
Division as of the Register Date shown on the Policy Information Page and on
each policy anniversary. See ADDING INTEREST IN THE GUARANTEED INTEREST DIVISION
on page 6 and POLICY PERIODS, ANNIVERSARIES, DATES AND AGES on page 14.
We may delay the Allocation Date for the same reasons that we would also delay
effecting a transfer request. There will be no charge for the transfer out of
the Money Market Division on the Allocation Date and that transfer will not
count as one of the four free transfers per policy year. See TRANSFERS OF POLICY
ACCOUNT VALUE on page 10.
You may change the allocation percentages of net premiums or of monthly
deductions by writing to our Administrative Office and indicating the changes
you wish to make. These changes will go into effect as of the date your request
is received at our Administrative Office, but no earlier than the first business
day following the Allocation Date, and will affect transactions on and after
such date.
Although premiums are flexible, 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 premiums that will keep your policy in effect.
You may make the planned payment or skip the planned payment. We will send
premium reminder notices based on your planned premium. You may ask us not to
send notices by writing to our Administration Office. We reserve the right to
limit the amount of any premium payments you make which are in addition to your
planned 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 may have different
minimum premium payments.) 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 on page 15 for an explanation of modified endowment
contracts, the special tax consequences of such contracts and how your policy
might become a modified endowment contract.
If you stop paying premiums, your policy will continue in effect until the Net
Cash Surrender Value can no longer cover the monthly deductions from your Policy
Account. See YOUR POLICY CAN LAPSE on page 14.
DEATH BENEFITS
We pay a benefit to the beneficiary of the policy when the insured person dies.
This benefit will be equal to the death benefit under your policy plus any
additional benefits included in your policy and then due, less any policy loan,
any lien securing a Living Benefit payment and accrued interest. If the insured
person dies during a grace period, we will also deduct any overdue monthly
deductions.
You may choose between two death benefit options:
o OPTION A provides a death benefit equal to the policy's Face Amount. Except
as described below, the Option A benefit is fixed.
o OPTION B provides a death benefit equal to the Face Amount of the policy PLUS
the amount in your Policy Account on the day the insured person dies. Under
Option B, the value of the benefit is variable and fluctuates with the amount
in your Policy Account.
7
<PAGE>
Policyowners who prefer to have favorable investment experience reflected in
increased insurance coverage should choose Option B. Policyowners who prefer to
have insurance coverage that does not vary in amount and lower cost of insurance
charges should choose Option A.
Under both options, a higher death benefit may apply. This higher benefit is a
percentage multiple of the amount in your Policy Account. The percentage is
based on provisions of Federal tax law which require a minimum death benefit in
relation to cash value for your policy to qualify as life insurance. The higher
death benefit will be the amount in your Policy Account on the day the insured
person dies times the percentage for the insured person's age (nearest birthday)
at the beginning of the policy year of the insured person's death. The
percentage declines as the insured person gets older. For ages that are not
shown on the following table, the applicable percentage multiples will decrease
by a ratable portion for each full year.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
TABLE OF DEATH BENEFITS BASED ON POLICY ACCOUNT VALUES
INSURED 40 or 45 50 55 60 65 70 75 to 95
PERSON'S AGE under 90
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
POLICY ACCOUNT 250% 215% 185% 150% 130% 120% 115% 105% 100%
PERCENTAGE MULTIPLE
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
For example, if the insured person were 40 years old and you had a Policy
Account value of $100,000, the death benefit would be at least 250% of $100,000
or $250,000.
CHANGES IN INSURANCE PROTECTION
CHANGING THE FACE AMOUNT. You may request a change in the Face Amount any time
after the first policy year by sending a written request to our Administrative
Office. See TAX EFFECTS on page 15 for the tax consequences of changing the Face
Amount. Any change will be subject to our approval and the following conditions:
o To increase the Face Amount, you must provide satisfactory evidence that the
insured person is still insurable. The cost of insurance rate for the amount
of the increase will be based on the rating class, attained age and
smoker/non-smoker status of the insured person on the date of the increase
and on the insured person's sex. If the insured person has become a more
expensive risk we will ask you if you want to pay the higher cost of
insurance charges before we process the change.
o Any increase must be at least $10,000. Monthly deductions from your Policy
Account for the cost of insurance will generally increase, beginning on the
date the increase takes effect. An administrative charge of $1.50 for each
additional $1,000 of insurance (up to a maximum charge of $250) will be
deducted from your Policy Account. See HOW POLICY ACCOUNT CHARGES ARE
ALLOCATED on page 13.
o You may reduce the Face Amount but not below the minimum we require to issue
this policy at the time of the reduction. Any reduction must be at least
$10,000. Monthly deductions from your Policy Account for the cost of
insurance will generally decrease, beginning on the date the decrease in Face
Amount takes effect. If you reduce the Face Amount during the first ten
policy years, we will deduct a pro rata share of the applicable surrender
charge from the Policy Account. See SURRENDER CHARGE on page 13.
o Our current procedure is to disapprove a requested decrease if it would cause
a death benefit based on the Policy Account percentage multiple to apply. See
DEATH BENEFITS on page 7.
Reductions will be applied to prior increases in the Face Amount, if any, in the
reverse order in which such increases occurred, and then to the original Face
Amount.
CHANGING THE DEATH BENEFIT OPTION. At any time after the first policy year while
your policy is in force, you may change the death benefit option by sending a
written request to our Administrative Office. See TAX EFFECTS on page 15 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 COST OF INSURANCE
CHARGE on page 12). We do not require evidence of insurability for the increase
in Face Amount when you change from Option B to Option A, nor do we make any
charge for this increase. We will not charge a surrender charge for the decrease
in Face Amount when you change from Option A to Option B.
SUBSTITUTION OF INSURED PERSON. If you provide satisfactory evidence that the
person proposed to be insured is insurable then, subject to certain
restrictions, you may, after the first policy year, substitute the insured
person under your policy. If you do so, the cost of insurance charges may change
but we will not change the surrender charge. Since substituting the insured
person is a taxable event and may have other tax consequences as well, you
should consult your tax adviser prior to substituting the insured person under
your policy. As a condition to substituting the insured person, we may require
you to sign a form acknowledging the tax consequences of making this change.
8
<PAGE>
WHEN POLICY CHANGES GO INTO EFFECT. A substitution of insured person, or change
in Face Amount or death benefit option, will go into effect at the beginning of
the policy month that coincides with or follows the date we approve the request
for the change. In some cases, we may not approve a change because it might
disqualify your policy as life insurance under applicable Federal tax law. In
other cases there may be tax consequences as a result of the change. See TAX
EFFECTS on page 15.
MATURITY BENEFITS
If the insured person is still living on the policy anniversary nearest his or
her 95th birthday (Final Policy Date), we will pay you the amount in the Policy
Account net of any policy loan, any lien securing a Living Benefit payment and
accrued interest. The policy will then terminate. You may choose to have this
benefit paid in installments. See TAX EFFECTS on page 15 and YOUR PAYMENT
OPTIONS on page 19.
LIVING BENEFIT OPTION
Subject to regulatory approval in your state and our underwriting guidelines,
our new Living Benefit rider will be added to your policy at issue. The Living
Benefit rider is not available in certain states, including New Jersey. The
Living Benefit rider enables the policyowner to receive a portion of the
policy's death benefit (excluding death benefits payable under certain riders)
if the insured person has a terminal illness. Certain eligibility requirements
apply when you submit a Living Benefit claim (for example, satisfactory evidence
of less than six month life expectancy). There is no additional charge for the
rider, but we will deduct an administrative charge of $250 from the proceeds of
the Living Benefit payment. This charge may be less in some states. 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 Variable 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 on page 11.
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 Division where it will earn interest
at the same rate as unloaned amounts. See THE GUARANTEED INTEREST DIVISION on
page 6. This liened amount will not be available for loans, transfers or partial
withdrawals. Any death benefit, maturity benefit or Net Cash Surrender Value
payable upon policy surrender will be reduced by the amount of the lien.
Unlike a death benefit received by a beneficiary after the death of an insured,
receipt of a Living Benefit payment may be taxable as a distribution under the
policy. See TAX EFFECTS on page 15 for a discussion of the tax treatment of
distributions under the policy. Consult your tax adviser. Receipt of a Living
Benefit payment may also affect a policyowner's eligibility for certain
government benefits or entitlements. You should contact your Equitable agent if
you wish to make a claim under the rider.
ADDITIONAL BENEFITS MAY BE AVAILABLE
Your policy may include additional benefits. A charge will be deducted from your
Policy Account monthly for each additional benefit you choose. These benefits
are subject to our rules and may be cancelled by you at any time. More details
will be included in your policy if you choose any of these benefits. The
following additional benefits are currently available: disability waiver
benefit, accidental death benefit, children's term insurance and term insurance
on an additional insured person.
If the disability waiver goes into effect, we will not permit Face Amount
increases or decreases and the death benefit will be changed to Option B.
YOUR POLICY ACCOUNT VALUE
The amount in your Policy Account is the sum of the amounts you have in the
Guaranteed Interest Division and in the various divisions of the Separate
Account. Your Policy Account also reflects various charges. See DEDUCTIONS AND
CHARGES on page 12.
AMOUNTS IN THE SEPARATE ACCOUNT. Amounts allocated, transferred or added to a
Separate Account division are used to purchase units of that division. Units are
redeemed from a Separate Account division when amounts are withdrawn,
transferred or deducted for charges or capitalized loan interest. The number of
units purchased or redeemed in a division of the Separate Account is calculated
by dividing the dollar amount of the transaction by the division's unit value
calculated after the close of business that day. On any given day, the value you
have in a division of the Separate Account is the unit value for that division
times the number of units credited to you in that division.
HOW WE DETERMINE THE UNIT VALUE. We determine unit values for the divisions of
the Separate Account at the end of each business day. Generally, a business day
is any day we are open and the New York Stock Exchange is open for trading. We
are closed on national business holidays, including Martin Luther King Day, and
also the Friday after Thanksgiving. Additionally, we may choose to close on the
day immediately preceding or following a national business holiday or due to
emergency conditions. We will not process any policy transactions as of such
days other than a policy anniversary report, monthly charge deduction and the
payment of death benefit proceeds. The unit value for any business day is equal
to the unit value for the preceding business day multiplied by the net
investment factor for that division on that business day.
A net investment factor is determined for each division of the Separate Account
every business day as follows: first, we take the net asset value of a share in
the corresponding Trust portfolio at the close of business that day as reported
by the Trust, and we add the per share amount of any dividends or capital gains
distributions paid by the Trust on that day. We divide this amount by the per
share net asset value on the preceding business day. Then, we subtract a daily
asset charge for each calendar day between business days (for example, a Monday
calculation may include charges for Saturday, Sunday and Monday). The daily
charge is guaranteed not to exceed an effective annual rate of .60%. See CHARGES
AGAINST THE SEPARATE ACCOUNT on page 13. Finally, we reserve the right to
subtract any daily charge for taxes or amounts set aside as a reserve for taxes.
For current Incentive Life unit values, call (212) 714-5015.
9
<PAGE>
TRANSFERS OF POLICY ACCOUNT VALUE. You may request a transfer of amounts from
any division of the Separate Account to any other division of the Separate
Account or to the Guaranteed Interest Division. Special rules apply to transfers
out of the Guaranteed Interest Division. See TRANSFERS FROM THE GUARANTEED
INTEREST DIVISION on page 6.
You may make a transfer by telephone or by submitting a written transfer request
to our Administrative Office. Transfer request forms are available from your
Equitable agent or from our Administrative Office. Special rules apply to
telephone transfers. See TELEPHONE TRANSFERS below.
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 division or be transferred to any one division as long as the total amount
transferred that day, including any amounts transferred to or from the
Guaranteed Interest Division, at least equals the minimum. However, we will
transfer the entire amount in any division of the Separate Account 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 division. We may delay making a transfer if the New
York Stock Exchange is closed or the SEC has declared that an emergency exists.
In addition, we may delay transfers where permitted under applicable law.
AUTOMATIC TRANSFER SERVICE. The Automatic Transfer Service enables you to make
automatic monthly transfers out of the Money Market Division into the other
Separate Account divisions.
To start using this service you must first complete a special election form that
is available from your agent or our Administrative Office. You must also have a
minimum of $5,000 in the Money Market Division on the date the Automatic
Transfer Service is scheduled to begin. You can elect up to eight Separate
Account investment divisions for monthly transfers, but the minimum amount that
may be transferred to each division each month is $50.
If you elect the Automatic Transfer Service with your policy application, the
automatic transfers will begin in the second policy month following the
Allocation Date. If you elect the Automatic Transfer Service after your
application has been submitted, automatic transfers will begin on the next
monthly processing date after we receive your election form at our
Administrative Office. See POLICY PERIODS, ANNIVERSARIES, DATES AND AGES on page
14.
The Automatic Transfer Service will remain in effect until the earliest of the
following events: (1) the funds in the Money Market Division are insufficient to
cover the automatic transfer amount; (2) the policy is in a grace period; (3) we
receive at our Administrative Office your written instruction to cancel the
Automatic Transfer Service; or (4) we receive notice of death under the policy.
Using the Automatic Transfer Service does not guarantee a profit or protect
against loss in a declining market.
TELEPHONE TRANSFERS. In order to make transfers by telephone, you must first
complete and return an authorization form. Authorization forms can be obtained
from your Equitable agent or our Administrative Office. The completed form MUST
be returned to our Administrative Office before requesting a telephone transfer.
Telephone transfers may be requested on each day we are open to transact
business. You will receive the division's unit values as of the close of
business on the day you call. We do not accept telephone transfer requests after
3:00 p.m. Eastern Time. Only one telephone transfer request is permitted per day
and it may not be revoked at any time. The telephone transfer requests are
automatically recorded and are invalid if incomplete information is given,
portions of the request are inaudible, no authorization form is on file, or the
request does not comply with the transfer limitations described above.
Procedures have been established by Equitable Variable that are considered to be
reasonable and are designed to confirm that instructions communicated by
telephone are genuine. Such procedures include requiring certain personal
identification information prior to acting on telephone instructions and
providing written confirmation of instructions communicated by telephone. If
Equitable Variable does not employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, it may be liable for any
losses arising out of any action on its part or any failure or omission to act
as a result of its own negligence, lack of good faith, or willful misconduct. In
light of the procedures established, Equitable Variable will not be liable for
following telephone instructions that it reasonably believes 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 if you make more than four transfers of Policy Account value
in a policy year. Currently we are charging $25 per transfer after the twelfth
transfer. 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 Division.
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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
Division. This loaned amount earns an interest rate expected to be different
from the interest rate for unloaned amounts. Amounts securing a Living Benefit
payment are not available for policy loans.
HOW TO REQUEST A LOAN. You may request a loan by writing to our Administrative
Office. You should tell us how much of the loan you want taken from your
unloaned amount in the Guaranteed Interest Division and how much you want taken
from your amounts in the divisions of the Separate Account. If you request a
loan from a division of the Separate Account, we will redeem units sufficient to
cover that part of the loan and transfer the amount to the loaned portion of the
Guaranteed Interest Division. The amounts you have in each division will be
determined as of the day your request for a loan is received at our
Administrative Office.
If you do not indicate how you wish to allocate it, the loan will be allocated
according to the deduction allocation percentages applicable to your Policy
Account. If the loan cannot be allocated based on these percentages, it will be
allocated based on the proportions of your unloaned amounts in the Guaranteed
Interest Division and your value in each division of the Separate Account to the
unloaned value of your Policy Account.
POLICY LOAN INTEREST. Interest on a policy loan accrues daily at an adjustable
interest rate. We determine the rate at the beginning of each policy year. The
same rate applies to any outstanding policy loans and any new amounts you borrow
during the year. You will be notified of the current rate when you apply for a
loan. The maximum rate is the greater of 5 1/2%, 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 Division where it earns a declared rate for loaned amounts.
Loaned amounts are expected to 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. 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 1/2%.
WHEN INTEREST IS DUE. Interest is due on each policy anniversary. If you do not
pay the interest when it is due, it will be added to your outstanding loan and
allocated based on the deduction allocation percentages for your Policy Account
which are then in effect. This means an additional loan is made to pay the
interest and amounts are transferred from the investment divisions to make the
loan. If the interest cannot be allocated on this basis, it will be allocated as
described above for allocating your loan.
REPAYING THE LOAN. You may repay all or part of a policy loan at any time. While
you have a policy loan 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. 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 Division until the amount of any loans originally allocated
to that division have been repaid. After you have repaid this amount, you may
choose how you want us to allocate the balance of any additional repayments. If
you do not provide specific instructions, repayments will be allocated on the
basis of your premium allocation percentages.
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 Division
will not be available for investment in the divisions of the Separate Account or
in the unloaned portion of the Guaranteed Interest Division. Whether you earn
more or less with the loaned amount set aside depends on the investment
experience of the divisions of the Separate Account and the rates declared for
the unloaned portion of the Guaranteed Interest Division. The amount of any
policy loan and accrued loan interest will reduce the proceeds paid from your
policy upon the death of the insured person, policy maturity or policy
surrender. In addition, a loan will reduce the amount available for you to
withdraw from your policy. See TAX EFFECTS on page 15 for the tax consequences
of a policy loan. A loan may also affect the length of time that your insurance
remains in force because the amount set aside to secure your loan cannot be used
to cover the monthly deductions. See YOUR POLICY CAN LAPSE on page 14.
