INCENTIVE LIFE
PLUS (SM)
Propectus Dated
July 15, 1998
Incentive Life Plus is a flexible premium variable life insurance policy issued
by The Equitable Life Assurance Society of the United States (Equitable).
The policy offers flexible premium payments, a choice of two death benefit
options, increases and decreases to the policy's Face Amount of insurance and a
choice of funding options, including a guaranteed interest option and the
following seventeen investment portfolios:
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIOS
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<S> <C> <C>
o Alliance Money Market o BT Equity 500 Index o MFS Research
o Alliance High Yield o BT Small Company Index o MFS Emerging Growth Companies
o Alliance Common Stock o BT International Equity Index o Morgan Stanley Emerging Markets
o Alliance Aggressive Stock o JPM Core Bond Equity
o Alliance Small Cap Growth o Lazard Large Cap Value o EQ/Putnam Growth & Income Value
o Lazard Small Cap Value o EQ/Putnam Investors Growth
o EQ/Putnam International Equity
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</TABLE>
We do not guarantee the investment performance of these investment portfolios,
which involve varying degrees of risk.
Although premiums are flexible, additional premiums may be required to keep the
policy in effect. The policy may terminate if its value (net of any policy loan
and surrender charge) is too small to pay the policy's monthly charges. The
policy can be guaranteed to stay in force regardless of investment performance
through the death benefit guarantee provision (if available in your state).
You can borrow against or withdraw money from the policy, within limits. Loans
and withdrawals will reduce the policy's death benefit and cash surrender value.
You can also surrender the policy. A surrender charge will apply if you
surrender the policy during the first fifteen policy years or within fifteen
years after certain Face Amount increases. This charge may also apply if you
reduce the Face Amount or if the policy terminates.
Your Equitable agent can provide you with information about all forms of life
insurance available from us and help you decide which may best meet your needs.
Replacing existing insurance with an Incentive Life Plus or other policy may not
be to your advantage.
You may examine the policy for a limited period and cancel it for a full refund
of premiums paid.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS CONTAINS INFORMATION THAT SHOULD BE KNOWN BEFORE INVESTING IN
INCENTIVE LIFE PLUS. THIS PROSPECTUS IS NOT VALID UNLESS IT IS ATTACHED TO
CURRENT PROSPECTUSES FOR BOTH THE HUDSON RIVER TRUST AND THE EQ ADVISORS TRUST.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Copyright 1998 The Equitable Life Assurance Society of the United States.
All rights reserved.
EVM-124 (EDI)
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF INCENTIVE LIFE PLUS FEATURES...............................3
PART 1 -- DETAILED INFORMATION ABOUT EQUITABLE AND
INCENTIVE LIFE PLUS INVESTMENT CHOICES.....................9
THE COMPANY THAT ISSUES INCENTIVE LIFE PLUS................9
Equitable...............................................9
THE SEPARATE ACCOUNT AND THE TRUSTS........................9
The Separate Account....................................9
The Trusts..............................................9
HRT's Manager And Investment Adviser...................10
EQAT's Manager.........................................10
EQAT's Investment Advisers.............................10
Investment Policies And Objectives Of The Trusts'
Portfolios...........................................11
THE GUARANTEED INTEREST ACCOUNT...........................13
Adding Interest In The Guaranteed Interest Account.....13
Transfers Out Of The Guaranteed Interest Account.......14
PART 2 -- DETAILED INFORMATION ABOUT INCENTIVE LIFE PLUS............14
FLEXIBLE PREMIUMS.........................................14
Planned Periodic Premiums And Specified Premiums.......14
Premium And Monthly Charge Allocations.................14
DEATH BENEFITS............................................15
Guaranteeing The Death Benefit.........................15
CHANGES IN INSURANCE PROTECTION...........................16
Changing The Face Amount...............................16
Changing The Death Benefit Option......................17
Substitution Of Insured Person.........................17
When Policy Changes Go Into Effect.....................17
MATURITY BENEFIT..........................................17
LIVING BENEFIT OPTION.....................................18
ADDITIONAL BENEFITS MAY BE AVAILABLE......................18
YOUR POLICY ACCOUNT VALUE.................................18
Amounts In The Separate Account........................18
How We Determine The Unit Value........................19
Transfers Of Policy Account Value......................19
Automatic Transfer Service.............................19
Telephone Transfers....................................19
Charge For Transfers...................................20
BORROWING FROM YOUR POLICY ACCOUNT........................20
How To Request A Loan..................................20
Policy Loan Interest...................................20
When Interest Is Due...................................21
Repaying The Loan......................................21
The Effects Of A Policy Loan...........................21
PARTIAL WITHDRAWALS AND SURRENDER.........................21
Partial Withdrawals....................................21
Surrender For Net Cash Surrender Value.................21
DEDUCTIONS AND CHARGES....................................22
Deductions From Premiums...............................22
Deductions From Your Policy Account....................22
Charge Against The Separate Account....................24
Charges Of The Trusts..................................24
Surrender Charges......................................24
Purpose Of Policy Charges..............................25
ADDITIONAL INFORMATION ABOUT INCENTIVE LIFE PLUS..........25
Your Policy Can Terminate..............................25
You May Restore A Policy After It Terminates...........26
Policy Periods, Anniversaries, Dates And Ages..........26
TAX EFFECTS...............................................27
Policy Proceeds........................................27
Policy Terminations....................................28
Living Benefits........................................28
Diversification........................................28
Policy Changes.........................................29
Tax Changes............................................29
Estate And Generation Skipping Taxes...................29
Pension And Profit-Sharing Plans.......................29
Trade Or Business Entity Owns Or Is Directly Or
Indirectly A Beneficiary Of The Policy...............29
Other Employee Benefit Programs........................30
Our Taxes..............................................30
When We Withhold Income Taxes..........................30
PART 3 -- ADDITIONAL INFORMATION....................................30
YOUR VOTING PRIVILEGES....................................30
Trust Voting Privileges................................30
How We Determine Your Voting Shares....................30
Separate Account Voting Rights.........................31
OUR RIGHT TO CHANGE HOW WE OPERATE........................31
OUR REPORTS TO POLICYOWNERS...............................31
LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY...............31
YOUR PAYMENT OPTIONS......................................32
YOUR BENEFICIARY..........................................32
ASSIGNING YOUR POLICY.....................................32
WHEN WE PAY POLICY PROCEEDS...............................32
DIVIDENDS.................................................32
REGULATION................................................32
SPECIAL CIRCUMSTANCES.....................................33
DISTRIBUTION..............................................33
LEGAL PROCEEDINGS.........................................33
ACCOUNTING AND ACTUARIAL EXPERTS..........................33
ADDITIONAL INFORMATION....................................33
YEAR 2000 PROGRESS........................................34
MANAGEMENT................................................34
PART 4 -- ILLUSTRATIONS OF POLICY BENEFITS..........................38
INDIVIDUAL ILLUSTRATIONS..................................38
SEPARATE ACCOUNT FP FINANCIAL STATEMENTS..........................FSA-1
EQUITABLE FINANCIAL STATEMENTS......................................F-1
APPENDIX A -- COMMUNICATING PERFORMANCE DATA........................A-1
LONG-TERM MARKET TRENDS............................A-1
AVERAGE ANNUAL RATES OF RETURN.....................A-2
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In this prospectus "we," "our" and "us" mean Equitable, a New York stock life
insurance company. "You" and "your" mean the owner of the policy. The term
"Equitable agent" or "agent", as used herein, means a Registered Representative
authorized to sell the policies on Equitable's behalf. We refer to the person
who is covered by the policy as the "insured person" because the insured person
and the policyowner may not be the same. Unless indicated otherwise, the
discussion in this prospectus assumes that there is no policy loan outstanding
and that the policy is not in a grace period.
THE POLICY IS NOT AVAILABLE IN ALL JURISDICTIONS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. EQUITABLE DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN
AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED SUPPLEMENT THERETO OR IN ANY
SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY EQUITABLE.
<PAGE>
WHAT IS VARIABLE LIFE INSURANCE?
Variable life insurance is one kind of permanent cash value life insurance. Like
other kinds of permanent cash value life insurance, such as whole life and
universal life insurance, variable life insurance generally provides two
benefits: an income tax-free death benefit and a cash value with potential
earnings growth which is tax deferred.
What sets variable life insurance apart from universal life and whole life is
that variable life insurance allows the policyowner to direct premiums to
different variable investment fund options. This enables a policyowner to
harness the growth potential of, for example, the equity markets, but the
policyowner also bears the risk of investment losses. In contrast, whole life
insurance provides a minimum guaranteed cash value and universal life applies a
minimum guaranteed interest rate to premiums. Some variable life insurance
policies offer some of the other features of universal or whole life such as
premium flexibility (universal life), face amount increases (universal life) or
death benefit guarantees (whole life).
Equitable offers an array of permanent cash value insurance products and your
Equitable agent can help you determine which product best suits your insurance
needs.
SUMMARY OF INCENTIVE LIFE PLUS FEATURES
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE TERMS OF THE POLICY
WHEN ISSUED AND THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS (SEE TABLE OF CONTENTS ON OPPOSITE PAGE).
PUTTING MONEY INTO THE POLICY
FLEXIBLE PREMIUMS
o Premiums may be invested whenever and in whatever amount you determine,
within limits. Other than the minimum initial premium, there are no
scheduled or required premium payments (however, under certain conditions,
additional premiums may be needed to keep a policy in effect). See FLEXIBLE
PREMIUMS in Part 2 of this prospectus.
POLICY ACCOUNT
o Net premiums are put in your Policy Account and can be allocated to a
Guaranteed Interest Account and to one or more funds of Equitable's
Separate Account FP (each a Fund, and together, the Funds or the Separate
Account). The Funds invest in corresponding portfolios of The Hudson River
Trust (HRT) or the EQ Advisors Trust (EQAT), each of which is a mutual
fund. See THE SEPARATE ACCOUNT and THE TRUSTS, both in Part 1 of this
prospectus.
o Transfers can be made among the various funding options, BUT TRANSFERS OUT
OF THE GUARANTEED INTEREST ACCOUNT CAN ONLY BE MADE DURING A LIMITED TIME
AND IN LIMITED AMOUNTS. See TRANSFERS OUT OF THE GUARANTEED INTEREST
ACCOUNT in Part 1 of this prospectus for a description of these
limitations. Transfers into the Guaranteed Interest Account and among the
Funds may generally be made at any time and are subject to certain minimum
transfer amounts. See TRANSFERS OF POLICY ACCOUNT VALUE in Part 2 of this
prospectus.
o There is no minimum guaranteed cash value for amounts allocated to the
Funds. The value of amounts allocated to the Guaranteed Interest Account
will depend on the interest rates declared and guaranteed each year by
Equitable (4% minimum, before deductions). See THE GUARANTEED INTEREST
ACCOUNT in Part 1 of this prospectus.
TAKING MONEY OUT OF THE POLICY
o Loans may be taken against 90% of a policy's Cash Surrender Value (Policy
Account value less any applicable surrender charge) subject to certain
conditions. Loan interest accrues daily at a rate determined annually.
Currently, amounts set aside to secure the loan earn interest at a rate 1%
lower than the rate charged for policy loan interest. See BORROWING FROM
YOUR POLICY ACCOUNT in Part 2 of this prospectus.
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 in Part 2 of this prospectus.
o The policy may be surrendered for its Net Cash Surrender Value, less any
lien securing a Living Benefit payment, at which time insurance coverage
will end. See SURRENDER FOR NET CASH SURRENDER VALUE in Part 2 of this
prospectus.