PARTIAL WITHDRAWALS FROM YOUR POLICY ACCOUNT
At any time after the first policy year while the insured person is living, you
may request a partial withdrawal of your Net Cash Surrender Value by writing to
our Administrative Office. Any such withdrawal is subject to our approval and to
certain conditions. Amounts securing a Living Benefit payment are not available
for partial withdrawals. In addition, we reserve the right to decline a request
for a partial withdrawal. Under our current rules, a withdrawal must:
o be at least $500,
o not cause the death benefit to fall below the minimum Face Amount for which
we would issue the policy at the time, and
o not cause the policy to fail to qualify as life insurance under applicable
tax law.
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PARTIAL WITHDRAWAL CHARGES. 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.
ALLOCATION OF WITHDRAWALS AND CHARGES. You may specify how much of the
withdrawal you want taken from amounts you have in each division of the Separate
Account and the unloaned portion of the Guaranteed Interest Division. If you do
not specifically indicate, we will make the withdrawal on the basis of your
deduction allocation percentages. The related expense charge is deducted from
the amount you have remaining in each division and the unloaned portion of the
Guaranteed Interest Division, based on the proportion that the amount withdrawn
from each bears to the total amount withdrawn. If we cannot make the withdrawal
or deduct the expense charge in the manner discussed above, we will make the
withdrawal and deduction based on the proportions of your unloaned amounts in
the Guaranteed Interest Division and the divisions of the Separate Account 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. Normally, it also reduces the Cash Surrender Value
and 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 be reduced so that generally there will be no
change in the net amount at risk. However, under either option, if the death
benefit is based on the Policy Account percentage multiple, the reduction in
death benefit would be greater and the net amount at risk would be reduced. See
DEATH BENEFITS on page 7. The withdrawal and these reductions will be effective
as of the date your request is received at our Administrative Office. See TAX
EFFECTS on page 15 for the tax consequences of a reduction in benefits and a
partial withdrawal.
SURRENDER FOR NET CASH SURRENDER VALUE. The Cash Surrender Value is the amount
in your Policy Account minus the surrender charge described under SURRENDER
CHARGE on page 14. The Net Cash Surrender Value equals the Cash Surrender Value
minus any loan and accrued loan interest.
You may surrender your policy for its Net Cash Surrender Value at any time while
the insured person is living. 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 on page 15 for the tax
consequences of a policy surrender.
DEDUCTIONS AND CHARGES
DEDUCTIONS FROM YOUR PREMIUMS. Charges for applicable taxes are deducted from
all premiums and an initial administrative charge may be deducted from your
first premium. The balance of each premium (the net premium) is placed in your
Policy Account.
o CHARGES FOR APPLICABLE TAXES and all additional charges imposed on premium
payments by states and certain jurisdictions are deducted from each premium
payment. The amount of the tax may vary depending on the jurisdiction in
which the insured person resides. Such taxes currently range between .75% and
5%. This tax is incurred by Equitable Variable, so you cannot deduct it on
your income tax return.
This charge will be increased or decreased to reflect any legislative changes
in the applicable tax. In addition, if an insured person changes his or her
place of residence, you should notify us to change the charge to the tax rate
of the new jurisdiction.
o INITIAL ADMINISTRATIVE CHARGE. If you intend to invest premiums annually
(annual mode), and indicate this on your application, a $250 initial
administrative charge will be deducted from your first premium to cover the
costs of issuing your policy such as application processing, medical
examinations, establishment of policy records and underwriting costs
(determining insurability and assigning the insured person to a risk class).
This charge is designed to reimburse us for expenses and we do not expect a
profit from it. This charge will not apply to semi-annual, quarterly or
monthly payment modes.
DEDUCTIONS FROM YOUR POLICY ACCOUNT. At the beginning of each policy month, the
following charges are deducted from your Policy Account:
o ADMINISTRATIVE CHARGE. The current administrative charge is $31 per month
during the first policy year if you selected semi-annual or more frequent
planned premiums ($6 per month if you selected annual planned premiums).
During subsequent policy years, the administrative charge is currently $6 per
month regardless of the planned premium schedule you selected. This charge is
guaranteed never to be more than $8 per month.
This charge is designed to cover the continuing costs of maintaining your
policy, such as billing, policy transactions and policyowner communications.
In the case of policies not on an annual mode, the higher first year monthly
charge is also intended to cover the costs discussed above under INITIAL
ADMINISTRATIVE CHARGE. This charge is designed to reimburse us for expenses
and we do not expect to profit from it.
o COST OF INSURANCE CHARGE. The cost of insurance charge is calculated by
multiplying the net amount at risk at the beginning of the policy month by
the monthly cost of insurance rate applicable to the insured person at that
time. The net amount at risk is the difference between the current death
benefit and the amount in your Policy Account.
Your cost of insurance charge will vary from month to month with changes in
the net amount at risk. For example, if the current death benefit for the
month is increased because the death benefit is based on a percentage
multiple of the Policy Account, then the net amount at risk for the month
will increase. Assuming the percentage multiple is not in effect, increases
or decreases to the Policy Account will result in a corresponding increase or
decrease to the net amount at risk under Option A policies, but no
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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. After the first policy year, 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 Mortality Tables.
The current and guaranteed monthly cost of insurance rates are determined
based on the sex, age and rating class of the insured person and the Face
Amount of the policy at the time of the charge. In addition, the current
rates also vary depending on the duration of the policy (i.e., the length of
time since a policy has been issued) and on whether the insured person is a
non-smoker.
The current rate for a policy after the tenth policy year is less than the
rate that applies during the first ten policy years for a policy of the same
Face Amount on an insured person of the same sex, age, rating class and
smoker status. This cost of insurance charge reduction applies on a current
basis and is not guaranteed. Because Incentive Life was first offered in
1986, no cost of insurance charge reflecting a reduction for duration has yet
been made by Equitable Variable.
Lower current cost of insurance rates apply at most ages for insured persons
who qualify as non-smokers. To qualify, an insured person must be at standard
risk and must meet additional requirements that relate to smoking habits. In
addition, the insured person must be age twenty or over. Insured persons who
are under twenty years of age may ask us to review their current smoking
habits when they reach their twentieth birthday.
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 risk class. In addition, employers and
employee organizations should consider, in consultation with counsel, the
impact of Title VII of the Civil Rights Act of 1964 on the purchase of
Incentive Life in connection with an employment-related insurance or benefit
plan. The United States Supreme Court held, in a 1983 decision, that, under
Title VII, optional annuity benefits under a deferred compensation plan could
not vary on the basis of sex.
o CHARGES FOR ADDITIONAL BENEFITS. The cost of any additional benefits you
choose will be deducted monthly. Your policy contains tables showing the
guaranteed maximum rates for all of these insurance costs.
Any changes in the cost of insurance, charges for additional benefits or
administrative charges will be by class of insured person and will be based on
changes in future expectations about such factors as investment earnings,
mortality, the length of time policies will remain in effect, expenses and
taxes.
In addition to the monthly deductions from your Policy Account described above,
we charge fees for certain policy transactions: see PARTIAL WITHDRAWALS FROM
YOUR POLICY ACCOUNT on page 11, CHANGES IN INSURANCE PROTECTION on page 8,
TRANSFERS OF POLICY ACCOUNT VALUE on page 10. Also, if, after your policy is
issued, you request more than one illustration in a policy year, we may charge a
fee. See ILLUSTRATIONS OF POLICY BENEFITS in Part 24.
HOW POLICY ACCOUNT CHARGES ARE ALLOCATED. Generally, deductions from your Policy
Account for monthly charges are made from the divisions of our Separate Account
and the unloaned portion of our Guaranteed Interest Division in accordance with
the deduction allocation percentages specified in your application unless you
instruct us in writing to do otherwise. See FLEXIBLE PREMIUMS on page 7. If a
deduction cannot be made in accordance with these percentages, it will be made
based on the proportion that your unloaned amounts in the Guaranteed Interest
Division and your amounts in the divisions of the Separate Account bear to the
total unloaned value of your Policy Account.
CHARGES AGAINST THE SEPARATE ACCOUNT. These charges are reflected in the unit
values for the divisions of the Separate Account. See HOW WE DETERMINE THE UNIT
VALUE on page 9.
o A charge for assuming MORTALITY AND EXPENSE RISKS will be made. The annual
rate is .60%. 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
insurance deductions from your Policy Account will never be greater than the
maximum amounts shown in your policy. In making this guarantee, we assume the
mortality risk that insured persons will live for shorter periods than we
estimated. When this happens, we have to pay a greater amount of death
benefit than we expected to pay in relation to the cost of insurance charges
we received. We also assume the expense risk that the cost of issuing and
administering policies will be greater than we expected. If the amount
collected from this charge exceeds losses from the risks assumed, it will be
to our profit.
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 divisions
of the Separate Account. See TAX EFFECTS on page 15.
TRUST CHARGES. Our Separate Account purchases shares of the Trust at net asset
value. That price reflects investment management fees and other direct expenses
that have already been deducted from the assets of the Trust. The Trust does not
impose a sales charge. See THE TRUST'S INVESTMENT ADVISER on page 4.
SURRENDER CHARGE. No deductions are made from premiums for sales expenses. We
incur various sales and promotional expenses in connection with selling
Incentive Life, such as commissions, the cost of preparing sales literature,
other promotional activities and other direct and indirect expenses. We pay
these expenses from our own resources, including any surrender charge we might
collect and any profit we may earn on the charges deducted under the policy.
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There is a difference between the amount in your Policy Account and the Cash
Surrender Value of your policy for the first ten policy years. This difference
is the surrender charge, a contingent deferred sales load. It is a contingent
load because you pay it only if you surrender your policy (or reduce its Face
Amount or let it lapse) during the first ten policy years. It is a deferred load
because we do not deduct it from your premiums. Because the surrender charge is
contingent and deferred, the amount we might collect in a policy year is not
related to the actual sales expenses for that year.
To determine surrender charges, "target" premiums are used. Target premiums are
not based on the "planned" premium you determine. See FLEXIBLE PREMIUMS on page
7. In general, a target premium would equal the amount of annual premium
necessary to maintain a fixed whole life insurance policy for the same face
amount on the life of the insured person. Target premiums are based on the age
of the insured person and the initial Face Amount of the policy. Except in
certain circumstances, the sex of the insured person is also a factor in
determining target premiums. See COST OF INSURANCE CHARGE on page 12.
The maximum surrender charge for your policy will be shown on the Policy
Information Page and will equal 50% of one target premium. This maximum will not
vary based on the amount of premiums you pay or when you pay them. After the
first six policy years, this maximum surrender charge begins to decrease by 20%
per year. After ten years, there is no surrender charge.
Subject to the maximum, the surrender charge is calculated based on actual
premium payments. The surrender charge equals 30% of premium payments made
during the first policy year up to the amount of one target premium and 9% of
any additional premiums paid during the first ten policy years.
Attempting to structure the timing and amount of premium payments to reduce the
potential surrender charge below the maximum is not recommended. Paying small
amounts of premium in the policy's first ten years to reduce the potential
surrender charge could increase the risk that your policy will lapse. If
payments are structured in this manner, the amounts in your Policy Account would
need to receive favorable investment performance for your policy not to lapse
(performance in which, as a result of the payment structure, you would not fully
participate).
If you request a Face Amount reduction during the first ten policy years, we
will consider it a partial surrender and may deduct a portion of the surrender
charge. If you increase the Face Amount and later ask for a decrease, a
surrender charge will apply only to a decrease below the original Face Amount.
Generally, the pro rata surrender charge for a partial surrender will be
determined by dividing the amount of the Face Amount decrease (below the initial
Face Amount) by the initial Face Amount and multiplying that fraction by the
surrender charge. See TAX EFFECTS on page 15 for a discussion of the tax
consequences of changing the Face Amount.
ADDITIONAL INFORMATION ABOUT INCENTIVE LIFE
YOUR POLICY CAN LAPSE. Your insurance coverage under Incentive Life continues as
long as the Net Cash Surrender Value of the policy is enough to pay the monthly
deductions. The Net Cash Surrender Value equals the Cash Surrender Value minus
any loan and accrued loan interest. If the Net Cash Surrender Value at the
beginning of any policy month is less than the deductions for that month, a
61-day grace period will begin. We will notify you, and any assignees on our
records, in writing, that the grace period has begun and indicate the payment
that is needed to avoid policy lapse 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.
If we do not receive payment within the 61 days, your policy will lapse without
value. We will withdraw any amount left in your Policy Account and apply this
amount to the overdue deductions, any applicable surrender charge and any unpaid
loan and accrued loan interest. We will inform you, and any assignee, at last
known addresses that your policy has ended without value. See TAX EFFECTS on
page 15 for the potential tax consequences of policy lapse.
YOU MAY REINSTATE THE POLICY. You may reinstate the policy within three years
after it lapses if:
o you provide evidence that the insured person (and any other person insured
under a rider) is still insurable, and
o you make the premium payment that we require to reinstate the policy.
The effective date of the reinstated policy will be the beginning of the policy
month which coincides with or follows the date we approve your reinstatement
application. Upon reinstatement, there will be no further surrender charges
applied against the policy. Previous loans will not be reinstated. Some states
may vary the time period and conditions for reinstatement.
POLICY PERIODS, ANNIVERSARIES, DATES AND AGES. When an application for an
Incentive Life policy is completed and submitted to us, we decide whether or not
to issue the policy. This decision is made based on the information in the
application and our standards for issuing insurance and classifying risks. If we
decide not to issue a policy, any premium paid will be refunded.
The Issue Date, shown on the Policy Information Page, is the date your policy is
actually issued. Generally, contestability is measured from the Issue Date, as
is the suicide exclusion.
The Final Policy Date is the policy anniversary nearest the insured person's
95th birthday. The policy ends on that date and the maturity benefit is paid if
the insured person is still alive.
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The Register Date, also shown on the Policy Information Page, is used to measure
policy years and policy months. 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 on page 7.
Generally, we determine the Register Date based upon when we receive your full
initial premium. In most cases:
o If you submit the full initial premium to your Equitable agent at the time
you sign the application, and we issue the policy as it was applied for, then
the Register Date will be the later of (a) the date part I of the policy
application was signed or, (b) the date part II of the policy application was
signed by a medical professional.
o If we do not receive your full initial premium at our Administrative Office
before the Issue Date or, if the policy is not issued as applied for, the
Register Date will be the same as the Issue Date.
We may permit corporate policyowners to backdate a Register Date (up to six
months) in order to coordinate a single premium payment date for all employees.
We may also permit policyowners to advance a Register Date (up to three months)
in employer-sponsored payroll deduction cases. Backdating the Register Date (up
to six months) may also be permitted to save age.
The investment start date is the date that your initial net premium begins to
vary with the investment performance of the divisions of the Separate Account or
accrue interest in the Guaranteed Interest Division. Generally, the investment
start date will be the same as the Register Date if the full initial premium is
received at our Administrative Office before the Register Date. Otherwise, the
investment start date will be the date the full initial premium is received at
our Administrative Office. Thus, to the extent that your first premium is
received before the Register Date, there will be a period during which the
initial premium will not be invested. The investment start date for policies
with backdated Register Dates will also be the date the premium is received at
our Administrative Office. Any subsequent premium payment received after the
investment start date for the initial premium payment will begin to experience
investment performance as of the date such payment is received at our
Administrative Office. Remember, your net initial premium may be temporarily
allocated to the Money Market Division of the Separate Account prior to
allocation in accordance with your instructions.
See FLEXIBLE PREMIUMS on page 7.
Generally, when we refer to the age of the insured person, we mean his or her
age on the birthday nearest to the beginning of the particular policy year.
TAX EFFECTS
This discussion is based on our understanding of the effect of the current
Federal income tax laws as currently interpreted on Incentive Life policies
owned by U.S. resident individuals. The tax effects on corporate taxpayers
subject to the Federal alternative minimum tax, non-U.S. residents and non-U.S.
citizens, may be different. This discussion is general in nature, and should not
be considered tax advice, for which you should consult your legal or tax
adviser.
POLICY PROCEEDS. An Incentive Life policy will be treated as "life insurance"
for Federal income tax purposes if it meets the definitional requirement of the
Internal Revenue Code (the Code) and as long as the portfolios of the Trust
satisfy the diversification requirements under the Code. We believe that
Incentive Life will meet these requirements, and that under Federal income tax
law:
o the death benefit received by the beneficiary under your Incentive Life
policy will not be subject to Federal income tax; and
o as long as your policy remains in force, increases in the Policy Account
value as a result of interest or investment experience will not be subject to
Federal income tax unless and until there is a distribution from your policy,
such as a loan or a partial withdrawal.
Special tax rules may apply, however, if you transfer your ownership of the
policy. Consult your tax adviser before any transfer of your policy.
The Federal income tax consequences of a distribution from your policy will
depend on whether your policy is determined to be a "modified endowment." The
character of any income recognized will be ordinary income as opposed to capital
gain.
A MODIFIED ENDOWMENT IS a life insurance policy which fails to meet a
"seven-pay" test. In general, a policy will fail the seven-pay test if the
cumulative amount of premiums paid under the policy at any time during the first
seven policy years exceeds a calculated premium level. The calculated seven-pay
premium level is based on a hypothetical policy issued on the same insured
person and for the same initial death benefit which, under specified conditions
(which include the absence of expense, administrative and surrender charges),
would be fully paid for after seven level annual premiums. Your policy will be
treated as a modified endowment unless the cumulative premiums paid under your
policy, at all times during the first seven policy years, are less than or equal
to the cumulative seven-pay premiums which would have been paid under the
hypothetical policy on or before such times.