INSURANCE PROTECTION FEATURES
DEATH BENEFITS
o Option A, a fixed benefit equal to the policy's Face Amount.
o Option B, a variable benefit equal to the Face Amount plus the Policy
Account value.
o In some cases a higher death benefit may apply in order to meet Federal
income tax law requirements. See DEATH BENEFITS in Part 2 of this
prospectus.
3
<PAGE>
o After the first policy year, you can increase the Face Amount. After the
second policy year, you can decrease the Face Amount or change your death
benefit option. Conditions apply to Face Amount and death benefit option
changes. The minimum Face Amount is generally $50,000. See CHANGES IN
INSURANCE PROTECTION in Part 2 of this prospectus.
o After the second policy year, you may be able to substitute the insured
person. See SUBSTITUTION OF INSURED PERSON in Part 2 of this prospectus.
DEATH BENEFIT GUARANTEE
o The death benefit guarantee provision guarantees that, under certain
conditions, the policy will remain in force even if the Net Cash Surrender
Value is insufficient to pay the monthly policy charges. The death benefit
guarantee provision is not available in New York and New Jersey. In those
states a 3-Year no lapse guarantee provision will apply. See GUARANTEEING
THE DEATH BENEFIT in Part 2 of this prospectus for a description of these
provisions and the conditions that apply.
MATURITY BENEFIT
o A maturity benefit equal to the amount in your Policy Account, less any
policy loan, any lien securing a Living Benefit payment and accrued
interest, is payable on the policy anniversary nearest the insured person's
100th birthday (Final Policy Date), if the insured person is still living
on that date. See MATURITY BENEFIT in Part 2 of this prospectus.
LIVING BENEFIT
o The Living Benefit rider enables the policyowner to receive a portion of
the policy's death benefit (excluding death benefits payable under certain
riders) if the insured person has a terminal illness. The Living Benefit
rider will be added to most policies at issue for no additional cost. See
LIVING BENEFIT OPTION in Part 2 of this prospectus.
ADDITIONAL BENEFITS
o Disability waiver; accidental death; term insurance, including term
insurance on an additional insured person, children's term insurance, and
first-to-die term insurance; option to purchase additional insurance; and
designated insured option riders are available. You may be able to reduce
your costs by purchasing a term insurance rider on the insured person. See
ADDITIONAL BENEFITS MAY BE AVAILABLE in Part 2 of this prospectus.
DEDUCTIONS AND CHARGES
FROM PREMIUMS (See DEDUCTIONS FROM PREMIUMS in Part 2 of this prospectus.)
o Charge for taxes imposed by states and other jurisdictions. Such charges
currently range from .70% to 5% (Virgin Islands).
o Premium Sales Charge ranging from 3% to 6% of premiums paid, depending upon
the Face Amount. Equitable currently intends to stop deducting this charge
once premiums paid equal a specified amount.
FROM THE POLICY ACCOUNT (See DEDUCTIONS FROM YOUR POLICY ACCOUNT in Part 2 of
this prospectus.)
o Administrative charge during the first or first and second policy years
ranging from $20 per month to $55 per month depending upon the initial Face
Amount and the insured person's age. During subsequent years, the monthly
administrative charge ranges from $6 to $8. We may increase this charge,
but we guarantee that it will never exceed $10 per month.
o Current monthly cost of insurance rates for preferred risk insureds range
from $0.05 per thousand of net amount at risk at the younger ages to $50.00
per thousand of net amount at risk at the oldest age (99). The net amount
at risk is the difference between the Policy Account value and the current
death benefit. Guaranteed cost of insurance rates for preferred risk
insureds range from $0.06 (younger ages) to $83.33 (age 99).
o Monthly charge for any additional insurance benefits.
o Certain policy transactions will result in the following charges:
o Transfers -- Currently, we charge $25 per transfer after the twelfth
transfer in a policy year. We reserve the right to charge $25 per
transfer.
o Partial Withdrawals -- An expense charge of $25 or 2% of the amount
requested, whichever is less, is made for each partial withdrawal.
o Face Amount Increases -- An administrative charge of $1.50 for each
additional $1,000 of insurance (up to a maximum charge of $240) will
be deducted from your Policy Account.
o Substitution of Insured Person-- A $100 expense charge will be
deducted for each substitution of insured person.
o Monthly death benefit guarantee charge equal to $.01 per $1,000 of Face
Amount including the face amount of any yearly renewable term rider on the
insured person. This charge will not apply under certain circumstances.
FROM THE SEPARATE ACCOUNT (See CHARGE AGAINST THE SEPARATE ACCOUNT in Part 2 of
this prospectus.)
o Current charge for certain mortality and expense risks equal to .60% per
annum (guaranteed not to exceed .90% per annum). This charge will be
deducted differently for policies issued in New York.
4
<PAGE>
SURRENDER CHARGES (See SURRENDER CHARGES in Part 2 of this prospectus.)
o An Administrative Surrender Charge will apply during the first eight policy
years if you surrender the policy, reduce its Face Amount, or it
terminates. The Administrative Surrender Charge varies by issue age of the
insured person and the Face Amount, and will never be more than $3,000.
o A Premium Surrender Charge applies if the policy terminates, is surrendered
for its Net Cash Surrender Value or if the Face Amount is reduced during
the first fifteen policy years. The maximum charge is equal to 66% of one
"target premium." After the first nine policy years, the maximum charge
declines on a monthly basis until it reaches zero at the end of the
fifteenth policy year.
o If you increase the policy's Face Amount, additional Surrender Charges will
generally apply to the amount of the increase for fifteen years beginning
on the effective date of increase.
FROM THE TRUSTS
o The Separate Account Funds purchase Class IB shares of corresponding
portfolios of the HRT or EQAT at net asset value. That price reflects
investment management fees, 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, reflecting the
HRT's estimated expenses, is based on information for Class IB shares for
the year ended December 31, 1997 and has been restated to reflect (i) the
fees that would have been paid to Alliance if the present advisory
agreement had been in effect as of January 1, 1997 and (ii) estimated
accounting expenses for the year ended December 31, 1997. 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 expenses are also likely to fluctuate from
year to year. Both investment management fees and other expenses are
expressed in the table below as an annual percentage of each portfolio's
daily average net assets:
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1997 RESTATED FEES AND EXPENSES
-----------------------------------------------
MANAGEMENT 12B-1 OTHER TOTAL ANNUAL
HRT PORTFOLIO FEE FEE EXPENSES EXPENSES
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Alliance Money Market............ 0.35% 0.25% 0.04% 0.64%
Alliance High Yield.............. 0.60% 0.25% 0.04% 0.89%
Alliance Common Stock............ 0.37% 0.25% 0.03% 0.65%
Alliance Aggressive Stock........ 0.54% 0.25% 0.03% 0.82%
Alliance Small Cap Growth*....... 0.90% 0.25% 0.05% 1.20%
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*Estimated expenses. The portfolio commenced operations on May 1, 1997.
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EQ Advisors Trust. The table below shows the annual rates payable for
management fees, Rule 12b-1 distribution fees, and other estimated expenses
to be deducted from EQAT assets in 1998. Other 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,
Rule 12b-1 distribution fees and other expenses are expressed in the table
below as an annual percentage of each portfolio's daily average net assets:
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ESTIMATED 1998 FEES AND EXPENSES
------------------------------------------
MANAGEMENT 12B-1 OTHER TOTAL ANNUAL
EQAT PORTFOLIO* FEE FEES EXPENSES EXPENSES
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BT Equity 500 Index................... 0.25% 0.25% 0.05% 0.55%
BT Small Company Index................ 0.25% 0.25% 0.10% 0.60%
BT International Equity Index......... 0.35% 0.25% 0.20% 0.80%
JPM Core Bond......................... 0.45% 0.25% 0.10% 0.80%
Lazard Large Cap Value................ 0.55% 0.25% 0.10% 0.90%
Lazard Small Cap Value................ 0.80% 0.25% 0.15% 1.20%
MFS Research.......................... 0.55% 0.25% 0.05% 0.85%
MFS Emerging Growth Companies......... 0.55% 0.25% 0.05% 0.85%
Morgan Stanley Emerging Markets Equity 1.15% 0.25% 0.35% 1.75%
EQ/Putnam Growth & Income Value....... 0.55% 0.25% 0.05% 0.85%
EQ/Putnam Investors Growth............ 0.55% 0.25% 0.05% 0.85%
EQ/Putnam International Equity........ 0.70% 0.25% 0.25% 1.20%
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* The EQAT had no operations prior to May 1, 1997. The MFS Research, MFS
Emerging Growth Companies, EQ/Putnam Growth & Income Value, EQ/Putnam
Investors Growth, and EQ/Putnam International Equity Portfolios of EQAT
commenced operations on May 1, 1997. The Morgan Stanley Emerging Markets
Equity Portfolio commenced operations on August 20, 1997. The BT Equity 500
Index, BT Small Company Index, BT International Equity Index, JPM Core
Bond, Lazard Large Cap Value and Lazard Small Cap Value Portfolios
commenced operations on December 31, 1997. The amounts shown as "Other
Expenses" will fluctuate from year to year depending on actual expenses,
but pursuant to agreement, cannot together with other fees exceed total
annual expense limitations. See the attached EQAT prospectus.
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5
<PAGE>
VARIATIONS
o Equitable is subject to the insurance laws and regulations in every
jurisdiction in which Incentive Life Plus is sold. As a result, various
time periods and other terms and conditions described in this prospectus
may vary from state to state. These variations will be reflected in the
policy.
o The terms of Incentive Life Plus may also vary where special circumstances
result in a reduction in our costs.
o A modified version of Incentive Life Plus may be offered where certain
conditions are met.
ADDITIONAL INFORMATION
CANCELLATION RIGHT
o You have a right to examine the policy. You may cancel the policy, within
the time limit described below, by sending it to our Administrative Office
with a written request to cancel. Insurance coverage ends when you send
your request.
o Your request to cancel the policy must be postmarked no later than 10 days
after you receive the policy.
o If you cancel the policy, we will refund the premiums you paid. In certain
cases where the policy was purchased as a result of an exchange of one of
our life insurance policies, we may reinstate the prior policy.
o There may be income tax and withholding implications if you cancel.
POLICY TERMINATION
o The policy will go into default if the Net Cash Surrender Value is
insufficient to cover monthly charges and the death benefit guarantee or
the 3-Year no lapse guarantee provisions are not in effect. If this occurs,
you will be notified and given the opportunity to maintain the policy in
force by making additional payments. You may be able to restore a
terminated policy within a limited time period, but this will require
additional evidence of insurability. See YOUR POLICY CAN TERMINATE and YOU
MAY RESTORE A POLICY AFTER IT TERMINATES in Part 2 of this prospectus.
TAX EFFECTS
o Generally, under current Federal income tax law, death benefits are not
subject to income tax and Policy Account earnings are not subject to income
tax as long as they remain in the Policy Account. Loans, partial withdrawals,
surrender, maturity, policy termination, or a substitution of insured may
result in recognition of income for tax purposes. See TAX EFFECTS in Part 2
of this prospectus.
RATES OF RETURN AND YIELDS OF THE TRUSTS
The rates of return shown in the table below are based on the actual investment
performance of The Hudson River Trust and EQ Advisors Trust portfolios, after
deduction for investment management fees and direct operating expenses of the
Trusts (including Rule 12b-1 distribution fees) for periods ending December 31,
1997. The historical performance of the Alliance Common Stock and Alliance Money
Market Portfolios for periods prior to March 22, 1985, when these funds were
managed separate accounts and subject to a different fee structure, has been
restated to reflect the investment management fees and estimated direct
operating expenses that commenced on that date. The Alliance Common Stock
Portfolio and its predecessors have been in existence since 1976.
The yields shown below are derived from the actual rate of return of the
portfolio for the period, which is then adjusted to omit capital changes in the
portfolio during the period. We show the SEC standardized 7-day yield for the
Alliance Money Market Portfolio and 30-day yield for the Alliance High Yield
Portfolios.
These rates of return and yields are not illustrative of how actual investment
performance would affect the benefits under your policy. Moreover, these rates
of return and yields are not an estimate or guarantee of future performance.
THESE RATES OF RETURN AND YIELDS ARE FOR THE TRUSTS ONLY AND DO NOT REFLECT THE
ADMINISTRATIVE AND COST OF INSURANCE CHARGES, SALES CHARGES, TAX CHARGES AND THE
MORTALITY AND EXPENSE RISK CHARGE APPLICABLE UNDER AN INCENTIVE LIFE PLUS
POLICY. SUCH CHARGES WOULD REDUCE THE RETURNS AND YIELDS SHOWN. SEE
ILLUSTRATIONS OF INCENTIVE LIFE PLUS POLICY ACCOUNT AND CASH SURRENDER VALUES
BASED ON HISTORICAL INVESTMENT RESULTS BELOW.
6
<PAGE>
<TABLE>
<CAPTION>
RATES OF RETURN FOR PERIODS ENDING DECEMBER 31, 1997
-----------------------------------------------------------------------------------
SEC SINCE
PORTFOLIO YIELDS 1 YEAR 3 YEARS 5 YEARS 10 YEARS 15 YEARS 20 YEARS INCEPTION(+)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Money Market.................. 5.10% 5.16% 5.24% 4.44% 5.52% 6.34% -- 6.92%
Alliance High Yield.................... 10.07 18.19 20.15 15.63 12.54 -- -- 11.78
Alliance Common Stock.................. 29.07 28.39 20.81 17.74 17.00 17.30% 15.58
Alliance Aggressive Stock.............. 10.66 21.04 14.66 18.74 -- -- 19.17
Alliance Small Cap Growth.............. -- -- -- -- -- -- 26.57**
MFS Research........................... -- -- -- -- -- -- 16.07**
MFS Emerging Growth Companies.......... -- -- -- -- -- -- 22.42**
Morgan Stanley Emerging Markets Equity. -- -- -- -- -- -- (20.16)*
EQ/Putnam Growth & Income Value........ -- -- -- -- -- -- 16.23**
EQ/Putnam Investors Growth............. -- -- -- -- -- -- 24.70**
EQ/Putnam International Equity......... -- -- -- -- -- -- 9.58**
</TABLE>
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* This performance is unannualized and represents less than five months of
performance.
** This performance is unannualized and represents eight months of
performance.
+ The Alliance Small Cap Growth Portfolio received its initial funding on May
1, 1997; the Alliance High Yield Portfolio on January 2, 1987; the Alliance
Aggressive Stock Portfolio on January 27, 1986; the predecessor of the
Alliance Money Market Portfolio on July 13, 1981; and the predecessor of
the Alliance Common Stock Portfolio on January 13, 1976. The Morgan Stanley
Emerging Markets Equity Portfolio received its initial funding on August
20, 1997; EQ/Putnam Growth & Income Value, EQ/Putnam Investors Growth,
EQ/Putnam International Equity, MFS Research and MFS Emerging Growth
Companies, received their initial funding on May 1, 1997.
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Additional investment performance information appears in the attached HRT and
EQAT prospectuses.
PRIOR PERFORMANCE OF ADVISERS. The EQAT portfolios and the Alliance Small Cap
Growth Portfolio of the HRT commenced operations in 1997. For investment
performance of public mutual funds (or combinations thereof) advised by the same
EQAT or HRT Investment Adviser that have investment objectives, policies,
strategies and risks that their advisers believe to be substantially similar to
those of corresponding portfolios of the EQAT or HRT, see the respective EQAT or
HRT prospectus, attached to this prospectus. Such results are intended to show a
potential investor the past results of a similar style of investment management
and are not intended to be a substitute for actual performance, nor are such
results an estimate or guarantee of future results for the EQAT or Alliance
Small Cap Growth Portfolios. Keep in mind that such results do not reflect the
deductions and charges under your policy, which, if applied, would reduce the
returns shown.
ILLUSTRATIONS OF POLICY ACCOUNT AND CASH SURRENDER VALUES BASED ON HISTORICAL
INVESTMENT RESULTS. The following table was developed to demonstrate how the
actual investment experience of the HRT (and its predecessors) and the EQAT
would have affected the Policy Account value and Cash Surrender Value of
hypothetical Incentive Life Plus policies held for specified periods of time.
The table illustrates premiums, Policy Account values and Cash Surrender Values
of ten hypothetical Incentive Life Plus policies, each with a 100% premium
allocation to a different Fund. The illustration also assumes that, in each
case, the insured is a 40-year-old male, preferred non-tobacco user and that
each policy has a level death benefit, a $300,000 face amount and a $4,000
annual premium.
The table assumes that each policy was purchased on the first day of a calendar
year. For portfolios whose inception dates fall before June 30, the policy is
assumed to have been purchased at the beginning of and earned the actual return
over that entire calendar year of inception. For portfolios whose inception
dates fall after June 30, the policy is assumed to have been purchased at the
beginning of the first full calendar year of that portfolio's operation. The
table then illustrates what the Cash Surrender Value would have been after one
policy year, after five policy years, after 10 policy years and from inception
through December 31, 1997. No information has been included for portfolios whose
inception dates were after June 30, 1997.
7
<PAGE>
ILLUSTRATIONS OF INCENTIVE LIFE PLUS POLICY ACCOUNT AND CASH SURRENDER VALUES
BASED ON HISTORICAL INVESTMENT RESULTS, $300,000 OF INITIAL INSURANCE
PROTECTION AND CURRENT CHARGES (1)
<TABLE>
<CAPTION>
MALE AGE 40
PREFERRED RISK NON-TOBACCO USER
- -------------------------------------------------------------------------------------------------------------
ASSUMED
POLICY
PURCHASE AT THE END OF AT THE END OF
DATE(2) THE FIRST POLICY YEAR THE FIFTH POLICY YEAR
------- --------------------- ---------------------
BEGINNING TOTAL POLICY CASH TOTAL POLICY CASH
OF PREMIUM ACCOUNT SURRENDER PREMIUM ACCOUNT SURRENDER
PORTFOLIO: YEAR: PAID VALUE VALUE PAID VALUE VALUE
---------- ----- ---- ----- ----- ---- ----- -----
HRT:
- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alliance Money Market................. 1982 $4,000 $2,778 $ 876 $20,000 $17,728 $15,386
Alliance High Yield................... 1987 4,000 2,517 615 20,000 18,291 15,949
Alliance Common Stock................. 1976 4,000 2,662 760 20,000 26,540 24,198
Alliance Aggressive Stock............. 1986 4,000 3,462 1,560 20,000 22,614 20,272
Alliance Small Cap Growth............. 1997 4,000 3,206 1,304 -- -- --
EQAT:
- --------------------------------------
MFS Research.......................... 1997 4,000 2,886 984 -- -- --
MFS Emerging Growth Companies......... 1997 4,000 3,081 1,179 -- -- --
EQ/Putnam Growth & Income Value....... 1997 4,000 2,891 989 -- -- --
EQ/Putnam Investors Growth............ 1997 4,000 3,151 1,249 -- -- --
EQ/Putnam International Equity........ 1997 4,000 2,689 787 -- -- --
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
MALE AGE 40
PREFERRED RISK NON-TOBACCO USER
- ----------------------------------------------------------------------------------------------------------
AT THE END OF FROM POLICY PURCHASE THROUGH
THE TENTH POLICY YEAR DECEMBER 31, 1997
--------------------- -----------------
TOTAL POLICY CASH TOTAL POLICY CASH
PREMIUM ACCOUNT SURRENDER PREMIUM ACCOUNT SURRENDER
PORTFOLIO: PAID VALUE VALUE PAID VALUE VALUE
---------- ---- ----- ----- ---- ----- -----
HRT:
- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Money Market.................$40,000 $41,016 $39,141 $64,000 $69,117 $69,117
Alliance High Yield................... 40,000 56,079 54,254 44,000 69,278 67,818
Alliance Common Stock................. 40,000 68,440 66,615 88,000 534,552 534,552
Alliance Aggressive Stock............. 40,000 81,015 79,190 48,000 115,275 114,180
Alliance Small Cap Growth............. -- -- -- 4,000 3,206 1,304
EQAT:
- --------------------------------------
MFS Research.......................... -- -- -- 4,000 2,886 984
MFS Emerging Growth Companies......... -- -- -- 4,000 3,081 1,179
EQ/Putnam Growth & Income Value....... -- -- -- 4,000 2,891 989
EQ/Putnam Investors Growth............ -- -- -- 4,000 3,151 1,249
EQ/Putnam International Equity........ -- -- -- 4,000 2,689 787
- ----------------------------------------------------------------------------------------------------------
</TABLE>
THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS
POLICY WOULD BE $3,533.96. SEE GUARANTEEING THE DEATH BENEFIT IN PART 2 OF THIS
PROSPECTUS.
These values are not an estimate or guarantee of future performance.
(1) Policy values reflect all charges assessed under the policy and by the HRT
or EQAT, including an assumed charge for taxes of 2%. Current
non-guaranteed charges have been used for the cost of insurance charges,
Premium Sales Charge and monthly administrative charge. Such charges may be
increased in the future, but will never exceed the guaranteed maximum
charges set forth in DEDUCTIONS AND CHARGES in Part 2 of this prospectus.
If the guaranteed maximum cost of insurance charges, Premium Sales Charge
and monthly administrative charge were used, the results would be lower.
(2) Assumed Policy Purchase Date is based upon inception date of portfolio.
Please refer to the explanation of this table on page 6.
8
<PAGE>
PART 1: DETAILED INFORMATION ABOUT EQUITABLE AND INCENTIVE LIFE PLUS INVESTMENT
CHOICES
THE COMPANY THAT ISSUES INCENTIVE LIFE PLUS
EQUITABLE. Equitable, a New York stock life insurance company, has been in
business since 1859. We are a wholly owned subsidiary of The Equitable Companies
Incorporated (the Holding Company). The largest shareholder of the Holding
Company is AXA-UAP (AXA), a French insurance holding company. As of December 31,
1997, AXA beneficially owned 58.7% of the outstanding shares of common stock of
the Holding Company. 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 $274.1 billion of assets as
of December 31, 1997, including third party assets of approximately $216.9
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, 1997, we had approximately $125.7
billion face amount of variable life insurance in force, as compared to $114.6
billion at December 31, 1996. Prior to January 1, 1997, Incentive Life Plus
policies were issued by Equitable's wholly owned subsidiary, Equitable Variable
Life Insurance Company (Equitable Variable). Equitable Variable was merged into
Equitable as of January 1, 1997.
THE SEPARATE ACCOUNT AND THE TRUSTS
THE SEPARATE ACCOUNT. The Separate Account was established on September 21, 1995
under the Insurance Law of the State of New York. The Separate Account is a type
of investment company called a unit investment trust and is registered with the
Securities and Exchange Commission (SEC) under the Investment Company Act of
1940 (1940 Act). This registration does not involve any supervision by the SEC
of the management or investment policies of the Separate Account. The Separate
Account is a successor to a separate account that was established by Equitable
Variable on April 19, 1985. The assets of that separate account became assets of
the Separate Account on January 1, 1997 when Equitable Variable was merged into
Equitable.