Whenever there is a "material change" under a policy, it will generally be
treated as a new contract for purposes of determining whether the policy is a
modified endowment, and subjected to a new seven-pay period and a new seven-pay
limit. The new seven-pay limit would be determined taking into account, under a
downward adjustment formula, the Policy Account value of the policy at the time
of such change. A materially changed policy would be considered a modified
endowment if it failed to satisfy the new seven-pay limit. A material change
would occur if there was a substitution of the insured person, and could also
occur as a result of a change in death benefit option, the selection of
additional benefits, an increase in Face Amount and certain other changes.
If the benefits under your policy are reduced during the first seven policy
years after entering into the policy (or within seven years after a material
change), for example, by requesting a decrease in Face Amount or in some cases
by making partial withdrawals or terminating additional benefits under a rider,
the calculated seven-pay premium level will be redetermined based on the reduced
level of benefits and applied retroactively for purposes of the seven-pay test.
If the premiums previously paid are greater than the recalculated seven-pay
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premium level limits, the policy will become a modified endowment. Generally, a
life insurance policy which is received in exchange for a modified endowment
will also be considered a modified endowment.
Changes made to a life insurance policy, for example, a decrease in benefits, a
policy lapse or the reinstatement of a lapsed 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, action may be necessary for your
policy to continue to qualify as life insurance. See POLICY CHANGES below.
IF YOUR INCENTIVE LIFE 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 age of the insured person at the time of the
withdrawal. In addition, if at any time your policy is surrendered, the excess,
if any, of your Cash Surrender Value (which includes the amount of policy loan
and accrued loan interest) over your Basis will be subject to Federal income
tax. In addition, if a policy lapses 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 Final
Policy 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 distributions will be considered taxable income to you to the extent your
Policy Account value exceeds your Basis in the policy. For modified endowments,
your Basis would be increased by the amount of any prior loan under your policy
that was considered taxable income to you. For purposes of determining the
taxable portion of any distribution, all modified endowments issued by the same
insurer or an affiliate to the same policyowner (excluding certain qualified
plans) during any calendar year are to be aggregated. The Secretary of the
Treasury has authority to prescribe additional rules to prevent avoidance of
"income-first" taxation on distributions from modified endowments.
A 10% penalty tax will also apply to the taxable portion of a distribution from
a modified endowment. The penalty tax will not, however, apply to distributions
(i) to taxpayers 59 1/2 years of age or older, (ii) in the case of a disability
(as defined in the Code) or (iii) received as part of a series of substantially
equal periodic annuity payments for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the taxpayer and his
beneficiary. If your policy is surrendered, the excess, if any, of your Cash
Surrender Value over your Basis will be subject to Federal income tax and,
unless one of the above exceptions applies, the 10% penalty tax. If your policy
lapses while there is a policy loan, the cancellation of such loan and accrued
loan interest will be treated as a distribution to the extent not previously
treated as such and could be subject to tax, including the penalty tax, as
described under the above rules. In addition, upon the Final Policy Date the
excess of the amount of any benefit paid, not taking into account any reduction
for any loan and accrued loan interest, over your Basis in the policy, will be
subject to Federal income tax and, unless an exception applies, a 10% penalty
tax.
If your policy becomes a modified endowment, distributions that occur during the
policy year it becomes a modified endowment and any subsequent policy year will
be taxed as described in the two preceding paragraphs. In addition distributions
from a policy within two years before it becomes a modified endowment will be
subject to tax in this manner. THIS MEANS THAT A DISTRIBUTION MADE FROM A POLICY
THAT IS NOT A MODIFIED ENDOWMENT COULD LATER BECOME TAXABLE AS A DISTRIBUTION
FROM A MODIFIED ENDOWMENT. The Secretary of the Treasury has been authorized to
prescribe rules which would treat similarly other distributions made in
anticipation of a policy becoming a modified endowment.
DIVERSIFICATION. Under Section 817(h) of the Code, the Secretary of the Treasury
has the authority to set standards for diversification of the investments
underlying variable life insurance policies. The Treasury Department has issued
final regulations regarding the diversification requirements. Failure to meet
these requirements would disqualify your policy as a variable life insurance
policy under Section 7702 of the Code. If this were to occur, you would be
subject to Federal income tax on the income under the policy. The Separate
Account, through the Trust, intends to comply with these requirements.
In connection with the issuance of the then temporary diversification
regulations, the Treasury Department stated that it anticipated the issuance of
regulations or rulings prescribing the circumstances in which the ability of a
policyowner to direct his investment to particular 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 account
would be included in your gross income for Federal income tax purposes. Under
current law we believe that Equitable Variable, and not the owner of the policy,
would be considered the owner of the assets of the Separate Account.
POLICY CHANGES. For you and your beneficiary to receive the tax treatment
discussed above, your policy must initially qualify and continue to qualify as
life insurance under Sections 7702 and 817(h) of the Code. We have reserved in
the policy the right to decline to accept all or part of any premium payments,
decline to change death benefits, or decline to make partial withdrawals that we
believe would cause your policy to fail to qualify. We may also make changes in
the policy or its riders or require additional premium payments or make
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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. In addition, the Treasury
Department may amend existing regulations, issue new regulations, or adopt new
interpretations of existing laws. State tax laws or, if you are not a United
States resident, foreign tax laws, may 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 retroactive effect regardless of the date of enactment.
We suggest you consult your legal or tax adviser.
ESTATE AND GENERATION SKIPPING TAXES. If the insured person is the policyowner,
the death benefit under Incentive Life will generally be includable in the
policyowner's estate for purposes of Federal estate tax. If the policyowner is
not the insured person, under certain conditions only the Cash Surrender Value
of the policy would be so includable. Federal estate tax is integrated with
Federal gift tax under a unified rate schedule. In general, estates less than
$600,000 will not incur a Federal estate tax liability. In addition, an
unlimited marital deduction may be available for Federal estate tax purposes.
As a general rule, if a "transfer" is made to a person two or more generations
younger than the policyowner, a generation skipping tax may be payable at rates
similar to the maximum estate tax rate in effect at that 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. If we believe a generation
skipping tax may be payable, we may be required to withhold tax from benefits
payable unless we receive proper written evidence that no such tax is payable.
Because these rules are complex, you should consult with your tax adviser for
specific information, especially where benefits are passing to younger
generations, as opposed to a spouse or a child.
The particular situation of each policyowner or beneficiary will determine how
ownership or receipt of policy proceeds will be treated for purposes of Federal
estate and generation skipping taxes as well as state and local estate,
inheritance and other taxes.
PENSION AND PROFIT-SHARING PLANS. If Incentive Life policies are purchased by a
fund which forms part of a pension or profit-sharing plan qualified under
Sections 401(a) or 403 of the Code for the benefit of participants covered under
the plan, the Federal income tax treatment of such policies will be somewhat
different from that described above.
If purchased as part of a pension or profit-sharing plan, the current cost of
insurance for the net amount at risk is treated as a "current fringe benefit"
and is required to be included annually in the plan participant's gross income.
This cost (generally referred to as the "P.S. 58" cost) is reported to the
participant annually. If the plan participant dies while covered by the plan and
the policy proceeds are paid to the participant's beneficiary, then the excess
of the death benefit over the Policy Account value will not be subject to
Federal income tax. However, the Policy Account value will generally be taxable
to the extent it exceeds the sum of $5,000 plus the participant's cost basis in
the policy. The participant's cost basis will generally include the costs of
insurance previously reported as income to the participant. Special rules may
apply if the participant had borrowed from his Policy Account or was an
owner-employee under the plan.
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased by
a tax qualified plan.
OTHER EMPLOYEE BENEFIT PROGRAMS. Complex rules may apply when a policy is held
by an employer or a trust, or acquired by an employee, in connection with the
provision of employee benefits. These policyowners also must consider whether
the policy was applied for by or issued to a person having an insurable interest
under applicable state law, as the lack of insurable interest may, among other
things, affect the qualification of the policy as life insurance for Federal
income tax purposes and the right of the beneficiary to death benefits.
Employees and employer-created trusts may be subject to reporting, disclosure,
and fiduciary obligations under the Employee Retirement Income Security Act of
1974 (ERISA). You should consult your legal adviser.
OUR TAXES. Under the life insurance company tax provisions of the Code, variable
life insurance is treated in a manner consistent with fixed life insurance. The
operations of the Separate Account are reported in our Federal income tax return
but we currently pay no income tax on investment income and capital gains
reflected in variable life insurance policy reserves. Therefore, no charge is
currently being made to any division of the Separate Account for taxes. We
reserve the right to make a charge in the future if we incur income tax which is
attributable to the Separate Account. If such a charge is made, it would be set
aside as a provision for taxes which we would keep in the affected division
rather than in our General Account. We anticipate that our variable life
policyowners would benefit from any investment earnings that are not needed to
maintain this provision.
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.
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.
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PART 3: ADDITIONAL INFORMATION
YOUR VOTING PRIVILEGES
TRUST VOTING PRIVILEGES. As explained in Part 1, we invest the assets in the
divisions of our Separate Account in shares of the corresponding Trust
portfolios. Equitable Variable is the legal owner of the shares and will attend,
and has the right to vote at, any meeting of the Trust's shareholders. Among
other things, we may vote on any matters described in the Trust's prospectus or
requiring a vote by shareholders under the Investment Company Act of 1940 (the
Act).
Even though we own the shares, to the extent required by the Act, you will have
the opportunity to tell us how to vote the number of shares that can be
attributed to your policy. We will vote those shares at meetings of Trust
shareholders according to your instructions. If we do not receive instructions
in time from all policyowners, we will vote shares in a portfolio for which no
instructions have been received in the same proportion as we vote shares for
which we have received instructions in that portfolio. We will vote any Trust
shares that we are entitled to vote directly due to amounts we have accumulated
in our Separate Account in the same proportions that all policyowners vote,
including those who participate in other separate accounts. If the Federal
securities laws or regulations or interpretations of them change so that we are
permitted to vote shares of the Trust in our own right or to restrict
policyowner voting, we may do so.
HOW WE DETERMINE YOUR VOTING SHARES. You may participate in voting only on
matters concerning the Trust portfolios corresponding to the Separate Account
divisions to which your Policy Account is allocated. The number of Trust shares
in each division that are attributable to your policy is determined by dividing
the amount in your Policy Account allocated to that division by the net asset
value of one share of the corresponding Trust portfolio as of the record date
set by the Trust's Board for the Trust's shareholders meeting. The record date
for this purpose must be at least 10 and no more than 90 days before the meeting
of the Trust. Fractional shares are counted.
If you are entitled to give us voting instructions, we will send you proxy
material and a form for providing voting instructions. In certain cases, we may
disregard instructions relating to changes in the Trust's adviser or the
investment policies of its portfolios. We will advise you if we do and detail
the reasons in the next semiannual report to policyowners.
SEPARATE ACCOUNT VOTING RIGHTS. Under the 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 divisions of the Separate Account. We will cast
votes attributable to amounts we have in the divisions of the Separate Account
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 divisions to, or remove divisions from, the Separate Account, combine two
or more divisions within the Separate Account, or withdraw assets relating to
Incentive Life from one division and put them into another;
o register or end the registration of the Separate Account under the Act;
o operate the Separate Account under the direction of a committee or discharge
such a committee at any time (the committee may be composed entirely of
persons who are "interested persons" of Equitable Variable under the 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 divisions 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 division, you will be notified as required by law. We may, for
example, cause the division to invest in a mutual fund other than, or in
addition to, the Trust. If you then wish to transfer the amount you have in that
division to another division of the Separate Account or to the Guaranteed
Interest Division, you may do so, without charge, by contacting our
Administrative Office. At the same time, you may also change how your net
premiums and deductions are allocated.
OUR REPORTS TO POLICYOWNERS
Shortly after the end of each policy year you will receive a report that
includes information about your policy's current death benefit, Policy Account
value, Cash Surrender Value and policy loan. Notices will be sent to you to
confirm premium payments (except premiums paid through an automated
arrangement), transfers of amounts between investment divisions and certain
other policy transactions.
LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY
We can challenge the validity of your insurance policy based on material
misstatements in your application and any application for change. However, there
are some limits on how and when we can challenge the policy.
o We cannot challenge the policy after it has been in effect, during the
insured person's lifetime, for two years from the date the policy was issued
or reinstated. Some states may require that we measure this time in some
other way.
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o We cannot challenge any policy change that requires evidence of insurability
(such as an increase in Face Amount or a substitution of insured) after the
change has been in effect for two years during the insured person's lifetime.
o We cannot challenge an additional benefit rider that provides benefits in the
event that the insured person becomes totally disabled after two years from
the later of the Issue Date or the date as of which the additional benefit
rider became effective. We can require proof of continuing disability while
such a rider is in effect as specified in the rider.
If the insured person dies within the time that we may challenge the validity of
the policy, we may delay payment until we decide whether to challenge the
policy. If the insured person's age or sex is misstated on any application, the
death benefit and any additional benefits provided will be those which would be
purchased by the most recent deduction for the cost of insurance and the cost of
any additional benefits at the insured person's correct age and sex.
If the insured person commits suicide within two years after the date on which
the policy was issued, the death benefit will be limited to the total of all
premiums that have been paid to the time of death minus any outstanding policy
loan, accrued loan interest and any partial withdrawals of Net Cash Surrender
Value. If the insured person commits suicide within two years after the
effective date of an increase in Face Amount that you requested, we will pay the
death benefit based on the Face Amount which was in effect before the increase,
plus the monthly cost of insurance deductions for the increase (including the
transaction charge for the Face Amount increase). A new two-year suicide and
contestability period will begin on the date of substitution following a
substitution of insured. (Some states require that we measure this time by some
other date.)
YOUR PAYMENT OPTIONS
Policy benefits or other payments, such as the Net Cash Surrender Value, may be
paid immediately in one sum or you may choose another form of payment for all or
part of the money. Payments under these options are not affected by the
investment experience of any division of the Separate Account. Instead, interest
accrues pursuant to the options chosen.
You will make a choice of payment option (or any later changes) and your choice
will take effect in the same way as it would if you were changing a beneficiary.
(See YOUR BENEFICIARY below). If you do not arrange for a specific form of
payment before the insured person dies, the beneficiary will be paid through the
Equitable Access Account. See WHEN WE PAY POLICY PROCEEDS below. The beneficiary
will then have a choice of payment options. However, if you do make an
arrangement with us for how the money will be paid, the beneficiary cannot
change the choice after the insured person dies. Different payment options may
result in different tax consequences.
The beneficiary or any other person who is entitled to receive payment may name
a successor to receive any amount that we would otherwise pay to that person's
estate if that person died. The person who is entitled to receive payment may
change the successor at any time.
We must approve any arrangements that involve more than one payment option, or a
payee who is not a natural person (for example, a corporation), or a payee who
is a fiduciary. Also, the details of all arrangements will be subject to our
rules at the time the arrangements are selected and take effect. This includes
rules on the minimum amount we will pay under an option, minimum amounts for
installment payments, withdrawal or commutation rights (your rights to receive
payments over time, for which we may offer a lump sum payment), the naming of
people who are entitled to receive payment and their successors, and the ways of
proving age and survival.
YOUR BENEFICIARY
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the insurance benefits of the policy. You may change the beneficiary
during the insured person's lifetime by writing to our Administrative Office. If
no beneficiary is living when the insured person dies, we will pay the death
benefit in equal shares to the insured person's surviving children. If there are
no surviving children, we will pay the death benefit to the insured person's
estate.
ASSIGNING YOUR POLICY
You may assign (transfer) your rights in the policy to someone else as
collateral for a loan or for some other reason. A copy of the assignment must be
forwarded to our Administrative Office. We are not responsible for any payment
we make or any action taken before we receive notice of the assignment or for
the validity of the assignment. An absolute assignment is a change of ownership.
BECAUSE THERE MAY BE TAX CONSEQUENCES INCLUDING THE LOSS OF INCOME TAX-FREE
TREATMENT FOR ANY DEATH BENEFIT PAYABLE TO THE BENEFICIARY, YOU SHOULD CONSULT
YOUR TAX ADVISER PRIOR TO MAKING AN ASSIGNMENT.
WHEN WE PAY POLICY PROCEEDS
We will pay any death benefits, maturity benefit, Net Cash Surrender Value or
loan proceeds within seven days after we receive the last required form or
request (and other documents that may be required for payment of death benefits)
at our Administrative Office. Death benefits are determined as of the date of
death of the insured person and will not be affected by subsequent changes in
the unit values of the divisions of the Separate Account. 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 to the
agent within seven days after we receive the required documents. The agent will
deliver the checkbook to the beneficiary.
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We may, however, delay payment if we contest the policy. We may also delay
payment if we cannot determine the amount of the payment because the New York
Stock Exchange is closed, because trading in securities has been restricted by
the SEC, or because the SEC has declared that an emergency exists. In addition,
if necessary to protect our policyowners, we may delay payment where permitted
under applicable law.
We may defer payment of any Net Cash Surrender Value or loan amount (except a
loan to pay a premium to us) from the Guaranteed Interest Division 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 Division.
DIVIDENDS
No dividends are paid on the policy described in this prospectus.
REGULATION
We are regulated and supervised by the New York State Insurance Department. In
addition, we are subject to the insurance laws and regulations in every
jurisdiction where we sell policies. As a result, the provisions of the
Incentive Life policy may vary somewhat from jurisdiction to jurisdiction. State
variations will be covered by a supplement to this prospectus or policy
endorsement as appropriate.
The Second Series Incentive Life policy (Plan No. 88-300) has been filed with
and approved by insurance officials in 50 states, Puerto Rico and the Virgin
Islands. No Incentive Life policy is available in the District of Columbia. We
submit annual reports on our operations and finances to insurance officials in
all the jurisdictions where we sell policies. The officials are responsible for
reviewing our reports to be sure that we are financially sound.