Under New York law, we own the assets of the Separate Account and use them to
support your policy and other variable life insurance policies. The portion of
the Separate Account's assets supporting these policies may not be used to
satisfy liabilities arising out of any other business we may conduct. This means
that the assets supporting Policy Account values maintained in the Separate
Account are not subject to the claims of our other creditors.
The Separate Account has several Funds which invest in Class IB shares of a
corresponding portfolio of the HRT or EQAT. You may allocate some or all
premiums among the Funds.
In addition to premiums made under the policies, we may allocate to the Separate
Account monies received under other variable life insurance policies. Owners of
all such policies will participate in the Separate Account in proportion to the
amounts they have in the Funds that relate to their policies. We may also retain
in the Separate Account assets that are in excess of the reserves and other
liabilities relating to Policy Account values, or we may transfer them to our
general account.
If any changes are made that result in a material change in the underlying
investments of a Fund, policyowners will be notified. We may make other changes
in the policies that do not reduce any Cash Surrender Value, Death Benefit,
Policy Account value, or other accrued rights or benefits.
THE TRUSTS. The following portfolios of The Hudson River Trust (HRT) and the EQ
Advisors Trust (EQAT) are available under your policy. The Funds of the Separate
Account invest in these portfolios according to your instructions.
INVESTMENT PORTFOLIOS
<TABLE>
<CAPTION>
HRT PORTFOLIOS EQAT PORTFOLIOS
- ----------------------------- --------------------------------------------------------------------
<S> <C> <C>
o Alliance Money Market o BT Equity 500 Index o MFS Research
o Alliance High Yield o BT Small Company Index o MFS Emerging Growth Companies
o Alliance Common Stock o BT International Equity Index o Morgan Stanley Emerging Markets
o Alliance Aggressive Stock o JPM Core Bond Equity
o Alliance Small Cap Growth o Lazard Large Cap Value o EQ/Putnam Growth & Income Value
o Lazard Small Cap Value o EQ/Putnam Investors Growth
o EQ/Putnam International Equity
- ----------------------------- --------------------------------------------------------------------
</TABLE>
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
9
<PAGE>
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 Class IB shares of a corresponding portfolio.
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, the Board of Trustees of HRT 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 Board's response to any of those events
insufficiently protects our policyowners, we will see to it that appropriate
action is taken to do so. Also, if we ever believe that any of the Trusts'
portfolios is so large as to materially impair the investment performance of the
portfolio or the Trust involved, we will examine other investment options.
All of the portfolios, except for the Morgan Stanley Emerging Markets Equity
portfolio and Lazard Small Cap Value portfolio, are "diversified" for 1940 Act
purposes. The Trustees of the HRT or the EQAT may establish additional
portfolios or eliminate existing 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 and all other aspects of their operations, appears in
the HRT prospectus (beginning after this prospectus), the EQAT prospectus
(beginning after the HRT prospectus), or in their respective Statements of
Additional Information, which are available upon request.
HRT'S MANAGER AND INVESTMENT ADVISER. HRT is managed and its portfolios are
advised by Alliance Capital Management L.P. ("Alliance"), which is registered
with the SEC as an investment adviser under the 1940 Act.
In its role as manager of the HRT, Alliance has overall responsibility for the
general management and administration of the HRT, including selecting the
portfolio managers for HRT's portfolios, monitoring their investment programs
and results, reviewing brokerage matters, performing fund accounting, overseeing
compliance by HRT with various Federal and state statutes, and carrying out the
directives of its Board of Trustees. With the approval of the HRT's Trustees,
Alliance may enter into agreements with other companies to assist with its
administrative and management responsibilities to the HRT.
ALLIANCE CAPITAL MANAGEMENT L.P. Alliance, a leading international investment
adviser, subject to the supervision of the Trustees of HRT, provides investment
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.
Alliance is a publicly traded limited partnership incorporated in Delaware. At
December 31, 1997, Alliance was managing approximately $218.7 billion in assets.
Alliance employs 223 investment professionals, including 83 research analysts.
Portfolio managers have average investment experience of more than 14 years.
All of the HRT portfolios are advised by Alliance. As adviser, Alliance is
responsible for developing the portfolios' investment programs, making
investment decisions for the portfolios, placing all orders for the purchase and
sale of those investments and performing certain limited related administrative
functions.
Alliance is an indirect, majority-owned subsidiary of Equitable, and its main
office is located at 1345 Avenue of the Americas, New York, New York 10105.
Additional information regarding Alliance is located in the HRT prospectus,
which directly follows this prospectus.
EQAT'S MANAGER. EQ Financial Consultants, Inc. ("EQF"), subject to the
supervision and direction of the Trustees of EQAT, has overall responsibility
for the general management and administration of the EQAT. EQF is an investment
adviser registered under the 1940 Act, as amended, and a broker-dealer
registered under the Securities Exchange Act of 1934, as amended ("1934 Act").
EQF currently furnishes specialized investment advice to other clients,
including individuals, pension and profit-sharing plans, trusts, charitable
organizations, corporations, and other business entities. EQF is a Delaware
corporation and an indirect, wholly owned subsidiary of Equitable.
EQF is responsible for providing management and administrative services to EQAT
and selects the investment advisers for EQAT's portfolios, monitors the EQAT
Advisers' investment programs and results, reviews brokerage matters, oversees
compliance by EQAT with various Federal and state statutes, and carries out the
directives of its Board of Trustees.
Pursuant to a service agreement, Chase Global Funds Services Company assists EQF
in the performance of its administrative responsibilities to the EQAT with other
necessary administrative, fund accounting and compliance services. EQ Financial
Consultants, Inc.'s main office is located at 1290 Avenue of the Americas, New
York, New York 10104.
EQAT'S INVESTMENT ADVISERS. Putnam Investment Management, Inc.; Massachusetts
Financial Services Company; Morgan Stanley Asset Management, Inc.; Bankers Trust
Company; J.P. Morgan Investment Management Inc.; and Lazard Asset Management
serve as EQAT Advisers only for their respective EQAT portfolios.
10
<PAGE>
Each EQAT Adviser furnishes EQAT's manager, EQF, with an investment program
(updated periodically) for each of its portfolios, makes investment decisions on
behalf of its EQAT portfolios, places all orders for the purchase and sale of
investments for the portfolio's account with brokers or dealers selected by such
Adviser and may perform certain limited related administrative functions.
If an EQAT portfolio shall at any time have more than one EQAT Adviser, the
allocation of an EQAT portfolio's assets among EQAT Advisers may be changed at
any time by EQF.
BANKERS TRUST COMPANY. Bankers Trust Company ("Bankers Trust") is a wholly owned
subsidiary of Bankers Trust New York Corporation which was founded in 1903.
Bankers Trust conducts a variety of general banking and trust activities and is
a major wholesale supplier of financial services to the international and
domestic institutional markets. Bankers Trust advises BT Equity 500 Index, a
domestic equity portfolio, BT International Equity Index, an international
equity portfolio, and BT Small Company Index, an aggressive equity portfolio. As
of December 31, 1997, Bankers Trust had approximately $317.8 billion in assets
under management worldwide. The executive offices of Banker Trust are located at
130 Liberty Street (One Bankers Trust Plaza), New York, NY 10006.
LAZARD ASSET MANAGEMENT. Lazard Asset Management ("LAM") is a division of Lazard
Freres & Co. LLC, which was founded in 1848. LAM and its affiliates provide
investment management services to client discretionary accounts with assets
totaling approximately $53 billion as of December 31, 1997. LAM advises Lazard
Large Cap Value, a domestic equity portfolio, and Lazard Small Cap Value, an
aggressive equity portfolio. LAM's global headquarters are located at 30
Rockefeller Plaza, New York, NY 10112.
J.P. MORGAN INVESTMENT MANAGEMENT INC. J.P. Morgan Investment Management Inc.
("J.P. Morgan") advises JPM Core Bond, a high quality bond portfolio. It is a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated (JPM & Co.). JPM &
Co., through J.P. Morgan and other subsidiaries, offers a wide range of services
to governmental, institutional, corporate and individual customers and acts as
investment adviser to individual and institutional clients. Its combined assets
under management totaled over $255 billion as of December 31, 1997. J.P. Morgan
is located at 522 Fifth Avenue, New York, NY 10036.
MASSACHUSETTS FINANCIAL SERVICES COMPANY. Massachusetts Financial Services
Company ("MFS") is America's oldest mutual fund organization, whose assets under
management as of December 31, 1997 were approximately $70.2 billion on behalf of
more than 2.7 million investors. MFS advises MFS Research, a domestic equity
portfolio, and MFS Emerging Growth Companies, an aggressive equity portfolio.
MFS is an indirect subsidiary of Sun Life Assurance Company of Canada and is
located at 500 Boylston Street, Boston, MA 02116.
MORGAN STANLEY ASSET MANAGEMENT INC. Morgan Stanley Asset Management ("MSAM")
provides a broad range of portfolio management services to customers in the
United States and abroad and serves as an investment adviser to numerous
open-end and closed-end investment companies. MSAM, together with its affiliated
institutional investment management companies, had approximately $146 billion in
assets under management and fiduciary care as of December 31, 1997. MSAM advises
Morgan Stanley Emerging Markets Equity, an international equity portfolio. MSAM
is a subsidiary of Morgan Stanley, Dean Witter & Co. and is located at 1221
Avenue of the Americas, New York, New York 10020.
PUTNAM INVESTMENT MANAGEMENT, INC. Putnam Investment Management, Inc. ("Putnam")
has been managing mutual funds since 1937. As of December 31, 1997, Putnam and
its affiliates managed more than $235 billion in assets. Putnam advises
EQ/Putnam Growth & Income Value, a domestic equity portfolio, EQ/Putnam
Investors Growth, a domestic equity portfolio and EQ/Putnam International
Equity, an international equity portolio. Putnam is an indirect subsidiary of
Marsh & McLennan Companies, Inc. and is located at One Post Office Square,
Boston, MA 02109.
Additional information regarding each of the companies which serve as an EQAT
Adviser appears in the EQAT prospectus, attached at the end of this prospectus.
INVESTMENT POLICIES AND OBJECTIVES 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 expected return and its risks. There is no guarantee that these objectives
will be achieved.
The value of your money invested in these portfolios will fluctuate, and may be
worth more or less than its original value when you or your beneficiaries redeem
your policy or make withdrawals. The policies and objectives of the portfolios
are as follows:
11
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT POLICY OBJECTIVE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HRT PORTFOLIO:
- -------------
Alliance Money Market Primarily high-quality short-term money market High level of current income while
instruments. preserving assets and maintaining
liquidity.
Alliance High Yield Primarily a diversified mix of high-yield, fixed- High return by maximizing current
income securities involving greater volatility income and, to the extent consistent
of price and risk of principal and income than with that objective, capital
high-quality fixed-income securities. The appreciation.
medium- and lower-quality debt securities
in which the portfolio may invest are commonly
known as "junk bonds."
Alliance Common Stock Primarily common stock and other equity-type instruments. Long-term growth of capital and
increasing income.
Alliance Aggressive Stock Primarily common stocks and other equity-type securities Long-term growth of capital.
issued by medium- and other smaller-sized companies with
strong growth potential.
Alliance Small Cap Growth Primarily U.S. common stock and other equity-type Long-term growth of capital.
securities issued by smaller companies with favorable
growth prospects.
EQAT PORTFOLIO:
- --------------
BT Equity 500 Index Invest in a statistically selected sample Replicate as closely as possible
of the 500 stocks included in the Standard & Poor's 500 (before the deduction of Portfolio
Composite Stock Price Index ("S&P 500"). expenses) the total return of the
S&P 500.
BT Small Company Index Invest in a statistically selected sample of the 2,000 Replicate as closely as possible
stocks included in the Russell 2000 Small Stock Index (before the deduction of Portfolio
("Russell 2000"). expenses) the total return of the
Russell 2000.
BT International Equity Index Invest in a statistically selected sample of the Replicate as closely as possible
securities of companies included in the (before the deduction of Portfolio
Morgan Stanley Capital International Europe, expenses) the total return of the EAFE.
Australia, Far East Index ("EAFE"), although not
all companies within a country will be represented in
the Portfolio at the same time.
JPM Core Bond Under normal circumstances, all of the Portfolio's High total return consistent with
assets will, at the time of purchase, consist of moderate risk of capital and
investment grade fixed-income securities rated BBB or maintenance of liquidity.
better by Standard & Poor's Rating Service or Baa
or better by Moody's Investors Service,
Inc. or unrated securities of comparable quality.
Lazard Large Cap Value Primarily equity securities of companies with relatively Capital appreciation.
large market capitalizations (i.e., companies having
market capitalizations of at least $1 billion at the time
of initial purchase) that the portfolio adviser considers
to be inexpensively priced relative to the return on
total capital or equity.
Lazard Small Cap Value Primarily equity securities of United States companies Capital appreciation.
with small market capitalizations (i.e., in the range of
companies represented in the Russell 2000) that the
portfolio adviser considers inexpensively priced relative
to the return on total capital or equity.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT POLICY OBJECTIVE
- ------------------------------------------------------------------------------------------------------------------------------------
EQAT PORTFOLIO (CONTINUED):
- --------------------------
<S> <C> <C>
MFS Research A substantial portion of assets invested in common Long-term growth of capital and future
stock or securities convertible into common stock income.
of companies believed by the portfolio adviser to
possess better than average prospects
for long-term growth.
MFS Emerging Growth Primarily in common stocks of emerging growth Long-term growth of capital.
Companies companies that the portfolio adviser believes are
early in their life cycle but which have
the potential to become major enterprises.
Morgan Stanley Emerging Markets Primarily equity securities of emerging market country Long-term capital appreciation.
Equity issuers with a focus on those in which the portfolio
adviser believes the economies are
developing strongly and in which the
markets are becoming more sophisticated.
EQ/Putnam Growth Primarily common stocks that offer potential for Capital growth and, secondarily,
& Income Value capital growth and may, consistent with the current income.
portfolio's investment objective, invest in common
stocks that offer potential for current
income.
EQ/Putnam Investors Growth Primarily common stocks that the Portfolio adviser Long-term growth of capital and any
believes afford the best opportunity for increased income that results
long-term capital growth. from this growth.
EQ/Putnam International Primarily a diversified portfolio of equity Capital appreciation.
Equity securities of companies organized under laws of
countries other than the United States.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Because you may invest Policy Account values in the Fund options described
above, Incentive Life Plus offers an opportunity for the Cash Surrender Value to
appreciate more rapidly than it would under comparable fixed benefit whole life
insurance. You must, however, accept the risk that if investment performance is
unfavorable, the Cash Surrender Value may not appreciate as rapidly and, indeed,
may decrease in value.
THE GUARANTEED INTEREST ACCOUNT
You may allocate some or all of your Policy Account to the Guaranteed Interest
Account, which is funded by our general account and pays interest at a declared
rate guaranteed for each policy year. The principal, after deductions, is also
guaranteed. The general account supports all of our insurance and annuity
guarantees, including the Guaranteed Interest Account, as well as our general
obligations. The general account is subject to regulation and supervision by the
Insurance Department of the State of New York and to the insurance laws and
regulations of all jurisdictions where we are authorized to do business. Because
of applicable exemptive and exclusionary provisions, interests in the general
account have not been registered under the Securities Act of 1933 (1933 Act),
nor is the general account an investment company under the 1940 Act.
Accordingly, neither the general account, the Guaranteed Interest Account nor
any interests therein are subject to regulation under the 1933 Act or the 1940
Act. We have been advised that the staff of the SEC has not made a review of the
disclosures that are included in the prospectus for your information and that
relate to the general account and the Guaranteed Interest Account. These
disclosures, however, may be subject to certain generally applicable provisions
of the Federal securities laws relating to the accuracy and completeness of
statements made in prospectuses.
The amount you have in the Guaranteed Interest Account at any time is the sum of
the amounts allocated or transferred to it, plus the interest credited to it,
minus amounts deducted, transferred and withdrawn from it. In addition, any
policy loan is secured by an amount in your Policy Account equal to the
outstanding loan. This amount remains part of the Policy Account but is assigned
to the Guaranteed Interest Account. We refer to this amount as the loaned amount
in the Guaranteed Interest Account. A Living Benefit payment will also result in
amounts being transferred to the Guaranteed Interest Account. See LIVING BENEFIT
OPTION in Part 2 of this prospectus.
ADDING INTEREST IN THE GUARANTEED INTEREST ACCOUNT. We pay a declared interest
rate on all amounts that you have in the Guaranteed Interest Account. At policy
issuance, and prior to each policy anniversary, we declare the rates that will
apply to amounts in the Guaranteed Interest Account for the following policy
year. These annual interest rates will never be less than the minimum guaranteed
interest rate of 4% (before deductions). Interest is credited and compounds
daily at an effective annual rate that equals the declared rate for each policy
year. Different rates may apply to policies currently being issued and
previously issued policies. Different rates are also paid on
13
<PAGE>
unloaned and loaned amounts in the Guaranteed Interest Account. See POLICY LOAN
INTEREST in Part 2 of this prospectus. Amounts securing a Living Benefit payment
are considered unloaned amounts for purposes of crediting interest.
TRANSFERS OUT OF THE GUARANTEED INTEREST ACCOUNT. Transfers out of the
Guaranteed Interest Account to the Separate Account are allowed once a year on
or within 30 days after your policy anniversary. If we receive your transfer
request up to 30 days before your policy anniversary, the transfer will be made
on your policy anniversary. If we receive your request on or within 30 days
after your policy anniversary, the transfer will be made as of the date we
receive your request. You may transfer up to 25% of your unloaned value in the
Guaranteed Interest Account as of the transfer date or the minimum transfer
amount, whichever is more. The minimum transfer amount is $500 or your total
unloaned value in the Guaranteed Interest Account on the transfer date,
whichever is less. Amounts securing a Living Benefit payment may not be
transferred from the Guaranteed Interest Account.
PART 2: DETAILED INFORMATION ABOUT INCENTIVE LIFE PLUS
FLEXIBLE PREMIUMS
You may choose the amount and frequency of premium payments, as long as they are
within the limits described below. We determine the applicable minimum initial
premium based on the age, sex, rating class and tobacco-user status of the
insured person, the initial Face Amount of the policy (the initial minimum Face
Amount is $50,000) and any additional benefits selected. In certain situations,
however, no distinction is made based on the sex of the insured person. See COST
OF INSURANCE CHARGE in Part 2 of this prospectus. You may choose to pay a higher
initial premium.
The full initial premium shown on your application must be given to your agent
or broker on or before the day the policy is delivered to you. No insurance
under your policy will take effect (a) until a policy is delivered and the full
initial premium is paid while the person proposed to be insured is living and
(b) unless the information in the application continues to be true and complete,
without material change, as of the time the initial premium is paid. If you have
submitted the full initial premium with your application, we may, subject to
certain conditions, provide a limited amount of temporary insurance on the
proposed insured. You may review a copy of our Temporary Insurance Agreement on
request.
Premiums must be by check or money order drawn on a U.S. bank in U.S. dollars
and made payable to Equitable. The preferred form of payment is a single check
on your business or personal account. Payment may also be in the form of a
single money order, bank draft or cashier's check payable directly to Equitable;
however, please be aware that Equitable is required to report the receipt of
these "cash equivalents" to the Internal Revenue Service under certain
circumstances. These checks, money orders and drafts are accepted subject to
collection. Cash and traveler's checks are not acceptable. Third party checks
payable to someone other than Equitable and endorsed over to Equitable are not
acceptable unless the check is money directly from a qualified retirement plan
or pursuant to a 1035 exchange (a tax-deferred exchange pursuant to Section 1035
of the Internal Revenue Code) or it is a trustee check that involves no refund.
Equitable's policy is to return any unacceptable forms of payment, and the
policyowner bears the risk of lapse or other consequences which may result from
the effective non-payment.
Premiums after the first must be sent directly to our Administrative Office. The
minimum premium is $100 (policies issued in some states or automatic payment
plans may have different minimums). This minimum may be increased if we give you
written notice.
We may return premium payments if we determine based upon our interpretation of
current tax rules that such premiums would cause your policy to become a
modified endowment contract or to cease to qualify as life insurance under
Federal income tax law. We may also make such changes to the policy as we deem
necessary to continue to qualify the policy as life insurance. See TAX EFFECTS
in Part 2 of this prospectus for an explanation of modified endowment contracts,
the special tax consequences of such contracts, and how your policy might become
a modified endowment contract.
PLANNED PERIODIC PREMIUMS AND SPECIFIED PREMIUMS. Although premiums are
flexible, page 3 of your policy (the Policy Information Page) will show a
"planned" periodic premium and "specified premiums." Specified premiums are
called no lapse guarantee premiums for policies issued in New York and New
Jersey. We measure actual premiums against specified premiums to determine
whether the death benefit guarantee provision or the 3-Year no lapse guarantee
provision will prevent the policy from going into default.
Specified premiums are actuarially determined at issue based on the age, sex,
tobacco-user status and rating class of the insured person, the Face Amount and
any additional benefits. Specified premiums may change if you make policy
changes that increase or decrease the Face Amount of the policy or a rider, add
or eliminate a rider, or if there is a change in the insured person's rating or
tobacco-user classification. Certain additional benefit riders will cause
specified premiums to increase each year. We reserve the right to limit the
amount of any premium payments which are in excess of specified premiums.
The planned periodic premium is an amount you determine (within limits set by
us) when you apply for the policy. The planned premium may be more or less than
the specified premiums. Neither the planned premium nor the specified premiums
are required premiums.
Failure to pay premiums could cause the policy to go into default and ultimately
terminate. See YOUR POLICY CAN TERMINATE in Part 2 of this prospectus.
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PREMIUM AND MONTHLY CHARGE ALLOCATIONS. On your application you provide us with
initial instructions as to how to allocate your net premiums and monthly charges
among the Funds and the Guaranteed Interest Account. Allocation percentages may
be any whole number from zero to 100, but the sum must equal 100. Allocations to
a Fund take effect on the first business day that follows the 20th calendar day
after the Issue Date of your policy. The Issue Date is shown on the Policy
Information Page, and is the date we actually issue your policy. The date your
allocation instructions take effect is called the Allocation Date. Our business
days are described in HOW WE DETERMINE THE UNIT VALUE in Part 2 of this
prospectus.
Until the Allocation Date, any net premiums allocated to a Fund will be
allocated to the Alliance Money Market Fund, and all monthly deductions
allocated to a Fund will be deducted from the Alliance Money Market Fund. On the
Allocation Date, amounts in the Alliance Money Market Fund will be allocated to
the various Funds in accordance with your policy application. We may delay the
Allocation Date for the same reasons that we would delay effecting a transfer
request. There will be no charge for the transfer out of the Alliance Money
Market Fund on the Allocation Date.