SPECIAL CIRCUMSTANCES
Equitable Variable may vary the charges and other terms of Incentive Life where
special circumstances result in sales or administrative expenses or mortality
risks that are different than those normally associated with Incentive Life
policies. These variations will be made only in accordance with uniform rules
that we establish.
OUR SPECIAL OFFER POLICY. In 1989, Equitable Variable introduced its Second
Series Incentive Life policy, which is the policy described in this prospectus.
Subject to the rules discussed below, Equitable Variable will offer a modified
version of the First Series Incentive Life policy (the "Special Offer Policy")
to qualified offerees. Set forth below are modifications to the discussion in
this prospectus which are appropriate with respect to the Special Offer Policy.
o ADDING INTEREST IN THE GUARANTEED INTEREST DIVISION (page 6). Interest
credited to any loaned amounts in the Guaranteed Interest Division is
allocated to the unloaned portion of the Guaranteed Interest Division at the
end of the policy month.
o FLEXIBLE PREMIUMS (page 7). We have not reserved the right to limit the
amount of any premium payments which are in addition to your planned premium.
o TRANSFERS OF POLICY ACCOUNT VALUE (page 10). You may tell us how much of the
charge, if any, for transfers of Policy Account value to allocate to your
values in each of the divisions of the Separate Account or to the unloaned
value in the Guaranteed Interest Division. If you do not provide specific
instructions, we will allocate the charge as described under HOW POLICY
ACCOUNT CHARGES ARE ALLOCATED on page 13.
o BORROWING FROM YOUR POLICY ACCOUNT (page 11). You may borrow up to 100% of
your policy's Net Cash Surrender Value.
o PARTIAL WITHDRAWALS FROM YOUR POLICY ACCOUNT (page 11). We have not reserved
the right to decline a request for a partial withdrawal. However, any such
request will be subject to our approval and the conditions listed on page 11.
o ALLOCATION OF WITHDRAWALS AND CHARGES (page 12). You may specify how much of
the withdrawal you want taken from your amounts in each of the divisions of
the Separate Account and your unloaned amounts in the Guaranteed Interest
Division. If you do not provide specific instructions or we cannot make the
withdrawal in accordance with your directions, we will withdraw the amount in
the manner described for deductions under HOW POLICY ACCOUNT CHARGES ARE
ALLOCATED on page 13. Unless you specify otherwise, the charge for partial
withdrawals will also be deducted in this manner.
o DEDUCTIONS FROM YOUR PREMIUMS (page 12). Regardless of the mode of premium
payment selected on your application, a $250 administrative charge will be
deducted from your initial premium.
o CURRENT COST OF INSURANCE RATES are generally less than those under the
Second Series Incentive Life policy. However, the current rates for females
at certain ages and for females who do not qualify as non-smokers are higher
than those that are applicable to females under the Second Series Incentive
Life policy. Moreover, the current annual cost of insurance rates under the
Special Offer Policy for male non-smokers at certain issue ages in later
policy years may be higher than rates under the Second Series Incentive Life
policy for these insureds, but over the life of the contract the cumulative
current cost of insurance rates for the Special Offer Policy are lower than
those under the Second Series Incentive Life policy. Also, if the Face Amount
of a Special Offer Policy is reduced below $200,000, higher current cost of
insurance rates will apply.
The current rates for the Special Offer Policy, unlike those for the Second
Series Incentive Life policy, do not vary depending on duration. This means
that the current rate is the same for all Special Offer Policies of the same
Face Amount on an insured person of the same age, rating class and smoker
status -- regardless of how many policy years the policies have been in
effect.
THE MAXIMUM COST OF INSURANCE RATES under the Special Offer Policy are the
same as those that apply to males under the Second Series policy. As a
result, a female would have higher maximum rates under the Special Offer
Policy than under the Second Series policy. The maximum rates will be set
forth in the Special Offer Policy when it is issued. See COST OF INSURANCE
CHARGE on page 12.
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o THE SURRENDER CHARGES imposed on face amount decreases will be modified by
shortening to five years the period to which the pro-rata surrender charge
applies, and by not imposing this charge unless the cumulative reduction in
Face Amount for a policy exceeds 20% of the initial Face Amount. The modified
surrender charges will be set forth in the Special Offer Policy when it is
issued. See SURRENDER CHARGE on page 13.
Under Equitable Variable's current rules, the Special Offer Policy will be
offered where the following conditions are met:
o an employer-employee relationship is present;
o a minimum of five policies are issued, each on the life of a different
eligible insured person;
o the persons proposed to be insured under the policies are deemed by us to be
highly compensated individuals;
o the initial Face Amount of each of the policies is $500,000 or greater;
o the minimum initial premium under each of the policies is remitted to
Equitable Variable by the employer; and
o certain undertakings, which may be required by Equitable Variable in certain
situations, have been submitted to Equitable Variable.
EQUITABLE VARIABLE MAY MODIFY THESE RULES FROM TIME TO TIME AND MAY ALSO
TERMINATE OFFERING THE SPECIAL OFFER POLICY AT ANY TIME.
DISTRIBUTION
Prior to May 1, 1994, we were the principal underwriter of the Trust under a
Distribution Agreement. In addition, Equitable distributed our policies under a
Sales Agreement. Effective May 1, 1994, these underwriting and distribution
responsibilities will be transferred to Equico Securities, Inc. (Equico), a
wholly-owned subsidiary of Equitable, whose principal business address is 1755
Broadway, New York, NY 10019. Equico is registered with the SEC as a
broker-dealer under the Securities Exchange Act of 1934 (the Exchange Act) and
is a member of the National Association of Securities Dealers, Inc. Equico will
be paid a fee for its services as distributor of our 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 Equico. The agent who sells you this policy receives sales
commissions from Equitable. We reimburse Equitable from our own resources,
including any Surrender Charges we might collect. Generally, during the first
policy year, the agent will receive an amount equal to a maximum of 40% of the
premiums paid up to a certain amount and 3% of the premiums paid in excess of
that amount. For policy years two through ten, the agent receives an amount up
to a maximum of 8% of the premiums paid up to a certain amount and 3% of the
premiums paid in excess of that amount; and, for years eleven and later, the
agent receives an amount up to 3% of the premiums paid. Following a Face Amount
increase, commissions on a portion of the premium will be calculated using first
year commission rates. 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 Equico or of another company registered
with the SEC as a broker-dealer under the Exchange Act. The commissions for
independent brokers will be no more than those for agents and the same policy
for recovery of commissions applies. Commissions will be paid through the
registered broker-dealer.
Equitable performs certain sales and administrative duties for us, pursuant to a
written agreement which is automatically renewed each year, unless either party
terminates. Under this agreement, we pay Equitable for salary costs and other
services and an amount for indirect costs incurred through our use of Equitable
personnel and facilities. We also reimburse Equitable for sales expenses related
to business other than variable life insurance policies. The amounts paid and
accrued to Equitable by us under the sales and services agreements totalled
approximately $355.7 million in 1993, $374.9 million in 1992, and $336.6 million
in 1991.
LEGAL PROCEEDINGS
We are not involved in any material legal proceedings.
ACCOUNTING AND ACTUARIAL EXPERTS
The financial statements of Equitable Variable and of the Separate Account
included in this prospectus have been audited for the year ended December 31,
1993 by Price Waterhouse and for the years ended December 31, 1992 and 1991 by
Deloitte & Touche, as stated in their respective reports. The financial
statements of the Separate Account and Equitable Variable for the year ended
December 31, 1993 included in this prospectus have been so included in reliance
on the report of Price Waterhouse, independent accountants, given on the
authority of such firm as experts in accounting and auditing. The financial
statements of the Separate Account and Equitable Variable for the years ended
December 31, 1992 and 1991 included in this prospectus have been so included in
reliance on the reports of Deloitte & Touche, independent accountants, given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of Equitable Variable contained in this prospectus
should be considered only as bearing upon the ability of Equitable Variable to
meet its obligations under the Incentive Life policies. They should not be
considered as bearing upon the investment experience of the divisions of the
Separate Account.
Actuarial matters in this prospectus have been examined by Barbara Fraser,
F.S.A., M.A.A.A., who is a Vice President and Actuary of Equitable. Her opinion
on actuarial matters is filed as an exhibit to the Registration Statement we
filed with the SEC.
21
<PAGE>
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.
MANAGEMENT
Here is a list of our directors and principal officers and a brief statement of
their business experience for the past five years. Unless otherwise noted, the
following persons have been involved in the management of Equitable and its
subsidiaries in various positions for the last five years. Unless otherwise
noted, their address is 787 Seventh Avenue, New York, New York 10019.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ---------------- ----------------------
DIRECTORS
<S> <C>
Michel Beaulieu.............. Director of Equitable Variable since February 1992. Senior Vice President, Equitable, since
September 1991; prior thereto, Chief Life Actuary AXA group 1989 to 1991; Managing Director
Blondeau & CIE (France) 1986 to 1989. Director, Equity & Law (London).
Jerry de St Paer............. Director of Equitable Variable since April 1992. Executive Vice President & Chief Financial
Officer, Equitable, since April 1992; prior thereto, Executive Vice President since December
1990; Senior Vice President & Treasurer June 1990 to December 1990; Senior Vice President,
Equitable Investment Corporation January 1987 to January 1991; Executive Vice President & Chief
Financial Officer, Equitable Companies Inc. since May 1992; Director, Economic Services
Corporation & various Equitable subsidiaries.
William T. McCaffrey......... Director of Equitable Variable since February 1987. Executive Vice President, Equitable, since
February 1986 and Chief Administrative Officer since February 1988; prior thereto, various
other Equitable positions. Director, Equitable Foundation since September 1986.
Harvey Blitz................. Director of Equitable Variable since October 1992. Senior Vice President, Equitable since
September 1987. Senior Vice President, The Equitable Companies, Incorporated, since July 1992.
Director, Equico Securities, Inc., since September 1992; The Equitable of Colorado, since
September 1992; Traditional Equinet Business Corporation of New York and its subsidiaries since
October 1992.
Christophe Dupont-Madinier... Director of Equitable Variable since February 1993. Senior Vice President, AXA (Paris, France),
since 1988. Director, Donaldson, Lufkin & Jenrette, Inc.; Alliance Capital Management
Corporation, Equitable Real Estate Investment Management, Inc.
Pascal Thebe................. Director of Equitable Variable since February 1993. Vice President, Equitable, since March
1993. Prior thereto, Vice President, AXA (Paris), since March 1992; Vice President, Alpha
Assurances, since June 1989; Actuary, Drout Assurances, since 1986.
OFFICERS--DIRECTORS
James M. Benson.............. President, Equitable Variable since December, 1993; Vice Chairman of the Board, Equitable
Variable since July 1993. President and Chief Operating Officer, Equitable, February 1994 to
present; Senior Executive Vice President, April 1993 to February 1994. Prior thereto,
President, Management Compensation Group, 1983 to February 1993.
Gordon Dinsmore.............. Senior Vice President, Equitable Variable, since February 1991. Senior Vice President,
Equitable since September 1989; prior thereto, various other Equitable positions. Director and
Senior Vice President, March 1991 to present, Equitable of Colorado; Director, FHJV Holdings,
Inc., December 1990 to present; Director, Equitable Capital Securities Corporation, August 1993
to present, and Director Equitable Foundation, May 1991 to present.
Richard H. Jenrette.......... Senior Investment Officer, Equitable Variable, since September 1988; Chairman and Chief
Executive Officer, The Equitable Companies Incorporated, since May 1992; Chairman of Executive
Committee, Equitable, since February 1994. Prior thereto, Chairman since May 1987. Chairman and
Chief Executive Officer from May 1990 to September 1992. Chairman, Donaldson, Lufkin and
Jenrette, Inc., since December 1973. Director, AXA since July 1991 and various other Equitable
subsidiaries. Director, McGraw-Hill, Inc., since January 1993.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ---------------- ----------------------
<S> <C>
OFFICERS--DIRECTORS (Continued)
James S. Kalmer.............. Senior Vice President, Equitable Variable, since February 1991. Vice President since December
1987. Senior Vice President, Equitable, since September 1989, prior thereto, Vice President.
Director, Traditional Equinet Business Corporation of New York (TRAEBCO) and its subsidiaries
since March 1991.
Joseph J. Melone............. Chairman of the Board and Chief Executive Officer, Equitable Variable, since November 1990;
Chairman of the Board and Chief Executive Officer, Equitable, February 1994 to present;
President and Chief Executive Officer, September 1992 to February 1994; President and Chief
Operating Officer from November 1990 to September 1992. President and Chief Operating Officer
of The Equitable Companies Incorporated since July 1992. Prior thereto, President, The
Prudential Insurance Company of America, since December 1984. Director, Equity & Law (United
Kingdom) and various other Equitable subsidiaries.
Brian O'Neil................. Senior Vice President and Chief Investment Officer, Equitable Variable, since October 1992.
Executive Vice President & Chief Investment Officer, Equitable, since April 1992; prior
thereto; Senior Vice President since February 1989; Vice President from July 1988 to February
1989. Senior Vice President, Equitable Capital, from November 1987 to March 1989.
Samuel B. Shlesinger......... Senior Vice President, Equitable Variable, since February 1988. Senior Vice President and
Actuary, Equitable; prior thereto, Vice President and Actuary.
Dennis D. Witte.............. Senior Vice President, Equitable Variable, since February 1991; Senior Vice President,
Equitable, since July 1990; prior thereto, various other Equitable positions.
OFFICERS
J. Thomas Liddle, Jr......... Senior Vice President and Chief Financial Officer, Equitable Variable, since February 1986.
Senior Vice President, Equitable since April 1991; prior thereto, Vice President and Actuary,
Equitable.
Franklin Kennedy, III........ Vice President, Equitable Variable, since August 1981. Senior Vice President, Alliance Capital
1345 Avenue of the Americas Management Corporation, July 1993 to present; Senior Vice President, Equitable Capital
New York, New York 10105 Management Corporation, March 1987 to July 1993. Vice President, The Hudson River Trust.
Managing Director and Chief Investment Officer, Equitable Investment Management Corporation,
from November 1983 to January 1987.
William A. Narducci.......... Vice President and Chief Claims Officer, Equitable Variable since February 1989. Vice
200 Plaza Drive President, Equitable since February 1988; prior thereto, Assistant Vice President.
Secaucus, New Jersey 07096
John P. Natoli............... Vice President and Chief Underwriting Officer, Equitable Variable, since February 1988. Vice
2 Penn Plaza President, Equitable.
New York, New York 10121
Molly K. Heines.............. Secretary, Equitable Variable, since February 1991; Vice President and Secretary, Equitable,
since July 1990; prior thereto, Vice President & Counsel.
Kevin R. Byrne............... Treasurer, Equitable Variable, since September 1990; Vice President and Treasurer, Equitable
Life since September 1993; prior thereto, Vice President from March 1989 to September 1993.
Vice President and Treasurer, The Equitable Companies Incorporated, September 1993 to present;
Frontier Trust since August 1990; Traditional Equinet Business Corporation of New York
(TRAEBCO) and its subsidiaries October 1990 to present.
Stephen Hogan................ Vice President and Controller, Equitable Variable, February 1994 to present. Vice President,
Equitable, January 1994 to present; prior thereto, Controller, John Hancock subsidiaries, from
1987 to December 1993.
</TABLE>
23
<PAGE>
PART 4: ILLUSTRATIONS OF POLICY BENEFITS
To help clarify how the key financial elements of the policy work, a series of
tables has been prepared. The tables show how death benefits, Policy Account and
Cash Surrender Values ("policy benefits") under hypothetical Incentive Life
policies could vary over time if the divisions 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 division, if the overall actual rates of return averaged 0%, 6% or 12%,
but went above or below those figures for the individual investment divisions.
The tables are for a 40 year old standard risk male non-smoker. Planned premium
payments of $3,000 for an initial Face Amount of $200,000 are assumed to be paid
at the beginning of each policy year. The difference between the Policy Account
and the Cash Surrender Values in the first ten years is the surrender charge.
See SURRENDER Charge on page 14.
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
policies. Beginning in year eleven, the current charges reflect the lower
current cost of insurance rates applicable to policies in effect for longer than
ten policy years. The amounts shown at the end of each policy year reflect a
daily charge against the Separate Account investment divisions of .60% for
mortality and expense risks, .50% for investment management and .10% for direct
Trust expenses. The assumption for investment management fees is no less than
the average of the effective annual advisory fees applicable to each Trust
portfolio during 1993 and the maximum advisory fee for the Equity Index
Portfolio. The charge reflected for direct Trust expenses is no less than the
aggregate actual charges incurred by the portfolios of the Trust as a percentage
of aggregate average daily Trust net assets during 1993. The effect of these
adjustments is that on a 0% gross rate of return the net rate of return would be
- -1.20%, on 6% it would be 4.73%, and on 12% it would be 10.66%. Remember,
however, that investment management fees and direct Trust expenses vary by
portfolio. See THE TRUST'S INVESTMENT ADVISER on page 4.
The Tables assume an initial administrative charge of $250 and an applicable tax
rate of 2% of premiums for the deduction for premium taxes. 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. The
guaranteed tables assume that the monthly charge is $6 in the first year and $8
thereafter. 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 tables show that if a policy is returned in its very early years for
payment of its Cash Surrender Value, that Cash Surrender Value will be low in
comparison to the amount of the premiums accumulated with interest. Thus, the
cost of owning your policy for a relatively short time will be high.
The internal rate of return on Cash Surrender Value is equivalent to an interest
rate (after taxes) at which an amount equal to the illustrated premiums could
have been invested outside the Policy to arrive at the Cash Surrender Value of
the Policy. The internal rate of return on the death benefit is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated premiums
could have been invested outside the Policy to arrive at the death benefit of
the Policy. The internal rate of return is compounded annually, and the premiums
are assumed to be paid at the beginning of each policy year.
INDIVIDUAL ILLUSTRATIONS. On request, we will furnish you with a comparable
illustration based on the age and sex of the proposed insured person, 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
person's actual risk class. Upon request after issuance, we will also provide a
comparable illustration reflecting your actual Policy Account value. If you
request illustrations more than once in any policy year, we may charge for the
illustration.
24
<PAGE>
INCENTIVE LIFE
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $3,000 INITIAL FACE AMOUNT $200,000
MALE AGE 40
NON-SMOKER DEATH BENEFIT OPTION A
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT(2) POLICY ACCOUNT(2) CASH SURRENDER VALUE(2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED ------------------------------ ----------------------------- -----------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- -------- -------- -------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,150 $200,000 $200,000 $200,000 $ 2,223 $ 2,369 $ 2,515 $ 1,474 $ 1,620 $ 1,766
2 6,458 200,000 200,000 200,000 4,648 5,093 5,555 3,629 4,074 4,536
3 9,930 200,000 200,000 200,000 7,016 7,918 8,892 5,876 6,778 7,752
4 13,577 200,000 200,000 200,000 9,332 10,853 12,563 8,192 9,713 11,423
5 17,406 200,000 200,000 200,000 11,593 13,901 16,599 10,453 12,761 15,459
6 21,426 200,000 200,000 200,000 13,800 17,068 21,044 12,660 15,928 19,904
7 25,647 200,000 200,000 200,000 15,930 20,337 25,919 15,018 19,425 25,007
8 30,080 200,000 200,000 200,000 17,986 23,716 31,275 17,302 23,032 30,591
9 34,734 200,000 200,000 200,000 19,976 27,219 37,174 19,520 26,763 36,718
10 39,620 200,000 200,000 200,000 21,899 30,850 43,677 21,671 30,622 43,449
15 67,972 200,000 200,000 200,000 31,113 51,852 88,626 31,113 51,852 88,626
20 104,158 200,000 200,000 220,001 39,113 78,063 164,180 39,113 78,063 164,180
25 (age 65) $150,340 $200,000 $200,000 $353,037 $44,977 $110,499 $289,375 $44,977 $110,499 $289,375
<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 ACCUMULATED --------------------------- ---------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,150 -50.85% -46.00% -41.14% 6,566.67% 6,566.67% 6,566.67%
2 6,458 -29.18 -23.19 -17.25 668.03 668.03 668.03
3 9,930 -19.85 -13.52 -7.28 267.20 267.20 267.20
4 13,577 -14.70 -8.28 -1.96 153.63 153.63 153.63
5 17,406 -11.81 -5.34 1.01 103.51 103.51 103.51
6 21,426 -9.98 -3.48 2.88 76.08 76.08 76.08
7 25,647 -8.39 -1.95 4.37 59.05 59.05 59.05
8 30,080 -7.33 -0.92 5.37 47.57 47.57 47.57
9 34,734 -6.57 -0.18 6.09 39.36 39.36 39.36
10 39,620 -6.01 0.37 6.64 33.24 33.24 33.24
15 67,972 -4.77 1.75 8.08 17.17 17.17 17.17
20 104,158 -4.28 2.44 8.85 10.46 10.46 11.23
25 (age 65) $150,340 -4.21% 2.86% 9.28% 6.90% 6.90% 10.53%
<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. THE VALUES FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE VALUES
FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE
INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT DIVISIONS OF THE SEPARATE ACCOUNT
AND THE DIFFERENT RATES OF RETURN OF THE TRUST PORTFOLIOS, IF THE ACTUAL RATES
OF INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL DIVISIONS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
25
<PAGE>
INCENTIVE LIFE
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $3,000 INITIAL FACE AMOUNT $200,000
MALE AGE 40
NON-SMOKER DEATH BENEFIT OPTION A
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT(2) POLICY ACCOUNT(2) CASH SURRENDER VALUE(2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED ------------------------------ ----------------------------- -----------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- -------- -------- -------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,150 $200,000 $200,000 $200,000 $ 2,223 $ 2,369 $ 2,515 $ 1,474 $ 1,620 $ 1,766
2 6,458 200,000 200,000 200,000 4,368 4,804 5,258 3,349 3,785 4,239
3 9,930 200,000 200,000 200,000 6,440 7,307 8,247 5,300 6,167 7,107
4 13,577 200,000 200,000 200,000 8,436 9,878 11,504 7,296 8,738 10,364
5 17,406 200,000 200,000 200,000 10,356 12,520 15,060 9,216 11,380 13,920
6 21,426 200,000 200,000 200,000 12,193 15,229 18,943 11,053 14,089 17,803
7 25,647 200,000 200,000 200,000 13,948 18,011 23,189 13,036 17,099 22,277
8 30,080 200,000 200,000 200,000 15,618 20,865 27,838 14,934 20,181 27,154
9 34,734 200,000 200,000 200,000 17,199 23,792 32,933 16,743 23,336 32,477
10 39,620 200,000 200,000 200,000 18,685 26,792 38,523 18,457 26,564 38,295
15 67,972 200,000 200,000 200,000 24,383 42,756 76,001 24,383 42,756 76,001
20 104,158 200,000 200,000 200,000 26,069 59,873 137,900 26,069 59,873 137,900
25 (age 65) $150,340 $200,000 $200,000 $295,407 $21,697 $77,659 $242,137 $21,697 $77,659 $242,137
<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 ACCUMULATED --------------------------- ---------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,150 -50.85% -46.00% -41.14% 6,566.67% 6,566.67% 6,566.67%
2 6,458 -33.11 -27.05 -21.04 668.03 668.03 668.03
3 9,930 -24.23 -17.74 -11.35 267.20 267.20 267.20
4 13,577 -18.94 -12.29 -5.78 153.63 153.63 153.63
5 17,406 -15.82 -9.07 -2.48 103.51 103.51 103.51
6 21,426 -13.80 -6.96 -0.31 76.08 76.08 76.08
7 25,647 -11.95 -5.14 1.48 59.05 59.05 59.05
8 30,080 -10.67 -3.87 2.74 47.57 47.57 47.57
9 34,734 -9.75 -2.93 3.67 39.36 39.36 39.36
10 39,620 -9.07 -2.22 4.39 33.24 33.24 33.24
15 67,972 -8.14 -0.64 6.31 17.17 17.17 17.17
20 104,158 -8.84 -0.02 7.39 10.46 10.46 10.46
25 (age 65) $150,340 -11.66% 0.27% 8.14% 6.90% 6.90% 9.41%
<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. THE VALUES FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE VALUES
FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE
INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT DIVISIONS OF THE SEPARATE ACCOUNT
AND THE DIFFERENT RATES OF RETURN OF THE TRUST PORTFOLIOS, IF THE ACTUAL RATES
OF INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL DIVISIONS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
26
<PAGE>
INCENTIVE LIFE
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $3,000 INITIAL FACE AMOUNT $200,000
MALE AGE 40
NON-SMOKER DEATH BENEFIT OPTION B
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT(2) POLICY ACCOUNT(2) CASH SURRENDER VALUE(2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED ------------------------------ ----------------------------- -----------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- -------- -------- -------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,150 $202,219 $202,364 $202,510 $ 2,219 $ 2,364 $ 2,510 $ 1,470 $ 1,615 $ 1,761
2 6,458 204,634 205,077 205,538 4,634 5,077 5,538 3,615 4,058 4,519
3 9,930 206,987 207,884 208,854 6,987 7,884 8,854 5,847 6,744 7,714
4 13,577 209,281 210,793 212,491 9,281 10,793 12,491 8,141 9,653 11,351
5 17,406 211,513 213,802 216,477 11,513 13,802 16,477 10,373 12,662 15,337
6 21,426 213,684 216,919 220,853 13,684 16,919 20,853 12,544 15,779 19,713
7 25,647 215,767 220,120 225,630 15,767 20,120 25,630 14,855 19,208 24,718
8 30,080 217,766 223,411 230,853 17,766 23,411 30,853 17,082 22,727 30,169
9 34,734 219,687 226,802 236,575 19,687 26,801 36,575 19,231 26,346 36,119
10 39,620 221,528 230,294 242,847 21,528 30,294 42,847 21,300 30,066 42,619
15 67,972 230,213 250,198 285,575 30,213 50,198 85,575 30,213 50,198 85,575
20 104,158 237,352 274,100 355,145 37,352 74,100 155,145 37,352 74,100 155,145
25 (age 65) $150,340 $241,716 $301,502 $467,469 $41,716 $101,502 $267,469 $41,716 $101,502 $267,469
<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 ACCUMULATED --------------------------- ---------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,150 -51.00% -46.16% -41.31% 6,640.62% 6,645.47% 6,650.32%
2 6,458 -29.37 -23.40 -17.47 677.41 678.31 679.23
3 9,930 -20.07 -13.75 -7.52 271.92 272.51 273.16
4 13,577 -14.93 -8.52 -2.21 156.99 157.52 158.12
5 17,406 -12.05 -5.60 0.74 106.25 106.78 107.39
6 21,426 -10.24 -3.75 2.60 78.47 79.02 79.67
7 25,647 -8.67 -2.23 4.08 61.22 61.79 62.51
8 30,080 -7.62 -1.21 5.07 49.58 50.19 50.97
9 34,734 -6.88 -0.49 5.77 41.25 41.90 42.75
10 39,620 -6.34 0.04 6.30 35.03 35.72 36.66
15 67,972 -5.17 1.35 7.68 18.70 19.61 21.05
20 104,158 -4.77 1.97 8.38 11.84 12.99 15.04
25 (age 65) $150,340 -4.88% 2.25% 8.78% 8.13% 9.54% 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. THE VALUES FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE VALUES
FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE
INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT DIVISIONS OF THE SEPARATE ACCOUNT
AND THE DIFFERENT RATES OF RETURN OF THE TRUST PORTFOLIOS, IF THE ACTUAL RATES
OF INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL DIVISIONS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
27
<PAGE>
INCENTIVE LIFE
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
PLANNED PREMIUM $3,000 INITIAL FACE AMOUNT $200,000
MALE AGE 40
NON-SMOKER DEATH BENEFIT OPTION B
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
DEATH BENEFIT(2) POLICY ACCOUNT(2) CASH SURRENDER VALUE(2)
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED ------------------------------ ----------------------------- -----------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
------ ----------- -------- -------- -------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,150 $202,219 $202,364 $202,510 $ 2,219 $ 2,364 $ 2,510 $ 1,470 $ 1,615 $ 1,761
2 6,458 204,348 204,782 205,234 4,348 4,782 5,234 3,329 3,763 4,215
3 9,930 206,396 207,257 208,189 6,396 7,257 8,189 5,256 6,117 7,049
4 13,577 208,358 209,785 211,394 8,358 9,785 11,394 7,218 8,645 10,254
5 17,406 210,233 212,367 214,873 10,233 12,367 14,873 9,093 11,227 13,733
6 21,426 212,014 214,998 218,646 12,014 14,998 18,646 10,874 13,858 17,506
7 25,647 213,700 217,677 222,744 13,700 17,677 22,744 12,788 16,765 21,832
8 30,080 215,286 220,401 227,194 15,286 20,401 27,194 14,602 19,717 26,510
9 34,734 216,768 223,166 232,028 16,768 23,166 32,028 16,312 22,710 31,572
10 39,620 218,139 225,965 237,277 18,139 25,965 37,277 17,911 25,737 37,049
15 67,972 222,944 240,071 270,986 22,944 40,071 70,986 22,944 40,071 70,986
20 104,158 223,042 252,752 321,068 23,042 52,752 121,068 23,042 52,752 121,068
25 (age 65) $150,340 $216,376 $260,970 $395,276 $16,376 $60,970 $195,276 $16,376 $60,970 $195,276
<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 ACCUMULATED --------------------------- ---------------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12%
------ ----------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 3,150 -51.00% -46.16% -41.31% 6,640.62% 6,645.47% 6,650.32%
2 6,458 -33.39 -27.35 -21.35 676.84 677.71 678.62
3 9,930 -24.58 -18.11 -11.73 271.52 272.10 272.72
4 13,577 -19.33 -12.70 -6.19 156.66 157.16 157.73
5 17,406 -16.24 -9.51 -2.93 105.95 106.45 107.02
6 21,426 -14.25 -7.43 -0.79 78.19 78.70 79.31
7 25,647 -12.43 -5.63 0.97 60.95 61.47 62.14
8 30,080 -11.18 -4.39 2.21 49.31 49.86 50.59
9 34,734 -10.29 -3.48 3.11 40.98 41.57 42.36
10 39,620 -9.65 -2.81 3.80 34.76 35.38 36.25
15 67,972 -9.01 -1.46 5.51 18.35 19.16 20.48
20 104,158 -10.36 -1.24 6.29 11.34 12.34 14.24
25 (age 65) $150,340 -15.27% -1.63% 6.74% 7.41% 8.62% 11.23%
<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. THE VALUES FOR A
POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF ACTUAL RATES OF INVESTMENT RETURN
APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12% OVER A PERIOD OF YEARS, BUT ALSO
FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. THE VALUES
FOR A POLICY WOULD ALSO BE DIFFERENT FROM THOSE SHOWN, DEPENDING ON THE
INVESTMENT ALLOCATIONS MADE TO THE INVESTMENT DIVISIONS OF THE SEPARATE ACCOUNT
AND THE DIFFERENT RATES OF RETURN OF THE TRUST PORTFOLIOS, IF THE ACTUAL RATES
OF INVESTMENT RETURN APPLICABLE TO THE POLICY AVERAGED 0%, 6% OR 12%, BUT VARIED
ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL DIVISIONS. NO REPRESENTATIONS CAN BE
MADE THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
28
<PAGE>
APPENDIX A
COMMUNICATING PERFORMANCE DATA
In reports or other communications to policyowners or in advertising material,
we may describe general economic and market conditions affecting the Separate
Account and the Trust and may compare the performance or ranking of the Separate
Account investment divisions and Trust portfolios with (1) that of other
insurance company separate accounts or mutual funds included in the rankings
prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or similar
investment services that monitor the performance of insurance company separate
accounts or mutual funds, (2) other appropriate indices of investment securities
and averages for peer universes of funds, or (3) data developed by us derived
from such indices or averages. Advertisements or other communications furnished
to present or prospective policyowners may also include evaluations of a
Separate Account Division or Trust portfolio by financial publications that are
nationally recognized such as Barron's, Morningstar's Variable Annuity/Life
Sourcebook, 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 Age, 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. This means
that the performance data reported by the Trust may appear relatively more
favorable than the performance data reported by the Separate Account divisions.
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 investment divisions of the Separate Account
or the Trust portfolios, may help to provide a perspective on the potential
returns of different asset classes over different periods of time. By combining
this information with your knowledge of your own financial needs, you may be
able to better determine how you wish to allocate your Incentive Life 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 Division 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
investment divisions that invest primarily in common stock. Any investment in
securities, whether equity or debt, involves varying degrees of potential risk,
in addition to offering varying degrees of potential reward.
The chart on page A-2 illustrates the average annual compound rates of return
over selected time periods between December 31, 1925 and December 31, 1993 for
common stocks, long-term government bonds, long-term corporate bonds,
intermediate-term government bonds and Treasury Bills. The Consumer Price Index
is shown as a measure of inflation for comparison purposes. The average annual
returns assume the reinvestment of dividends, capital gains and interest.
The information presented is an historical record of unmanaged groups of
securities and is neither an estimate nor a guarantee of future results. In
addition, investment management fees and expenses and charges associated with a
variable life insurance policy, are not reflected.
The rates of return illustrated do not represent returns of the Separate Account
or the Trust and do not constitute a representation that the performance of the
investment divisions of the Separate Account or the Trust will correspond to
rates of return such as those illustrated in the chart. For a comparative
illustration of performance results of The Hudson River Trust, see page A-1 of
the Trust's prospectus.
A-1
<PAGE>
AVERAGE ANNUAL RATES OF RETURN
<TABLE>
<CAPTION>
INTER-
LONG-TERM LONG-TERM MEDIATE- U.S. CONSUMER
COMMON GOVT. CORPORATE TERM GOVT. TREAS. PRICE
STOCKS BONDS BONDS BONDS BILLS INDEX
------ ----- ----- ----- ----- -----
FOR THE
FOLLOWING
PERIODS ENDING
12/31/93:
- --------
<S> <C> <C> <C> <C> <C> <C>
1 year .......... 9.99% 18.24% 13.19% 11.24% 2.90% 3.00%
3 years ......... 15.63 15.08 14.07 11.25 3.99 2.99
5 years ......... 14.50 13.84 13.00 11.35 5.61 3.94
10 years ......... 14.94 14.41 14.00 11.43 6.35 3.73
20 years ......... 12.76 10.10 10.16 9.85 7.49 5.92
30 years ......... 10.46 7.37 7.69 8.17 6.65 5.32
40 years ......... 11.80 6.01 6.43 6.80 5.55 4.32
50 years ......... 12.30 5.21 5.57 5.74 4.61 4.35
60 years ......... 11.42 5.11 5.54 5.43 3.86 4.10
Since 1926 ....... 10.33 5.02 5.59 5.25 3.69 3.13
Inflation Adjusted
Since 1926 ....... 6.98 1.83 2.38 2.06 0.54 N/A
- ----------
<FN>
*Source: Ibbotson, Roger G. and Rex A. Sinquefield, STOCKS, BONDS, BILLS, AND
INFLATION (SBBI), 1982, updated in STOCKS, BONDS, BILLS, AND INFLATION 1994
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 1969-1993, 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 1969-1993; for the
period 1926-1945, the Standard and Poor's monthly High-Grade Corporate
Composite yield data were used, assuming a 4 percent coupon and a twenty year
maturity.