You may change the allocation percentages for either your current premium
payment or the current and future premium payments by writing to our
Administrative Office and indicating the changes you wish to make. Your request
must be signed. These changes will go into effect as of the date your request is
received at our Administrative Office, but no earlier than the first business
day following the Allocation Date, and will affect transactions on and after
such date.
DEATH BENEFITS
We pay a benefit to the beneficiary of the policy when the insured person dies.
This benefit will be equal to the death benefit under your policy plus any
additional benefits included in your policy and then due, less any policy loan,
any lien securing a Living Benefit payment and accrued interest. If the insured
person dies during a grace period, we will also deduct any overdue monthly
charges.
You may choose between two death benefit options:
o OPTION A provides a death benefit equal to the policy's Face Amount. Except
as described below, the Option A benefit is fixed.
o OPTION B provides a death benefit equal to the policy's Face Amount PLUS
the amount in your Policy Account on the day the insured person dies. Under
Option B, the value of the benefit is variable and fluctuates with the
amount in your Policy Account.
Policyowners who prefer to have favorable investment experience reflected in
increased insurance coverage should choose Option B. Policyowners who prefer to
have insurance coverage that does not vary in amount and lower cost of insurance
charges should choose Option A.
Under both options, a higher death benefit may apply. This higher death benefit
is a percentage multiple of the amount in your Policy Account. The percentage is
generally based on provisions of Federal tax law which require a minimum death
benefit in relation to cash value for your policy to qualify as life insurance.
A higher percentage multiple than that required by Federal tax law will be
applied at ages 91 and over. Since cost of insurance charges are assessed on the
difference between the Policy Account value and the death benefit, these charges
will increase if the higher death benefit takes effect.
The higher death benefit will be the amount in your Policy Account on the day
the insured person dies times the percentage for the insured person's age
(nearest birthday) at the beginning of the policy year of the insured person's
death. The percentage declines as the insured person gets older. For ages that
are not shown on the following table, the percentage multiples will decrease by
a ratable portion for each full year.
- --------------------------------------------------------------------------------
TABLE OF DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF POLICY ACCOUNT VALUES
INSURED 40 or 45 50 55 60 65 70 75 to 100
PERSON'S AGE under 95
250% 215% 185% 150% 130% 120% 115% 105% 100%
- --------------------------------------------------------------------------------
For example, if the insured person were 75 years old and your policy had a
Policy Account value of $200,000, the higher death benefit would be 105% of
$200,000 or $210,000.
GUARANTEEING THE DEATH BENEFIT. We will guarantee your death benefit coverage,
regardless of the policy's investment performance, if you have paid a certain
amount of premiums into your policy and you have not withdrawn or borrowed those
amounts. The death benefit guarantee period is either three years (under the
3-Year no lapse guarantee provision) or the period described in the following
paragraphs (under the death benefit guarantee provision). Whether your policy
has the 3-Year no lapse guarantee provision or the death benefit guarantee
provision depends upon the state in which your policy is issued. Policies issued
in New York and New Jersey have the 3-Year no lapse guarantee provision.
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The death benefit option you select (A or B) and the amount of your yearly
renewable term rider for the insured person (YRT rider) can affect the length of
time that the death benefit guarantee provision will last. If you have selected
death benefit Option A, and you never change it to Option B, assuming no YRT
rider, then the death benefit guarantee provision will terminate on the Final
Policy Date. See MATURITY BENEFIT in Part 2 of this prospectus. If ever your
policy, at any time, has an Option B death benefit, and assuming no YRT rider,
the death benefit guarantee provision will terminate on the later of (1) the
policy anniversary nearest the insured person's 80th birthday or (2) the 15th
policy anniversary. However, if your death benefit first changes to an Option B
after this time, the death benefit guarantee provision will terminate
immediately. The death benefit option does not have any effect on the length of
the 3-Year no lapse guarantee provision.
If your policy is issued with a YRT rider (see ADDITIONAL BENEFITS MAY BE
AVAILABLE in Part 2 of this prospectus), and your policy is issued in any state
other than New York, New Jersey, and Massachusetts the length of time that the
death benefit guarantee provision will last (the "DBG Period") may be shorter
than the times set forth in the preceding paragraph. The DBG Period will depend
on the proportion that the face amount of the YRT rider bears to the total face
amount (base policy plus YRT rider) at the issue date of the policy and the
death benefit option.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
% OF YRT RIDER TO TOTAL DBG PERIOD IF DEATH BENEFIT DBG PERIOD IF DEATH BENEFIT
FACE AMOUNT OPTION IS ALWAYS A OPTION IS EVER B
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than 25% To the later of policy anniversary nearest age To the later of policy anniversary nearest
75 or 15 policy years* age 75 or 30 policy years
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
25% to less than 50% To the later of policy anniversary nearest age To the later of policy anniversary nearest
65 or 20 policy years age 65 or 15 policy years
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
50% to less than 75% To the later of policy anniversary nearest age To the later of policy anniversary nearest
55 or 10 policy years age 55 or 10 policy years
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
75% and greater 3 policy years 3 policy years
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* In no event will the DBG period extend beyond the Final Policy Date.
The DBG Period is determined at the issue date and is not affected by subsequent
changes in the base policy face amount or the YRT rider face amount, or by
dropping or exchanging the YRT rider after issue. The only time the DBG Period
will change after issue is if the policy was originally Option A and is later
changed to Option B.
If your policy's Net Cash Surrender Value is insufficient to pay the monthly
deductions, the death benefit guarantee provision can keep your policy from
terminating if two conditions are satisfied. First, any outstanding policy loan
plus accrued loan interest cannot exceed the policy's Cash Surrender Value.
Second, the amount of your actual premium payments minus any withdrawals (each
accumulated at 4% interest) must equal or exceed a benchmark premium amount. To
determine this benchmark premium amount we accumulate the specified premiums
(shown on the Policy Information Page) at 4% interest.
CHANGES IN INSURANCE PROTECTION
CHANGING THE FACE AMOUNT. You may request an increase in the Face Amount after
the first policy year and a decrease after the second policy year. You must send
your signed written request to our Administrative Office. See TAX EFFECTS in
Part 2 of this prospectus for the tax consequences of changing the Face Amount.
If disability waiver goes into effect (see ADDITIONAL BENEFITS MAY BE AVAILABLE
in Part 2 of this prospectus), we will not permit any Face Amount change. Any
change will be subject to our approval and the following conditions:
Face Amount Increases. To increase the Face Amount, you must provide
satisfactory evidence that the insured person is still insurable. The cost of
insurance rate for the amount of the increase will be based on the rating class,
attained age and tobacco-user status of the insured person on the date of the
increase and on the insured person's sex. See COST OF INSURANCE CHARGE in Part 2
of this prospectus. We reserve the right to decline Face Amount increases if the
insured person has become a more expensive risk.
Any increase must be at least $10,000. Specified premiums as well as monthly
deductions from your Policy Account for the cost of insurance and the death
benefit guarantee provision will generally increase beginning on the date the
increase takes effect. An administrative charge of $1.50 for each additional
$1,000 of insurance (up to a maximum charge of $240) will be deducted from your
Policy Account. See HOW POLICY ACCOUNT CHARGES ARE ALLOCATED in Part 2 of this
prospectus.
Surrender Charges will generally be applicable to a Face Amount increase for
fifteen years from the effective date of the increase. The Premium Surrender
Charge percentage may be higher than the percentage applied prior to the
increase. Face Amount reductions will be applied against prior Face Amount
increases, if any, in the reverse order in which such increases occurred, and
then to the original Face Amount. See SURRENDER CHARGES in Part 2 of this
prospectus.
Following the increase, a portion of each premium payment will be deemed to be
attributable to the Face Amount increase. The Premium Sales Charge will
generally be deducted from this amount, even if we had previously stopped
deducting the charge on the premiums paid
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before the increase in accordance with our current practice. The Premium Sales
Charge percentage may be lower than the percentage applied prior to the
increase. See DEDUCTIONS FROM PREMIUMS -- PREMIUM SALES CHARGE in Part 2 of this
prospectus.
You will have the right to cancel the Face Amount increase within 10 days after
receipt of a new Policy Information Page showing the increase. If you cancel the
increase we will reverse any charges attributable to the increase and
recalculate the Policy Account value, Cash Surrender Value and Surrender Charges
to what they would have been had the increase not taken place. No Premium or
Administrative Surrender Charge will be incurred upon cancellation. We reserve
the right not to offer the cancellation right for Face Amount increases if we
are not required to do so under applicable law.
Face Amount Decreases. You may reduce the Face Amount but not below the minimum
we require to issue this policy at the time of the reduction. Any reduction must
be at least $10,000. Specified premiums as well as monthly deductions from your
Policy Account for the death benefit guarantee provision and the cost of
insurance will generally decrease (even though the rates may increase) beginning
on the date the decrease in Face Amount takes effect.
Face Amount decreases that reduce the Face Amount below certain levels will
result in higher monthly administrative charges. If you reduce the Face Amount
during the first fifteen policy years or during the first fifteen years after a
Face Amount increase, we may deduct a pro rata share of the applicable Surrender
Charges from the Policy Account. Assuming you have not previously changed the
Face Amount, the pro rata Surrender Charges for a partial surrender will be
determined by dividing the amount of the Face Amount decrease by the initial
Face Amount and multiplying that fraction by the Surrender Charges. Face Amount
reductions will be applied against prior Face Amount increases, if any, in the
reverse order in which such increases occurred, and then to the original Face
Amount. See DEDUCTIONS FROM YOUR POLICY ACCOUNT and SURRENDER CHARGES in Part 2
of this prospectus.
CHANGING THE DEATH BENEFIT OPTION. At any time after the second policy year
while your policy is in force, you may change the death benefit option by
sending a signed written request to our Administrative Office. See TAX EFFECTS
in Part 2 of this prospectus for the tax consequences of changing the death
benefit option.
o If you change from OPTION A TO OPTION B, the Face Amount will be decreased
by the amount in your Policy Account on the date of the change. This change
may shorten the length of time the death benefit guarantee provision is
available. See GUARANTEEING THE DEATH BENEFIT in Part 2 of this prospectus.
We may not allow such a change if it would reduce the Face Amount below the
minimum required to issue this policy at the time of the reduction. We may
require evidence of insurability to make the change.
o If you change from OPTION B TO OPTION A, the Face Amount will be increased
by the amount in the Policy Account on the date of the change.
These increases and decreases in Face Amount are made so that the amount of the
death benefit remains the same on the date of the change. When the death benefit
remains the same, there is no change in the net amount at risk, which is the
amount on which cost of insurance charges are based (see COST OF INSURANCE
CHARGE in Part 2 of this prospectus). If your death benefit is determined by a
percentage multiple of the Policy Account, however, the new Face Amount will be
determined differently. A Face Amount change that results from a death benefit
option change will not affect any expense or sales charge (including any
Surrender Charge) which varies by Face Amount, and no Surrender Charges will be
deducted or established at the time of the change.
SUBSTITUTION OF INSURED PERSON. If you provide satisfactory evidence that the
person proposed to be insured is insurable, then, subject to certain
restrictions, you may, after the second policy year, substitute the insured
person under your policy. The cost of insurance charges may change, but we will
not change the Surrender Charges. Substituting the insured person is a taxable
event and may, depending upon individual circumstances, have other adverse tax
consequences as well, including classification of the policy as a modified
endowment contract or disqualification of the policy as life insurance for
Federal income tax purposes unless funds are distributed out of the policy. See
TAX EFFECTS in Part 2 of this prospectus. You should consult your tax adviser
prior to substituting the insured person. As a condition to substituting the
insured person we may require you to sign a form acknowledging the potential tax
consequences of making this change. A $100 charge will be deducted from the
Policy Account for each substitution of insured person.
WHEN POLICY CHANGES GO INTO EFFECT. A substitution of the insured person, or
change in Face Amount or death benefit option, will go into effect 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
based upon our interpretation of current rules, the change might disqualify your
policy as life insurance under applicable Federal tax law. In other cases there
may be adverse tax consequences as a result of the change. See TAX EFFECTS in
Part 2 of this prospectus.
MATURITY BENEFIT
If the insured person is still living on the policy anniversary nearest his or
her 100th birthday (Final Policy Date), we will pay you the amount in the Policy
Account net of any policy loan, any lien securing a Living Benefit payment and
accrued interest. The policy will then terminate. You may choose to have this
benefit paid in installments. See TAX EFFECTS in Part 2 of this prospectus and
YOUR PAYMENT OPTIONS in Part 3 of this prospectus.
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<PAGE>
LIVING BENEFIT OPTION
Subject to our underwriting guidelines and availability in your state, our
Living Benefit rider will be added to your policy at issue. The Living Benefit
rider enables the policyowner to receive a portion of the policy's death benefit
(excluding death benefits payable under certain riders) if the insured person
has a terminal illness. Certain eligibility requirements apply when you submit a
Living Benefit claim (for example, satisfactory evidence of less than six-month
life expectancy). There is no additional charge for the rider, but we will
deduct an administrative charge of up to $250 from the proceeds of the Living
Benefit payment. In addition, if you tell us that you do not wish to have the
rider added at issue, but you later ask to add it, additional underwriting will
be required and there will be a $100 administrative charge.
When a Living Benefit claim is paid, we establish a lien against the policy. The
amount of the lien is the sum of the Living Benefit payment and any accrued
interest on that payment. Interest will be charged at a rate equal to the
greater of: (i) the yield on a 90-day Treasury bill and (ii) the maximum
adjustable policy loan interest rate permitted in the state your policy is
delivered. See BORROWING FROM YOUR POLICY ACCOUNT -- POLICY LOAN INTEREST in
Part 2 of this prospectus.
Until a death benefit is paid, or the policy is surrendered, a portion of the
lien is allocated to the policy's Cash Surrender Value. This liened amount will
be transferred to the Guaranteed Interest Account where it will earn interest at
the same rate as unloaned amounts. See THE GUARANTEED INTEREST ACCOUNT in Part 2
of this prospectus. This liened amount will not be available for loans,
transfers or partial withdrawals. Any death benefit, maturity benefit or Net
Cash Surrender Value payable upon policy surrender will be reduced by the amount
of the lien.
The receipt of a Living Benefit payment may be able to qualify for exclusion
from income tax. See TAX EFFECTS in Part 2 of this prospectus. Consult your tax
adviser. Receipt of a Living Benefit payment may also affect a policyowner's
eligibility for certain government benefits or entitlements. You should contact
your Equitable agent if you wish to make a claim under the rider.
ADDITIONAL BENEFITS MAY BE AVAILABLE
Your policy may include additional benefits. A monthly charge will be deducted
from your Policy Account for each additional benefit you choose. Eligibility for
and changes in these benefits are subject to our underwriting and other rules.
More details will be included in your policy if you choose any of these
benefits. The following additional benefits are currently available: disability
waiver benefits, accidental death benefit, term insurance riders for the insured
person (including the YRT rider), children's term insurance, term insurance on
an additional insured person, designated insured option rider, option to
purchase additional insurance and first-to-die term insurance.
The designated insured option rider permits the policyowner, upon the death of
the insured person, to purchase insurance on the life of a "designated insured
person" without evidence of insurability. The option to purchase additional
insurance permits purchases of additional amounts of insurance on the insured
person, without evidence of insurability, upon the occurrence of certain
specified events. The first-to-die rider is yearly renewable term insurance that
insures two lives and pays a death benefit upon the first death.
The term insurance riders for the insured person allow you to purchase
additional death benefit coverage. Choosing coverage under a term insurance
rider for the insured person in lieu of coverage under the base policy will
reduce total charges and increase Policy Account values on a current charge
basis. The more term insurance coverage you elect, the greater will be the
amount of reduction in charges and increase in Policy Account values on a
current charge basis. Also, term coverage is not subject to a surrender charge.
However, if the higher death benefit becomes applicable (see DEATH BENEFITS in
Part 2 of this prospectus) or if term rider insurance charges increase in
relation to cost of insurance charges on the base policy, the combination
coverage may ultimately become more costly and have lower Policy Account values
than coverage under the base policy alone. Generally, the greater the proportion
of term insurance coverage you elect, the greater the likelihood that the higher
death benefit will apply. Also, the Living Benefit option discussed above does
not apply to any term insurance coverage. Moreover, in New York, there are age
restrictions on the final renewal period for term riders. If you later terminate
your term rider coverage and also increase the Face Amount under the base
policy, a new Surrender Charge period will commence.
The amount of the specified or 3-Year no lapse guarantee premium will be
affected by the term rider coverage. In addition, if your policy is issued with
a YRT rider, the duration of the death benefit guarantee may be shorter. See
GUARANTEEING THE DEATH BENEFIT in Part 2 of this prospectus. Your agent can
provide further information and policy illustrations showing how the term riders
can affect your policy values under different assumptions.
YOUR POLICY ACCOUNT VALUE
The amount in your Policy Account is the sum of the amounts you have in the
Guaranteed Interest Account and in the Funds. Your Policy Account also reflects
various charges. See DEDUCTIONS AND CHARGES in Part 2 of this prospectus.
AMOUNTS IN THE SEPARATE ACCOUNT. Amounts allocated, transferred or added to a
Fund are used to purchase units of that Fund. Units are redeemed from a Fund
when amounts are withdrawn, transferred or deducted for charges or capitalized
loan interest. The number of units purchased or redeemed in a Fund is calculated
by dividing the dollar amount of the transaction by the Fund's unit value
calculated
18
<PAGE>
after the close of business that day. On any given day, the value you have in a
Fund is the unit value for that Fund times the number of units credited to you
in that Fund.
HOW WE DETERMINE THE UNIT VALUE. We determine unit values for the Funds at the
end of each business day. 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 when we are closed, or
after 4:00 p.m. Eastern Time, the transaction date will be the next day we are
open. The transaction date for automatic transactions is the date they are
scheduled to be performed.
The unit value that applies to a transaction will be the unit value calculated
at the close of business on the transaction date. When a transaction is
scheduled on a non-business day, the unit value applied will be the unit value
calculated for the next business day. The unit value for any business day is
equal to the unit value for the preceding business day multiplied by the net
investment factor for that Fund on that business day.
A net investment factor is determined for each Fund 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
mortality and expense risk charge for each calendar day between business days
(for example, a Monday calculation may include charges for Saturday, Sunday and
Monday). The daily mortality and expense risk charge is currently at an annual
rate of .60% and is guaranteed not to exceed an annual rate of .90%. See CHARGE
AGAINST THE SEPARATE ACCOUNT in Part 2 of this prospectus. Finally, we reserve
the right to subtract any daily charge for taxes or amounts set aside as a
reserve for taxes. For current Incentive Life Plus unit values, call (888)
228-6690.
TRANSFERS OF POLICY ACCOUNT VALUE. You may request a transfer of amounts among
Funds or to the Guaranteed Interest Account. Special rules apply to transfers
out of the Guaranteed Interest Account. See TRANSFERS OUT OF THE GUARANTEED
INTEREST ACCOUNT in Part 1 of this prospectus. You may make a transfer by
telephone or by submitting a signed written transfer request to our
Administrative Office. Transfer request forms are available from your Equitable
agent or from our Administrative Office. Special rules apply to telephone
transfers. See TELEPHONE TRANSFERS in Part 2 of this prospectus.
The minimum amount which may be transferred is $500. This minimum need not come
from any one Fund or be transferred to any one Fund as long as the total amount
transferred that day, including any amounts transferred to or from the
Guaranteed Interest Account, is at least equal to the minimum. However, we will
transfer the entire amount in any Fund even if it is less than the minimum
specified in your policy. A lower minimum amount applies to our Automatic
Transfer Service, which is described below.
Transfers take effect on the date we receive your request, but no earlier than
the first business day following the Allocation Date. When part of a transfer
request cannot be processed, we will not process any part of the request. This
could occur, for example, where the request does not comply with our transfer
limitations, or where the request is for a transfer of an amount greater than
that currently allocated to a Fund. We may delay making a transfer if the New
York Stock Exchange is closed or the SEC has declared that an emergency exists.
In addition, we may delay transfers where permitted under applicable law.
AUTOMATIC TRANSFER SERVICE. The Automatic Transfer Service enables you to make
automatic monthly transfers out of the Money Market Fund into the other Funds.
To start using this service you must first complete a special election form that
is available from your agent or our Administrative Office. You must also have a
minimum of $5,000 in the Alliance Money Market Fund on the date the Automatic
Transfer Service is scheduled to begin. You can elect up to eight Funds for
monthly transfers, but the minimum amount that may be transferred to each Fund
each month is $50.
If you elect the Automatic Transfer Service with your policy application, the
automatic transfers will begin in the second policy month following the
Allocation Date. If you elect the Automatic Transfer Service after your
application has been submitted, automatic transfers will begin on the next
monthly processing date after we receive your election form at our
Administrative Office. See POLICY PERIODS, ANNIVERSARIES, DATES AND AGES in Part
2 of this prospectus.
The Automatic Transfer Service will remain in effect until the earliest of the
following events: (1) the amount in the Money Market Fund is insufficient to
cover the automatic transfer amount; (2) the policy is in a grace period; (3) we
receive at our Administrative Office your written instruction to cancel the
Automatic Transfer Service; or (4) we receive notice of death under the policy.
Using the Automatic Transfer Service does not guarantee a profit or protect
against loss in a declining market.
TELEPHONE TRANSFERS. You may make transfers by telephone by calling our
Administrative Office toll free at (888) 228-6690. In order to make transfers by
telephone, you must first complete and return an authorization form.
Authorization forms can be obtained from your
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Equitable agent or our Administrative Office. The completed signed form MUST be
returned to our Administrative Office before requesting a telephone transfer.
Telephone transfers may be requested on each day we are open to transact
business. You will receive the Fund's unit value as of the close of business on
the day you call. We do not accept telephone transfer requests after 4:00 p.m.
Eastern Time. Only one telephone transfer request is permitted per day and it
may not be revoked at any time. The telephone transfer requests are
automatically recorded and are invalid if incomplete information is given,
portions of the request are inaudible, no authorization form is on file, or the
request does not comply with the transfer limitations described above.
We have established reasonable procedures designed to confirm that instructions
communicated by telephone are genuine. Such procedures include requiring certain
personal identification information prior to acting on telephone instructions
and providing written confirmation of instructions communicated by telephone. If
we do not employ reasonable procedures to confirm that instructions communicated
by telephone are genuine, we may be liable for any losses arising out of any act
or any failure to act resulting from our own negligence, lack of good faith, or
willful misconduct. In light of the procedures established, we will not be
liable for following telephone instructions that we reasonably believe to be
genuine.