Intermediate-term Government Bonds--Measured by a one-bond portfolio
constructed each year containing a bond with approximately a five year
maturity.
U.S. Treasury Bills--Measured by rolling over each month a one-bill portfolio
containing, at the beginning of each month, the bill having the shortest
maturity not less than one month.
Inflation--Measured by the Consumer Price Index for all Urban Consumers
(CPI-U), not seasonally adjusted.
</FN>
</TABLE>
A-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VM 485
HRT 102 (5/90)
- --------------------------------------------------------------------------------
---------------
BULK RATE
U.S. POSTAGE
PAID
Mailing Address: NEW YORK, N.Y.
2 Penn Plaza PERMIT NO. 8048
New York, New York 10121 ---------------
ADDRESS CORRECTION REQUESTED
RETURN POSTAGE GUARANTEED
<PAGE>
PART II
REPRESENTATION REGARDING REASONABLENESS OF
AGGREGATE POLICY FEES AND CHARGES
Equitable represents that the fees and charges deducted under the Policies
described in this Registration Statement, in the aggregate, are reasonable in
relation to the services rendered, the expenses to be incurred, and the risks
assumed by Equitable under the Policies, Equitable bases its representation on
its assessment of all of the facts and circumstances, including such relevant
factors as: the nature and extent of such services, expenses and risks, the need
for Equitable to earn a profit, the degree to which the Policies include
innovative features, and regulatory standards for the grant of exemptive relief
under the Investment Company Act of 1940 used prior to October 1996, including
the range of industry practice.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Reconciliation and Tie, previously filed with this Registration Statement
File No. 333-17669 on December 11, 1996.
The Supplement dated May 1, 1997 consisting of 80 pages.
The Prospectus of Equitable Variable dated May 1, 1994 consisting of 65 pages.
Representation regarding reasonableness of aggregate policy fees and charges.
Undertaking to file reports, previously filed with this Registration Statement
File No. 333-17669 on December 11, 1996.
Undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933,
previously filed with this Registration Statement File No. 333-17669 on
December 11,1996.
The signatures.
Written Consents of the following persons:
Mary P. Breen, Vice President and Associate General Counsel (see
Exhibit 2(a))
Independent Public Accountants (see Exhibit 6(a))
<TABLE>
<CAPTION>
The following exhibits: Exhibits required by Article IX, paragraph A of Form
N-8B-2:
<S> <C> <C>
1-A(1)(a)(i) Certified resolutions re Authority to Market Variable Life Insurance
and Establish Separate Accounts, previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(2) Inapplicable.
1-A(3)(a) See Exhibit 1-A(8).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
1-A(3)(b) Broker-Dealer and General Agent Sales Agreement, previously
filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(3)(c) See Exhibit 1-A(8)(i).
1-A(4) Inapplicable.
1-A(5)(a)(i) Flexible Premium Life Insurance Policy (85-300),
previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(a)(ii) Flexible Premium Life Insurance Policy (88-300),
previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(b) Name Change Endorsement (S97-1),
previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(c) Accidental Death Benefit Rider (R85-401),
including state variation, previously filed
with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(d) Term Insurance Rider (R85-403), including
state variation, previously filed with
this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(e) Children's Term Insurance Rider (R85-404),
including state variations, previously filed
with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(f) Exchange Privilege Rider (R85-405), including
state variations, previously filed with
this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(g) Limitation on Amount of Insurance Rider (85-406),
previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(h) Disability Rider - Waiver of Monthly Deductions,
including state variations (R85-408), previously filed with
this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(i) Universal Life Exchange Program Riders,
previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(j) Pro Rata Surrender Charge Endorsement (S.87-289),
previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(k) Premium Tax Endorsement (S.88-294), previously filed
with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(l) Monthly Cost of Insurance Endorsement
(S.88-295, Non-Smoker, Standard Risk),
previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
1-A(5)(m) Asset Allocation Endorsement (S.89-301),
previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(n) Guaranteed Interest Division Transfer Endorsement (S.89-303)
and Guaranteed Interest Division Transfer
Rider (R.89-303) for use with Policy No. 85-300 (Investment Options Rider),
previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(5)(o) Accelerated Death Benefit Rider, previously filed with this Registration Statement File No.
333-17669 on December 11, 1996
1-A(5)(p) Free Look Rider, previously filed with this Registration Statement File No.
333-17669 on December 11, 1996
1-A(6)(a) Declaration and Charter of Equitable, as amended January 1, 1997.
1-A(6)(b) By-Laws of Equitable, as amended November 21, 1996.
1-A(7) Inapplicable.
1-A(8) Distribution and Servicing Agreement among EQ
Financial Consultants (formerly known as Equico
Securities, Inc.), Equitable and Equitable
Variable dated as of May 1,1994, previously filed
with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(8)(i) Schedule of Commissions, previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(9)(a) Agreement and Plan of Merger of Equitable
Variable with and into Equitable dated
September 19, 1996, previously filed with
this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(9)(b) Form of Participation Agreement among EQ Advisors Trust, Equitable,
Equitable Distributors, Inc. and EQ Financial Consultants, Inc.,
incorporated by reference to the this Registration Statement of EQ Advisors
Trust on Form N-1A (File Nos. 333-17217 and 811-07953).
Other Exhibits:
1-A(10)(a) Application EV4-200T, previously filed with this Registration Statement File No.
333-17669 on December 11, 1996.
1-A(10)(b) The Universal Life Exchange Program Application, previously filed with this Registration
Statement File No. 333-17669 on December 11, 1996.
2(a)(i) Opinion and Consent of Mary P. Breen, Vice President
and Associate General Counsel of Equitable, previously filed with this Registration
Statement File No. 333-17669 on December 11, 1996.
2(a)(ii) Opinion and Consent of Mary P. Breen, Vice President and Associate General
Counsel of Equitable.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
2(b)(i) Opinion and Consent, dated April 24, 1995, of
Barbara Fraser, F.S.A., M.A.A.A., Vice
President of Equitable, previously filed with
this Registration Statement File No.
333-17669 on December 11, 1996.
2(b)(ii) Opinion and Consent, dated April 26, 1994, of
Barbara Fraser, F.S.A., M.A.A.A., Vice
President of Equitable, previously filed with
this Registration Statement File No.
333-17669 on December 11, 1996.
2(b)(iii) Consent dated December 9, 1996 of Barbara Fraser, F.S.A., M.A.A.A.,
Vice President of Equitable, relating to
Exhibits 2(b)(i) and 2(b)(ii), previously filed
with this Registration Statement File No. 333-17669
on December 11, 1996.
3 Inapplicable.
4 Inapplicable.
5 Financial Data Schedule (See Exhibit 27 below).
6(a) Consent of Independent Public Accountant.
7(a) Powers of Attorney, previously filed
with this Registration Statement File No. 333-17669 on December 11, 1996.
7(b) Power-of-Attorney for Mary R. (Nina) Henderson.
8 Description of Equitable's Issuance, Transfer and Redemption Procedures for Policies
pursuant to Rule 6e-3(T)(b)(12)(iii) under the Investment Company Act of 1940,
previously filed with this Registration Statement File No. 333-17669 on December 11, 1996.
27 Financial Data Schedule.
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all the requirements for effectiveness of this amendment
to the this Registration statement pursuant to paragraph (b) of Rule 485 under
the Securities Act of 1933 and it has duly caused this amendment to the this
Registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
City and State of New York on the 30th day of April, 1997.
SEPARATE ACCOUNT FP OF THE EQUITABLE
LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By: THE EQUITABLE LIFE
ASSURANCE SOCIETY OF
THE UNITED STATES,
DEPOSITOR
By: /s/ Samuel B. Shlesinger
------------------------
(Samuel B. Shlesinger)
Senior Vice President
Attest: /s/Linda Galasso
-----------------
(Linda Galasso)
Assistant Secretary
April 30, 1997
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all the requirements for effectiveness of this amendment
to the this Registration statement pursuant to paragraph (b) of Rule 485 under
the Securities Act of 1933 and it has duly caused this amendment to the this
Registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City and State of New York on the 30th day of
April, 1997.
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: /s/ Samuel B. Shlesinger
------------------------
(Samuel B. Shlesinger)
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the this Registration statement has been signed by the following
persons in the capacities and on the date indicated:
PRINCIPAL EXECUTIVE OFFICERS:
*Joseph J. Melone Chairman of the Board and Chief Executive
Officer
*James M. Benson President
* William T. McCaffrey Senior Executive Vice President
and Chief Operating Officer
*Jerry M. de St. Paer Executive Vice President
PRINCIPAL FINANCIAL OFFICER:
*Stanley B. Tulin. Senior Executive Vice
President and Chief Financial Officer
PRINCIPAL ACCOUNTING OFFICER:
/s/Alvin H. Fenichel Senior Vice President and Controller
- --------------------
Alvin H. Fenichel
April 30, 1997
*DIRECTORS:
Claude Bebear Jean-Rene Foutou Winthrop Knowlton
James M. Benson Norman C. Francis Arthur L. Liman
Christopher J. Brocksom Donald J. Greene George T. Lowy
Francoise Colloc'h John T. Hartley William T. McCaffrey
Henri de Castries John H.F. Haskell, Jr. Joseph J. Melone
Joseph L. Dionne Mary R. (Nina) Henderson Didier Pineau-Valencienne
William T. Esrey W. Edwin Jarmain George J. Sella, Jr.
G.Donald Johnston, Jr. Dave H. Williams
*By: /s/ Samuel B. Shlesinger
------------------------
(Samuel B. Shlesinger)
Attorney-in-Fact
April 30,1997
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. TAG VALUE
- ----------- ---------
<S> <C> <C>
1-A(6)(a) Declaration and Charter of Equitable, as amended January 1, 1997. EX-99.1A6a.CHARTER
1-A(6)(b) By-Laws of Equitable, as amended November 21, 1996. EX-99.1A6b BYLAWS
2(a)(ii) Opinion and Consent of Mary P. Breen, Vice President and Associate EX-99.2aii CONSENT
General Counsel of Equitable.
6(a) Consent of Independent Public Accountant. EX-99.6a CONSENT
7(b) Powers of Attorney for Mary R. (Nina) Henderson. EX-99.7b POW ATTY
27 Financial Data Schedule. EX-27
</TABLE>
II-7
RESTATED CHARTER
OF
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
ARTICLE I
The name of the corporation shall continue to be The Equitable Life
Assurance Society of the United States.
ARTICLE II
The principal office of the corporation shall be located in the City of
New York, County of New York, State of New York.
ARTICLE III
(a) The business to be transacted by the corporation shall be the kinds
of insurance business specified in Paragraphs 1, 2 and 3 of Subsection (a) of
Section 1113 of the Insurance Law of the State of New York, as follows:
(1) "Life insurance": every insurance upon the lives of human
beings, and every insurance appertaining thereto, including the
granting of endowment benefits, additional benefits in the event of
death by accident, additional benefits to safeguard the contract from
lapse, accelerated payments of part or all of the death benefit or a
special surrender value upon diagnosis (A) of terminal illness defined
as a life expectancy of twelve months or less, or (B) of a medical
condition requiring extraordinary medical care or treatment regardless
of life expectancy, or provide a special surrender value, upon total
and permanent disability of the insured, and optional modes of
settlement of proceeds. "Life insurance" also includes additional
benefits to safeguard the contract against lapse in the event of
unemployment of the insured. Amounts paid the insurer for life
insurance and proceeds applied under optional modes of settlement or
under dividend options may be allocated by the insurer
<PAGE>
to one or more separate accounts pursuant to section four thousand two
hundred forty of the Insurance Law of the State of New York;
(2) "Annuities": all agreements to make periodical payments for a
period certain or where the making or continuance of all or some of a
series of such payments, or the amount of any such payment, depends
upon the continuance of human life, except payments made under the
authority of paragraph (1) above. Amounts paid the insurer to provide
annuities and proceeds applied under optional modes of settlement or
under dividend options may be allocated by the insurer to one or more
separate accounts pursuant to section four thousand two hundred forty
of the Insurance Law of the State of New York;
(3) "Accident and health insurance": (i) insurance against death
or personal injury by accident or by any specified kind or kinds of
accident and insurance against sickness, ailment or bodily injury,
including insurance providing disability benefits pursuant to article
nine of the workers' compensation law, except as specified in item (ii)
hereof; and (ii) non-cancellable disability insurance, meaning
insurance against disability resulting from sickness, ailment or bodily
injury (but excluding insurance solely against accidental injury) under
any contract which does not give the insurer the option to cancel or
otherwise terminate the contract at or after one year from its
effective date or renewal date;
and any amendments to such paragraphs or provisions in substitution therefor
which may be hereafter adopted; such other kind or kinds of business now or
hereafter authorized by the laws of the State of New York to stock life
insurance companies; and such other kind or kinds of business to the extent
necessarily or properly incidental to the kind or kinds of insurance business
which the corporation is authorized to do.
(b) The corporation shall also have all other rights, powers, and
privileges now or hereafter authorized or granted by the Insurance Law of the
State of New York or any other law or laws of the State of New York to stock
life insurance companies having power to do the kind or kinds of business
hereinabove referred to and any and all other rights, powers, and privileges of
a corporation now or hereafter granted by the laws of the State of New York and
not prohibited to such stock life insurance companies.
- 2 -
<PAGE>
ARTICLE IV
The business of the corporation shall be managed under the direction of
the Board of Directors.
ARTICLE V
(a) The Board of Directors shall consist of not less than 13 (except
for vacancies temporarily unfilled) nor more than 36 Directors, as may be
determined from time to time by a vote of a majority of the entire Board of
Directors. No decrease in the number of Directors shall shorten the term of any
incumbent Director.
(b) The Board of Directors shall have the power to adopt from time to
time such By-Laws, rules and regulations for the governance of the officers,
employees and agents and for the management of the business and affairs of the
corporation, not inconsistent with this Charter and the laws of the State of New
York, as may be expedient, and to amend or repeal such by-laws, rules and
regulations, except as provided in the By-Laws.
(c) Any or all of the Directors may be removed at any time, either for
or without cause, by vote of the shareholders.
(d) No Director shall be personally liable to the corporation or any of
its shareholders for damages for any breach of duty as a Director; provided,
however, that the foregoing provision shall not eliminate or limit (i) the
liability of a Director if a judgment or other final adjudication adverse to him
or her establishes that his or her acts or omissions were in bad faith or
involved intentional misconduct or that he or she personally gained in fact a
financial profit or other advantage to which he or she was not legally entitled,
or were acts or omissions which (a) he or she knew or reasonably should have
known violated the Insurance Law of the State of New York or (b) violated a
specific standard of care imposed on Directors directly, and not by reference,
by a provision of the Insurance Law of the State of New York (or any regulations
promulgated thereunder) or (c) constituted a knowing violation of any other law;
or (ii) the liability of a Director for any act or omission prior to September
21, 1989.
- 3 -
<PAGE>
ARTICLE VI
(a) The Directors of the corporation shall be elected at each annual
meeting of shareholders of the corporation in the manner prescribed by law. The
annual meeting of shareholders shall be held at such place, within or without
the State of New York, and at such time as may be fixed by or under the By-Laws.
At each annual meeting of shareholders, directors shall be elected to hold
office for a term expiring at the next annual meeting of shareholders.
(b) Newly created directorships resulting from an increase in the
number of Directors and vacancies occurring in the Board of Directors shall be
filled by vote of the shareholders.
(c) Each Director shall be at least twenty-one years of age, and at all
times a majority of the Directors shall be citizens and residents of the United
States, and not less than three of the Directors shall be residents of the State
of New York.
(d) The Board of Directors shall elect such officers as are provided
for in the By-Laws at the first meeting of the Board of Directors following each
annual meeting of the shareholders. In the event of the failure to elect
officers at such meeting, officers may be elected at any regular or special
meeting of the Board of Directors. A vacancy in any office may be filled by the
Board of Directors at any regular or special meeting.
ARTICLE VII
The duration of the corporate existence of the corporation shall be
perpetual.
ARTICLE VIII
The amount of the capital of the corporation shall be $2,500,000, and
shall consist of 2,000,000 Common Shares, par value $1.25 per share.
44859-1.DOC
- 4 -
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF
THE UNITED STATES
BY-LAWS
-------
As Amended November 21, 1996
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF
THE UNITED STATES
BY-LAWS
-------
Table of Contents
ARTICLE I SHAREHOLDERS................................................ 1
Section 1.1 Annual Meetings............................................ 1
Section 1.2 Notice of Meetings; Waiver................................. 1
Section 1.3 Organization; Procedure.................................... 2
Section 1.4 Action Without a Meeting................................... 2
ARTICLE II BOARD OF DIRECTORS.......................................... 2
Section 2.1 Regular Meetings........................................... 2
Section 2.2 Special Meetings........................................... 2
Section 2.3 Independent Directors; Quorum.............................. 2
Section 2.4 Notice of Meetings......................................... 3
Section 2.5 Newly Created Directorships;
Vacancies................................................ 3
Section 2.6 Presiding Officer.......................................... 3
Section 2.7 Telephone Participation in
Meetings; Action by Consent
Without Meeting.......................................... 3
ARTICLE III COMMITTEES.................................................. 4
Section 3.1 Committees................................................. 4
Section 3.2 Authority of Committees.................................... 5
Section 3.3 Quorum and Manner of Acting................................ 5
Section 3.4 Removal of Members......................................... 6
Section 3.5 Vacancies.................................................. 6
Section 3.6 Subcommittees.............................................. 6
Section 3.7 Alternate Members of Committees............................ 6
Section 3.8 Attendance of Other Directors.............................. 6
<PAGE>
ARTICLE IV OFFICERS.................................................... 6
Section 4.1 Chairman of the Board...................................... 6
Section 4.2 Vice-Chairman of the Board................................. 7
Section 4.3 President.................................................. 7
Section 4.4 Chief Executive Officer.................................... 7
Section 4.5 Secretary.................................................. 7
Section 4.6 Other Officers............................................. 8
ARTICLE V CAPITAL STOCK............................................... 8
Section 5.1 Transfers of Stock;
Registered Shareholders.................................. 8
Section 5.2 Transfer Agent and Registrar............................... 9
ARTICLE VI EXECUTION OF INSTRUMENTS..................................... 9
Section 6.1 Execution of Instruments................................... 9
Section 6.2 Facsimile Signatures of
Former Officers.......................................... 10
Section 6.3 Meaning of Term "Instruments".............................. 10
ARTICLE VII GENERAL..................................................... 10
Section 7.1 Reports of Committees...................................... 10
Section 7.2 Independent Certified
Public Accountants....................................... 10
Section 7.3 Directors' Fees............................................ 10
Section 7.4 Indemnification of Directors,
Officers and Employees................................... 10
Section 7.5 Waiver of Notice........................................... 11
Section 7.6 Company.................................................... 11
ARTICLE VIII AMENDMENT OF BY-LAWS....................................... 11
Section 8.1 Amendment of By-Laws....................................... 11
Section 8.2 Notice of Amendment........................................ 12
<PAGE>
BY-LAWS
OF
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
ARTICLE I
---------
SHAREHOLDERS
------------
Section 1.1. Annual Meetings. The annual meeting of the shareholders of
the Company for the election of Directors and for the transaction of such other
business as properly may come before such meeting shall be held at the principal
office of the Company on the third Wednesday in the month of May at 3:00 P.M.,
local time, or at such other place, within or without the State of New York, or
on such other earlier or later date in April or May or at such other hour as may
be fixed from time to time by resolution of the Board of Directors and set forth
in the notice or waiver of notice of the meeting. [Business Corporation Law
Secs. 602(a), (b)]*
Section 1.2. Notice of Meetings; Waiver. The Secretary or any Assistant
Secretary shall cause written notice of the place, date and hour of each meeting
of the shareholders, and, in the case of a special meeting, the purpose or
purposes for which such meeting is called and by or at whose direction such
notice is being issued, to be given, personally or by first class mail, not
fewer than ten nor more than fifty days before the date of the meeting to each
shareholder of record entitled to vote at such meeting.
No notice of any meeting of shareholders need be given to any
shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting or who attends the meeting, in person or by
proxy, without protesting prior to its conclusion the lack of notice of such
meeting. [Business Corporation Law Secs. 605, 606]
- --------
* Citations are to the Business Corporation Law and Insurance Law of the State
of New York, as in effect on [date of adoption], and are inserted for reference
only, and do not constitute a part of the By-Laws.
<PAGE>
Section 1.3. Organization; Procedure. At every meeting of shareholders
the presiding officer shall be the Chairman of the Board or, in the event of his
or her absence or disability, the President or, in his or her absence, any
officer of the Company designated by the shareholders. The order of business and
all other matters of procedure at every meeting of shareholders may be
determined by such presiding officer. The Secretary, or in the event of his or
her absence or disability, an Assistant Secretary or, in his or her absence, an
appointee of the presiding officer, shall act as Secretary of the meeting.
Section 1.4. Action Without a Meeting. Any action required or permitted
to be taken by shareholders may be taken without a meeting on written consent
signed by the holders of all the outstanding shares entitled to vote on such
action. [Business Corporation Law Sec. 615]
ARTICLE II
----------
BOARD OF DIRECTORS
------------------
Section 2.1. Regular Meetings. Regular meetings of the Board of
Directors shall be held at the principal office of the Company on the third
Thursday of each month, except January and August, unless a change in place or
date is ordered by the Board of Directors. The first regular meeting of the
Board of Directors following the annual meeting of the shareholders of the
Company is designated as the Annual Meeting. [Business Corporation Law Sec. 710]
Section 2.2. Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board, the President,
or two directors. [Business Corporation Law Sec. 710]
Section 2.3. Independent Directors; Quorum. Not less than one-third of
the Board of Directors shall be persons who are not officers or employees of the
Company or of any entity controlling, controlled by, or under common control
with the Company and who are not beneficial owners of a controlling interest in
the voting stock of the Company or of any such entity.
A majority of the entire Board of Directors, including at least one
Director who is not an officer or employee of the Company or of any entity
controlling, controlled by, or under common control with the Company and who is
not a beneficial owner of a controlling interest in the voting stock of the
Company
<PAGE>
or of any such entity, shall constitute a quorum for the transaction of business
at any regular or special meeting of the Board of Directors, except as otherwise
prescribed by these By-Laws. Except as otherwise prescribed by law, the Charter
of the Company, or these By-Laws, the vote of a majority of the Directors
present at the time of the vote, if a quorum is present at such time, shall be
the act of the Board of Directors. A majority of the Directors present, whether
or not a quorum is present, may adjourn any meeting from time to time and from
place to place. As used in these By-Laws "entire Board of Directors" means the
total number of directors which the Company would have if there were no
vacancies. [Business Corporation Law Secs. 707, 708; Insurance Law Sec. 1202]
Section 2.4. Notice of Meetings. Notice of a regular meeting of the
Board of Directors need not be given. Notice of a change in the time or place of
a regular meeting of the Board of Directors shall be given to each Director at
least five days in advance thereof in writing and by telephone or telecopy.
Notice of each special meeting of the Board of Directors shall be given to each
Director at least 24 hours prior to the special meeting, personally or by
telephone or telegram or telecopy, and shall state in general terms the purpose
or purposes of the meeting. Any such notice for a regular or special meeting not
specifically required by this Section 2.4 to be given by telephone or telecopy
shall be deemed given to a director when sent by mail, telegram, cablegram or
radiogram addressed to such director at his or her address furnished to the
Secretary. Notice of an adjourned regular or special meeting of the Board of
Directors shall be given if and as determined by a majority of the directors
present at the time of the adjournment, whether or not a quorum is present.
[Business Corporation Law Sec. 711]
Section 2.5. Newly Created Directorships; Vacancies. Any newly created
directorships resulting from an increase in the number of Directors and
vacancies occurring in the Board of Directors for any reasons (including
vacancies resulting from the removal of a Director without cause) shall be
filled by the shareholders of the Company. [Business Corporation Law Sec. 705;
Insurance Law Sec. 4211]
Section 2.6. Presiding Officer. In the absence or inability to act of
the Chairman of the Board at any regular or special meeting of the Board of
Directors, any Vice-Chairman of the Board, or the President, as designated by
the chief executive officer, shall preside at such meeting. In the absence or
inability to act of all of such officers, the Board of Directors shall select
from among their number present a presiding officer.
Section 2.7. Telephone Participation in Meetings; Action by
Consent Without Meeting. Any Director may participate in a meeting of the Board
<PAGE>
or any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and such participation shall
constitute presence in person at such meeting; provided that one meeting of the
Board each year shall be held without the use of such conference telephone or
similar communication equipment. When time is of the essence, but not in lieu of
a regularly scheduled meeting of the Board of Directors, any action required or
permitted to be taken by the Board or any committee thereof may be taken without
a meeting if all members of the Board or such committee, as the case may be,
consent in writing to the adoption of a resolution authorizing the action and
such written consents and resolution are filed with the minutes of the Board or
such committee, as the case may be. [Business Corporation Law Sec. 708]
ARTICLE III
-----------
COMMITTEES
----------
Section 3.1. Committees. (a) The Board of Directors, by resolution
adopted by a majority of the entire Board of Directors, may establish from among
its members an Executive Committee of the Board composed of three or more
Directors. Not less than one-third of the members of such committee shall be
persons who are not officers or employees of the Company or of any entity
controlling, controlled by, or under common control with the Company and who are
not beneficial owners of a controlling interest in the voting stock of the
Company or of any such entity.
(b) The Board of Directors, by resolution adopted by a majority of the
entire Board of Directors, shall establish from among its members one or more
committees with authority to discharge the responsibilities enumerated in this
subsection (b). Each such committee shall be composed of three or more Directors
and shall be comprised solely of Directors who are not officers or employees of
the Company or of any entity controlling, controlled by, or under common control
with the Company and who are not beneficial owners of a controlling interest in
the voting stock of the Company or of any such entity. Such committee or
committees shall have responsibility for:
(i) Recommending to the Board of Directors candidates for nomination
for election by the shareholders to the Board of Directors;
<PAGE>
(ii) Evaluating the performance of officers deemed by any such
committee to be principal officers of the Company and recommending their
selection and compensation;
(iii) Recommending the selection of independent certified public
accountants;
(iv) Reviewing the scope and results of the independent audit and of
any internal audit; and
(v) Reviewing the Company's financial condition.
(c) The Board of Directors, by resolution adopted from time to time by
a majority of the entire Board of Directors, may establish from among its
members one or more additional committees of the Board, each composed of five or
more Directors. Not less than one-third of the members of each such committee
shall be persons who are not officers or employees of the Company or of any
entity controlling, controlled by, or under common control with the Company and
who are not beneficial owners of a controlling interest in the voting stock of
the Company or of any such entity. [Business Corporation Law Sec. 712; Insurance
Law Sec. 1202]
Section 3.2. Authority of Committees. Each committee shall have all the
authority of the Board of Directors, to the extent permitted by law and provided
in the resolution creating such committee, provided, however, that no committee
shall have authority as to the following matters:
(a) the submission to shareholders of any action as to which
shareholder approval is required by law;
(b) the filling of vacancies in the Board of Directors or in any
committee thereof;
(c) the fixing of compensation of the Directors for serving on the
Board of Directors or any committee thereof;
(d) the amendment or repeal of the By-Laws, or the adoption of new
By-Laws; or
(e) the amendment or repeal of any resolution of the Board of Directors
unless such resolution of the Board of Directors by its terms provides that
it may be so amended or repealed.
<PAGE>
Section 3.3. Quorum and Manner of Acting. A majority of the total
membership that a committee would have if there were no vacancies (including at
least one Director who is not an officer or employee of the Company or of any
entity controlling, controlled by, or under common control with the Company and
who is not a beneficial owner of a controlling interest in the voting stock of
the Company or of any such entity) shall constitute a quorum for the transaction
of business. The vote of a majority of the members present at the time of the
vote, if a quorum is present at such time, shall be the act of such committee.
Except as otherwise prescribed by these By-Laws or by the Board of Directors,
each committee may elect a chairman from among its members, fix the times and
dates of its meetings, and adopt other rules of procedure.
Section 3.4. Removal of Members. Any member (and any alternate member)
of a committee may be removed by vote of a majority of the entire Board of
Directors.
Section 3.5. Vacancies. Any vacancy occurring in any committee for any
reason may be filled by vote of a majority of the entire Board of Directors.
Section 3.6. Subcommittees. Any committee may appoint one or more
subcommittees from its members. Any such subcommittee may be charged with the
duty of considering and reporting to the appointing committee on any matter
within the responsibility of the committee appointing such subcommittee but
cannot act in place of the appointing committee.
Section 3.7. Alternate Members of Committees. The Board of Directors
may designate, by resolution adopted by a majority of the entire Board of
Directors, one or more directors as alternate members of any committee who may
replace any absent member or members at a meeting of such committee. [Business
Corporation Law Sec. 712]
Section 3.8. Attendance of Other Directors. Except as otherwise
prescribed by the Board of Directors, members of the Board of Directors may
attend any meeting of any committee.
ARTICLE IV
----------
OFFICERS
--------
Section 4.1. Chairman of the Board. The Board of Directors may at a
regular or special meeting elect from among their number a Chairman of the
<PAGE>
Board who shall hold office, at the pleasure of the Board of Directors, until
the next Annual Meeting.
The Chairman of the Board shall preside at all meetings of the Board of
Directors and also shall exercise such powers and perform such duties as may be
delegated or assigned to or required of him or her by these By-Laws or by or
pursuant to authorization of the Board of Directors.
Section 4.2. Vice-Chairman of the Board. The Board of Directors may at
a regular or special meeting elect from among their number one or more
Vice-Chairmen of the Board who shall hold office, at the pleasure of the Board
of Directors, until the next Annual Meeting.
The Vice-Chairmen of the Board shall exercise such powers and perform
such duties as may be delegated or assigned to or required of them by these
By-Laws or by or pursuant to authorization of the Board of Directors or by the
Chairman of the Board.
Section 4.3. President. The Board of Directors shall at a regular or
special meeting elect from among their number a President who shall hold office,
at the pleasure of the Board of Directors, until the next Annual Meeting and
until the election of his or her successor.
The President shall exercise such powers and perform such duties as may
be delegated or assigned to or required of him or her by these By-Laws or by or
pursuant to authorization of the Board of Directors or (if the President is not
the chief executive officer) by the chief executive officer. The President and
Secretary may not be the same person.
Section 4.4. Chief Executive Officer. The Chairman of the Board or the
President shall be the chief executive officer of the Company as the Board of
Directors from time to time shall determine, and the Board of Directors from
time to time may determine who shall act as chief executive officer in the
absence or inability to act of the then incumbent.
Subject to the control of the Board of Directors, and to the extent not
otherwise prescribed by these By-Laws, the chief executive officer shall have
plenary power over all departments, officers, employees, and agents of the
Company, and shall be responsible for the general management and direction of
all the business and affairs of the Company.
<PAGE>
Section 4.5. Secretary. The Board of Directors shall at a regular or
special meeting elect a Secretary who shall hold office, at the pleasure of the
Board of Directors, until the next Annual Meeting and until the election of his
or her successor.
The Secretary shall issue notices of the meetings of the shareholders
and the Board of Directors and its committees, shall keep the minutes of the
meetings of the shareholders and the Board of Directors and its committees and
shall have custody of the Company's corporate seal and records. The Secretary
shall exercise such powers and perform such other duties as relate to the office
of the Secretary, and also such powers and duties as may be delegated or
assigned to or required of him or her by or pursuant to authorization of the
Board of Directors or by the Chairman of the Board or (if the Chairman of the
Board is not the chief executive officer) the chief executive officer.
Section 4.6. Other Officers. The Board of Directors may elect such
other officers as may be deemed necessary for the conduct of the business of the
Company. Each such officer elected by the Board of Directors shall exercise such
powers and perform such duties as may be delegated or assigned to or required of
him or her by the Board of Directors or the chief executive officer, and shall
hold office until the next Annual Meeting, but at any time may be suspended by
the chief executive officer or by the Board of Directors, or removed by the
Board of Directors. [Business Corporation Law Secs. 715, 716]
ARTICLE V
---------
CAPITAL STOCK
-------------
Section 5.1. Transfers of Stock; Registered Shareholders. (a) Shares of
stock of the Company shall be transferable only upon the books of the Company
kept for such purpose upon surrender to the Company or its transfer agent or
agents of a certificate (unless such shares shall be uncertificated shares)
representing shares, duly endorsed or accompanied by appropriate evidence of
succession, assignment or authority to transfer. Within a reasonable time after
the transfer of uncertificated shares, the Company shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates.
(b) Except as otherwise prescribed by law, the Board of Directors may
make such rules, regulations and conditions as it may deem expedient concerning
the subscription for, issue, transfer and registration of, shares of stock.
<PAGE>
Except as otherwise prescribed by law, the Company, prior to due presentment for
registration of transfer, may treat the registered owner of shares as the person
exclusively entitled to vote, to receive notifications, and otherwise to
exercise all the rights and powers of an owner. [Business Corporation Law Sec.
508(d), (f); Insurance Law Sec. 4203]
Section 5.2 Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents and one or more registrars, and may require
all certificates representing shares to bear the signature of any such transfer
agents or registrars. The same person may act as transfer agent and registrar
for the Company.
ARTICLE VI
----------
EXECUTION OF INSTRUMENTS
------------------------
Section 6.1. Execution of Instruments. (a) Any one of the following,
namely, the Chairman of the Board, any Vice-Chairman of the Board, the
President, any Vice-President (including a Deputy or Assistant Vice-President or
any other Vice-President designated by a number or a word or words added before
or after the title Vice-President to indicate his or her rank or
responsibilities), the Secretary, or the Treasurer, or any officer, employee or
agent designated by or pursuant to authorization of the Board of Directors or
any committee created under these By-Laws, shall have power in the ordinary
course of business to enter into contracts or execute instruments on behalf of
the Company (other than checks, drafts and other orders drawn on funds of the
Company deposited in its name in banks) and to affix the corporate seal. If any
such instrument is to be executed on behalf of the Company by more than one
person, any two or more of the foregoing or any one or more of the foregoing
with an Assistant Secretary or an Assistant Treasurer shall have power to
execute such instrument and affix the corporate seal.
(b) The signature of any officer may be in facsimile on any such
instrument if it shall also bear the actual signature, or personally inscribed
initials, of an officer, employee or agent empowered by or pursuant to the first
sentence of this Section to execute such instrument, provided that the Board of
Directors or a committee thereof may authorize the issuance of insurance
contracts and annuity contracts on behalf of the Company bearing the facsimile
signature of an officer without the actual signature or personally inscribed
initials of any person.
<PAGE>
(c) All checks, drafts and other orders drawn on funds of the Company
deposited in its name in banks shall be signed only pursuant to authorization of
and in accordance with rules prescribed from time to time by the Board of
Directors or a committee thereof, which rules may permit the use of facsimile
signatures.
Section 6.2. Facsimile Signatures of Former Officers. If any officer
whose facsimile signature has been placed upon any instrument shall have ceased
to be such officer before such instrument is issued, it may be issued with the
same effect as if he or she had been such officer at the time of its issue.
Section 6.3. Meaning of Term "Instruments". As used in this Article VI,
the term "instruments" includes, but is not limited to, contracts and
agreements, checks, drafts and other orders for the payment of money, transfers
of bonds, stocks, notes and other securities, and powers of attorney, deeds,
leases, releases of mortgages, satisfactions and all other instruments entitled
to be recorded in any jurisdiction.
ARTICLE VII
-----------
GENERAL
-------
Section 7.1. Reports of Committees. Reports of any committee charged
with responsibility for supervising or making investments shall be submitted at
the next meeting of the Board of Directors. Reports of other committees of the
Board of Directors shall be submitted at a regular meeting of the Board of
Directors as soon as practicable, unless otherwise directed by the Board of
Directors.
Section 7.2 Independent Certified Public Accountants. The books and
accounts of the Company shall be audited throughout each year by such
independent certified public accountants as shall be selected by the Board of
Directors.
Section 7.3. Directors' Fees. The Directors shall be paid such fees for
their services in any capacity as may have been authorized by the Board of
Directors. No Director who is a salaried officer of the Company shall receive
any fees for serving as a Director of the Company. [Business Corporation Law
Sec. 713(e)]
<PAGE>
Section 7.4. Indemnification of Directors, Officers and Employees. (a)
To the extent permitted by the law of the State of New York and subject to all
applicable requirements thereof:
(i) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he or she,
or his or her testator or intestate, is or was a director, officer or
employee of the Company shall be indemnified by the Company;
(ii) any person made or threatened to be made a party to any action or
proceeding, whether civil or criminal, by reason of the fact that he or she,
or his or her testator or intestate serves or served any other organization
in any capacity at the request of the Company may be indemnified by the
Company; and
(iii) the related expenses of any such person in any of said categories
may be advanced by the Company.
(b) To the extent permitted by the law of the State of New York, the
Company may provide for further indemnification or advancement of expenses by
resolution of shareholders of the Company or the Board of Directors, by
amendment of these By-Laws, or by agreement. [Business Corporation Law Secs.
721-726; Insurance Law Sec. 1216]
Section 7.5. Waiver of Notice. Notice of any meeting of the Board of
Directors or any committee thereof shall not be required to be given to any
Director who submits a signed waiver of notice whether before or after the
meeting, or who attends the meeting without protesting, prior to or at its
commencement, the lack of notice to him. [Business Corporation Law Sec. 711(c)]
Section 7.6. Company. The term "Company" in these By-Laws means The
Equitable Life Assurance Society of the United States.
ARTICLE VIII
------------
AMENDMENT OF BY-LAWS
--------------------
Section 8.1. Amendment of By-Laws. Subject to Section 1210 of the
Insurance Law of the State of New York, all By-Laws of the Corporation,
<PAGE>
whether adopted by the Board of Directors or the shareholders, shall be subject
to amendment, alteration or repeal, and new By-Laws may be made, either
(a) by the shareholders at any annual or special meeting of
shareholders the notice of which shall have specified or summarized the
proposed amendment, alteration, repeal or new By-Laws, or
(b) by resolution adopted by the Board of Directors at any regular or
special meeting, the notice or waiver of notice of which, unless none is
required hereunder, shall have specified or summarized the proposed
amendment, alteration, repeal or new By-Laws,
provided, however, that the shareholders may at any time provide in the By-Laws
that any specified provision or provisions of the By-Laws may be amended,
altered or repealed only in the manner specified in the foregoing clause (a), in
which event such provision or provisions shall be subject to amendment,
alteration or repeal only in such manner. [Business Corporation Law Sec. 601(a);
Insurance Law Sec. 1210]
Section 8.2. Notice of Amendment. If any By-Law regulating an impending
election of directors is adopted, amended or repealed by the Board of Directors,
there shall be set forth in the notice of the next meeting of shareholders for
the election of directors the By-Law so adopted, amended or repealed, together
with a concise statement of the changes made. [Business Corporation Law Sec. 601
(b).]
MARY P. BREEN
Vice President
and Associate General Counsel
(212) 314-3815
Fax: (212) 707-1882
[EQUITABLE -- MEMBER OF THE GLOBAL AXA GROUP LOGO]
LAW DEPARTMENT
April 30, 1997
The Equitable Life Assurance Society of the United States
1290 Avenue of the Americas
New York, NY 10104
Dear Sirs:
This opinion is furnished in connection with the filing of a Registration
Statement on Form S-6, File No. 333-17669 ("Registration Statement") of Separate
Account FP ("Separate Account FP") of The Equitable Life Assurance Society of
the United States ("Equitable"). The Registration Statement covers an indefinite
number of units of interest in Separate Account FP ("Units") funding Incentive
Life (policy form no. 88-300), individual flexible premium variable life
insurance policies ("Policies") issued by The Equitable Life Assurance Society
of the United States ("Equitable"). Although the Policies are no longer being
offered for sale, Equitable will continue to collect premiums under the
Policies. Net premiums received under the Policies are allocated by Equitable to
Separate Account FP to the extent directed by owners of the Policies. Net
premiums under other Equitable variable life insurance policies will also be
allocated to Separate Account FP.
I have examined all such corporate records of Equitable and such other
documents and laws as I consider appropriate as a basis for the opinion
hereinafter expressed. On the basis of such examination, it is my opinion that:
1. Equitable is a corporation duly organized and validly existing under
the laws of the State of New York.
2. Separate Account FP has been duly established by Equitable pursuant to
the laws of the State of New York, under which income, gains and losses, whether
or not realized, from assets allocated to Separate Account FP, are to be, in
accordance with the Policies, credited to or charged against Separate Account FP
without regard to other income, gains or losses of Equitable.
3. Assets allocated to Separate Account FP will be owned by Equitable;
Equitable will not be a trustee with respect thereto. The Policies provide that
the portion of the assets of Separate Account FP equal to the reserves and other
Policy liabilities with respect to Separate Account FP will not be chargeable
with liabilities arising out of any other business Equitable may conduct.
Equitable reserves the right to transfer assets of Separate Account FP in excess
of such reserves and other Policy liabilities to the general account of
Equitable.
4. The Policies (including any Units duly credited thereunder) have been
duly authorized and constitute validly issued and binding obligations of
Equitable in accordance with their terms.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Mary P. Breen
--------------------------
Mary P. Breen
51510
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
1290 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10104
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus Supplement constituting part of
this Post-Effective Amendment No. 1 to the Registration Statement No. 333-17669
on Form S-6 of our report dated February 10, 1997 relating to the financial
statements of The Equitable Life Assurance Society of the United States Separate
Account FP for the year ended December 31, 1996, and our report dated February
10, 1997 relating to the consolidated financial statements of The Equitable Life
Assurance Society of the United States for the year ended December 31, 1996,
which reports appear in such Prospectus Supplement. We also consent to the
reference to us under the heading "Financial Statements" in the Prospectus
Supplement.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
New York, New York
April 28, 1997
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned officer or
director of The Equitable Life Assurance Society of the United States (the
"Company"), a New York stock life insurance company, hereby constitutes and
appoints Gordon G. Dinsmore, Samuel B. Shlesinger, Maureen K. Wolfson, Pauline
Sherman, Donald R. Kaplan, Naomi J. Weinstein, Mildred Oliver and each of them
(with full power to each of them to act alone), his or her true and lawful
attorney-in fact and agent , with full power of substitution to each, for him or
her and on his or her behalf and in his or her name, place and stead, to execute
and file any of the documents referred to below relating to registrations under
the Securities Act of 1933, the Securities Exchange Act of 1934 and the
Investment Company Act of 1940 with respect to any insurance or annuity
contracts or other agreements providing for allocation of amounts to Separate
Accounts of the Company, and related units or interests in Separate Accounts:
registration statements on any form or forms under the Securities Act of 1933
and the Investment Company Act of 1940 and annual reports on any form or forms
under the Securities Exchange Act of 1934, and any and all amendments and
supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorney-in-fact and agents
and his, her or their substitutes being empowered to act with or without the
others or other, and to have full power and authority to do or cause to be done
in the name and on behalf of the undersigned each and every act and thing
requisite and necessary or appropriate with respect thereto to be done in and
about the premises in order to effectuate the same as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agents, or any of them, may do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand
this 6th day of January, 1997
/s/ Mary R. (Nina) Henderson
---------------------------------
Mary R. (Nina) Henderson
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 02
<NAME> Common Stock Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,277,628,295
<INVESTMENTS-AT-VALUE> 1,572,061,192
<RECEIVABLES> 967,531
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,573,028,723
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,250,844
<TOTAL-LIABILITIES> 2,250,844
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,570,777,879
<DIVIDEND-INCOME> 11,773,551
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 8,267,795
<NET-INVESTMENT-INCOME> 3,505,756
<REALIZED-GAINS-CURRENT> 187,552,444
<APPREC-INCREASE-CURRENT> 112,608,618
<NET-CHANGE-FROM-OPS> 303,666,818
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,505,756
<DISTRIBUTIONS-OF-GAINS> 300,161,062
<DISTRIBUTIONS-OTHER> 120,955,019
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 424,192,605
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 0
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 03
<NAME> Money Market Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 242,546,651
<INVESTMENTS-AT-VALUE> 242,570,674
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8,940,540
<TOTAL-ASSETS> 251,511,214
<PAYABLE-FOR-SECURITIES> 9,060,754
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 577,366
<TOTAL-LIABILITIES> 9,638,120
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 241,873,094
<DIVIDEND-INCOME> 9,126,793
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1,025,149
<NET-INVESTMENT-INCOME> 8,101,644
<REALIZED-GAINS-CURRENT> (110,954)
<APPREC-INCREASE-CURRENT> (65,953)
<NET-CHANGE-FROM-OPS> 7,924,737
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,101,644
<DISTRIBUTIONS-OF-GAINS> (176,907)
<DISTRIBUTIONS-OTHER> 26,877,953
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 34,739,563
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 04
<NAME> Aggressive Stock Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 747,842,158
<INVESTMENTS-AT-VALUE> 794,459,393
<RECEIVABLES> 3,729,663
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 798,189,056
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,589,925
<TOTAL-LIABILITIES> 4,589,925
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 793,599,131
<DIVIDEND-INCOME> 1,661,263
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4,086,388
<NET-INVESTMENT-INCOME> (2,425,125)
<REALIZED-GAINS-CURRENT> 163,630,203
<APPREC-INCREASE-CURRENT> (33,653,883)
<NET-CHANGE-FROM-OPS> 127,551,195
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,425,125)
<DISTRIBUTIONS-OF-GAINS> 129,976,320
<DISTRIBUTIONS-OTHER> 111,065,154
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 238,411,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
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<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 05
<NAME> Balanced Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 388,200,062
<INVESTMENTS-AT-VALUE> 430,582,886
<RECEIVABLES> 142,333
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 430,725,219
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,031,164
<TOTAL-LIABILITIES> 1,031,164
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 429,694,055
<DIVIDEND-INCOME> 13,094,730
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 2,490,188
<NET-INVESTMENT-INCOME> 10,604,542
<REALIZED-GAINS-CURRENT> 33,240,237
<APPREC-INCREASE-CURRENT> (714,363)
<NET-CHANGE-FROM-OPS> 43,130,416
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,604,542
<DISTRIBUTIONS-OF-GAINS> 32,525,874
<DISTRIBUTIONS-OTHER> (11,866,664)
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 31,128,846
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 06
<NAME> High Yield Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 96,502,438
<INVESTMENTS-AT-VALUE> 102,167,262
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 105,241
<TOTAL-ASSETS> 102,272,503
<PAYABLE-FOR-SECURITIES> 149,241
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 733,423
<TOTAL-LIABILITIES> 882,664
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 101,389,839
<DIVIDEND-INCOME> 8,696,039
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 518,429
<NET-INVESTMENT-INCOME> 8,177,610
<REALIZED-GAINS-CURRENT> 7,058,612
<APPREC-INCREASE-CURRENT> 1,840,843
<NET-CHANGE-FROM-OPS> 17,077,065
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,177,610
<DISTRIBUTIONS-OF-GAINS> 8,899,455
<DISTRIBUTIONS-OTHER> 12,590,932
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 29,458,877
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 07
<NAME> Global Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 374,535,031
<INVESTMENTS-AT-VALUE> 433,153,085
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<OVERDISTRIBUTION-GAINS> 0
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<ACCUMULATED-NII-PRIOR> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 08
<NAME> Conservative Investors Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 167,148,611
<INVESTMENTS-AT-VALUE> 174,848,746
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<OVERDISTRIBUTION-GAINS> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 09
<NAME> Growth Investors Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 631,813,336
<INVESTMENTS-AT-VALUE> 698,964,029
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<OTHER-ITEMS-ASSETS> 41,689
<TOTAL-ASSETS> 699,005,718
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<TOTAL-LIABILITIES> 766,097
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<SHARES-COMMON-PRIOR> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 698,239,621
<DIVIDEND-INCOME> 15,504,412
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<OTHER-INCOME> 0
<EXPENSES-NET> 3,746,683
<NET-INVESTMENT-INCOME> 11,757,729
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 142,361,955
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 12
<NAME> Intermed Gov Securities Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 44,817,781
<INVESTMENTS-AT-VALUE> 44,676,302
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 77,313
<TOTAL-ASSETS> 44,753,615
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 538,792
<TOTAL-LIABILITIES> 626,203
<SENIOR-EQUITY> 0
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<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 44,127,412
<DIVIDEND-INCOME> 2,367,498
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 245,038
<NET-INVESTMENT-INCOME> 2,122,460
<REALIZED-GAINS-CURRENT> (490,315)
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<NET-CHANGE-FROM-OPS> 1,345,144
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<DISTRIBUTIONS-OF-GAINS> (777,316)
<DISTRIBUTIONS-OTHER> 5,655,394
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<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,978,368
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<RETURNS-OF-CAPITAL> 0
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<EXPENSE-RATIO> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 13
<NAME> Growth & Income Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 32,957,253
<INVESTMENTS-AT-VALUE> 38,031,591
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 122,406
<TOTAL-ASSETS> 38,153,997
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 558,057
<TOTAL-LIABILITIES> 687,544
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 37,466,453
<DIVIDEND-INCOME> 525,200
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 155,175
<NET-INVESTMENT-INCOME> 370,025
<REALIZED-GAINS-CURRENT> 1,948,613
<APPREC-INCREASE-CURRENT> 2,950,992
<NET-CHANGE-FROM-OPS> 5,269,630
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<DISTRIBUTIONS-OF-INCOME> 370,025
<DISTRIBUTIONS-OF-GAINS> 4,899,605
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<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 18,848,140
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 14
<NAME> Quality Bond Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 127,911,618
<INVESTMENTS-AT-VALUE> 125,949,796
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125,949,796
<PAYABLE-FOR-SECURITIES> 28,516
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 706,967
<TOTAL-LIABILITIES> 735,483
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 125,214,313
<DIVIDEND-INCOME> 8,972,983
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 869,312
<NET-INVESTMENT-INCOME> 8,103,671
<REALIZED-GAINS-CURRENT> (1,130,915)
<APPREC-INCREASE-CURRENT> 143,854
<NET-CHANGE-FROM-OPS> 7,116,610
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,103,671
<DISTRIBUTIONS-OF-GAINS> (987,061)
<DISTRIBUTIONS-OTHER> (20,149,875)
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (13,073,133)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 15
<NAME> Equity Index
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 73,126,833
<INVESTMENTS-AT-VALUE> 94,575,057
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 188,428
<TOTAL-ASSETS> 94,763,485
<PAYABLE-FOR-SECURITIES> 188,527
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 337,447
<TOTAL-LIABILITIES> 525,974
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 94,237,511
<DIVIDEND-INCOME> 1,751,848
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 605,961
<NET-INVESTMENT-INCOME> 1,145,887
<REALIZED-GAINS-CURRENT> 11,903,017
<APPREC-INCREASE-CURRENT> 8,996,459
<NET-CHANGE-FROM-OPS> 22,045,363
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,145,887
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 22,613,896
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<OVERDISTRIB-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000771726
<NAME> Sep Acct FP ELAS
<SERIES>
<NUMBER> 16
<NAME> International Fund Fund
<MULTIPLIER> 1
<CURRENCY> U. S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 39,937,334
<INVESTMENTS-AT-VALUE> 41,795,127
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<ASSETS-OTHER> 0
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<TOTAL-ASSETS> 41,954,904
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<TOTAL-LIABILITIES> 378,697
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
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<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 41,576,207
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<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 164,149
<NET-INVESTMENT-INCOME> 411,375
<REALIZED-GAINS-CURRENT> 709,281
<APPREC-INCREASE-CURRENT> 1,189,887
<NET-CHANGE-FROM-OPS> 2,310,543
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<DISTRIBUTIONS-OF-INCOME> 411,375
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<SHARES-REINVESTED> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<PER-SHARE-DIVIDEND> 0
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<PER-SHARE-NAV-END> 0
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