During times of extreme market activity it may be impossible to contact us to
make a telephone transfer. If this occurs, you should submit a written transfer
request to our Administrative Office. Our rules on telephone transfers are
subject to change and we reserve the right to discontinue telephone transfers in
the future.
CHARGE FOR TRANSFERS. We have reserved the right under your policy to make a
charge of up to $25 for transfers of Policy Account value. Currently, you will
be able to make 12 free transfers in any policy year, but we will charge $25 per
transfer after the twelfth transfer. 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 apply to the transfer of all of your amounts in the
Separate Account to the Guaranteed Interest Account.
BORROWING FROM YOUR POLICY ACCOUNT
You may borrow up to 90% of your policy's Cash Surrender Value using only your
policy as security for the loan. Any new loan must be at least $500. If you
request an additional loan, the additional amount will be added to the
outstanding loan and accrued loan interest. Any amount that secures a loan
remains part of your Policy Account but is assigned to the Guaranteed Interest
Account. This loaned amount earns an interest rate expected to be different from
the interest rate for unloaned amounts. Amounts securing a Living Benefit
payment are not available for policy loans.
HOW TO REQUEST A LOAN. You may request a loan by sending a signed written
request to our Administrative Office. You should tell us how much of the loan
you want taken from your unloaned amount in the Guaranteed Interest Account and
how much you want taken from the Funds. If you request a loan from a Fund, we
will redeem units sufficient to cover that part of the loan and transfer the
amount to the loaned portion of the Guaranteed Interest Account. The amounts you
have in each Fund or the Account will be determined as of the day your request
for a loan is received at our Administrative Office.
If you do not indicate how you wish to allocate it, the loan will be allocated
according to the deduction allocation percentages applicable to your Policy
Account. If the loan cannot be allocated based on these percentages, it will be
allocated based on the proportions that your unloaned amount in the Guaranteed
Interest Account and your values in the Funds bear to the unloaned value of your
Policy Account.
POLICY LOAN INTEREST. Interest on a policy loan accrues daily at an adjustable
interest rate. We determine the rate at the beginning of each policy year. The
same rate applies to any outstanding policy loans and any new amounts you borrow
during the year. You will be notified of the current rate when you apply for a
loan. The maximum rate is the greater of 5%, or the "Published Monthly Average"
for the month that ends two months before the interest rate is set. The
"Published Monthly Average" is the Monthly Average Corporates yield shown in
Moody's Corporate Bond Yield Averages published by Moody's Investors Service,
Inc. If this average is no longer published, we will use any successor or the
average established by the insurance supervisory official of the jurisdiction in
which the policy is delivered. We will not charge more than the maximum rate
permitted by applicable law. We may also set a rate lower than the maximum.
Any change in the rate from one year to the next will be at least 1/2%. The
maximum loan interest rate will only change, therefore, if the Published Monthly
Average differs from the previous interest rate by at least 1/2 of 1%. You will
be notified in advance of any increase in the interest rate on any loan you have
outstanding.
When you borrow on your policy, the amount of your loan is set aside in the
Guaranteed Interest Account where it earns a declared rate for loaned amounts.
The interest rate we credit to the loaned portion of the Guaranteed Interest
Account will be at an annual rate up to 2% less than the loan interest rate we
charge. However, we reserve the right to credit a lower rate than this if in the
future tax laws change such that our taxes on policy loans or policy loan
interest are increased.
Under our current rules, the rate we credit on loaned amounts for the first
fifteen policy years is 1% less than the rate we charge for policy loan
interest, and the rate difference drops from 1% to 1/4 of 1% beginning in the
sixteenth policy year. Because Incentive Life Plus was
20
<PAGE>
offered for the first time in 1995, no reduction in the rate difference has yet
been attained. These rate differentials are those currently in effect and are
not guaranteed. Interest credited on loaned amounts will never be less than 4%.
Interest accrues daily on any loaned amount in the Guaranteed Interest Account.
On each policy anniversary and anytime you repay a policy loan in full, accrued
interest on the loaned amount is allocated to the Separate Account Funds and to
the unloaned portion of the Guaranteed Interest Account in accordance with your
premium allocation percentages.
WHEN INTEREST IS DUE. Interest is due on each policy anniversary. If you do not
pay the interest when it is due, it will be added to your outstanding loan and
allocated based on the deduction allocation percentages for your Policy Account
which are then in effect. This means an additional loan is made to pay the
interest and amounts are transferred from the Funds to make the loan. If the
interest cannot be allocated on this basis, it will be allocated as described
above for allocating your loan.
REPAYING THE LOAN. You may repay all or part of a policy loan at any time. While
you have a policy loan, we assume that any money you send us is a premium
payment. If you wish to have any of these payments applied as a loan repayment,
you must specifically so indicate in writing. Loan repayments are not subject to
a charge for taxes or a Premium Sales Charge. Any amount not needed to repay a
loan and accrued loan interest will be applied as a premium payment. We will
first allocate loan repayments to our Guaranteed Interest Account until the
amount of any loans originally allocated to that Account have been repaid. After
you have repaid this amount, you may choose how you want us to allocate 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 set aside in the Guaranteed Interest
Account will not be available for investment in the Funds or in the unloaned
portion of the Guaranteed Interest Account. Whether you earn more or less with
the loaned amount set aside depends on the investment experience of the Funds
and the rates declared for the unloaned portion of the Guaranteed Interest
Account. The amount of any policy loan and accrued loan interest will reduce the
proceeds paid from your policy upon the death of the insured person, policy
maturity or policy surrender. In addition, a loan will reduce the amount
available for you to withdraw from your policy. See TAX EFFECTS in Part 2 of
this prospectus for the tax consequences of a policy loan. A loan may also
affect the length of time that your insurance remains in force because the
amount set aside to secure your loan cannot be used to cover monthly deductions
or a loan may prevent the death benefit guarantee provision from keeping the
policy out of default. See YOUR POLICY CAN TERMINATE in Part 2 of this
prospectus.
PARTIAL WITHDRAWALS AND SURRENDER
PARTIAL WITHDRAWALS. At any time after the first policy year while the insured
person is living, you may request a partial withdrawal of your Net Cash
Surrender Value by sending a signed written request to our Administrative
Office. When you make a partial withdrawal, an expense charge of $25 or 2% of
the amount requested, whichever is less, will be deducted from your Policy
Account. Any such withdrawal is subject to our approval and to certain
conditions. Amounts securing a Living Benefit payment are not available for
partial withdrawals. In addition, we reserve the right to decline a request for
a partial withdrawal. Under our current rules, a withdrawal must:
o be at least $500,
o not cause the death benefit to fall below the minimum Face Amount for which
we would issue the policy at the time, and
o not cause the policy to fail to qualify as life insurance under applicable
tax law.
You may specify how much of the withdrawal you want taken from amounts you have
in each Fund and the unloaned portion of the Guaranteed Interest Account. The
related expense charge will also be deducted from the amount withdrawn. If you
do not specifically indicate, we will make the withdrawal and deduct the related
expense charge on the basis of your deduction allocation percentages. If we
cannot make the withdrawal and deduct the expense charge in the manner discussed
above, we will make the withdrawal and deduction based on the proportions that
your unloaned amounts in the Guaranteed Interest Account and the Funds bear to
the total unloaned value of your Policy Account.
A partial withdrawal reduces the amount you have in your Policy Account and Cash
Surrender Value on a dollar-for-dollar basis. Normally, it also reduces the
death benefit on a dollar-for-dollar basis, but does not affect the net amount
at risk, which is the difference between the current death benefit and the
amount in your Policy Account. If you selected death benefit Option A, the Face
Amount of your policy will generally be reduced so that there will be no change
in the net amount at risk. However, under either option, if the death benefit is
based on the Policy Account percentage multiple, the reduction in death benefit
would be greater and the net amount at risk would be reduced. See DEATH BENEFITS
in Part 2 of this prospectus. The withdrawal and these reductions will be
effective as of the date your request is received at our Administrative Office.
See TAX EFFECTS in Part 2 of this prospectus for the tax consequences of a
partial withdrawal and a reduction in benefits.
SURRENDER FOR NET CASH SURRENDER VALUE. The Cash Surrender Value is the amount
in your Policy Account minus the Surrender Charges described under SURRENDER
CHARGES in Part 2 of this prospectus. The Net Cash Surrender Value equals the
Cash Surrender Value minus any loan and accrued loan interest.
21
<PAGE>
You may surrender your policy for its Net Cash Surrender Value at any time while
the insured person is living. See TAX EFFECTS in Part 2 of this prospectus for
the tax consequences of a surrender. We will deduct from the Net Cash Surrender
Value any amount securing a Living Benefit payment. We will compute the Net Cash
Surrender Value as of the date we receive your written surrender request and the
policy at our Administrative Office. All insurance coverage under your policy
will end on that date.
DEDUCTIONS AND CHARGES
DEDUCTIONS FROM PREMIUMS. Charges for certain taxes are deducted from all
premiums. In addition, a Premium Sales Charge will be deducted from your
premiums as specified below. The balance of each premium (the net premium) is
placed in your Policy Account.
Charge For Taxes. We deduct a charge designed to approximate certain taxes and
additional charges imposed upon us by states and other jurisdictions. Such
charges currently range from .70% to 5% (Virgin Islands).
This charge may be increased or decreased to reflect any changes in our taxes.
In addition, if an insured person changes his or her place of residence, you
should notify us to change our records so that the charge will reflect the new
jurisdiction. Any change will take effect on the next policy anniversary, if
received at least 60 days prior to the policy anniversary.
Premium Sales Charge. A percentage of each premium will be deducted to
compensate us in part for sales and promotional expenses in connection with
selling Incentive Life Plus, such as commissions, the cost of preparing sales
literature, other promotional activities and other direct and indirect expenses.
See SURRENDER CHARGES in Part 2 of this prospectus. The Premium Sales Charge
percentage depends upon the Face Amount of the Policy as follows:
FACE AMOUNT RANGE: $50,000 TO $99,999 $100,000 TO $499,999 $500,000 AND OVER
-------------------------------------------------------------------------------
PERCENTAGE: 6% 4% 3%
Currently, we deduct the Premium Sales Charge from each premium payment until
the cumulative premiums paid equals ten times the "sales load target premium."
The sales load target premium varies by issue age, sex and tobacco-user status
of the insured person and the policy's Face Amount, and is generally less than
or equal to 75% of one annual whole life premium calculated at 4% interest and
guaranteed maximum cost of insurance and expense charges. We reserve the right,
however, to deduct the Premium Sales Charge from each premium payment at any
time.
If you request a Face Amount increase above the previous highest Face Amount, we
will establish a new sales load target premium attributable to the amount of the
increase, and the Premium Sales Charge will be deducted from that portion of
each subsequent premium payment deemed attributable to the increase until such
premium payments have cumulatively reached ten times the new sales load target
premium. Moreover, if the increase moves the policy into a higher Face Amount
range, the Premium Sales Charge percentage applied to future premiums will be
the lower percentage for that Face Amount range. Face Amount decreases do not
change the Premium Sales Charge percentage.
DEDUCTIONS FROM YOUR POLICY ACCOUNT. At the beginning of each policy month, the
following charges are deducted from your Policy Account:
Monthly Administrative Charge. The administrative charge is designed to
compensate us for administrative activities in connection with issuing and
maintaining your policy, such as billing, policy transactions and policyowner
communications. The amount of the monthly administrative charge depends upon the
initial Face Amount, the policy year and the issue age of the insured person as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
FACE AMOUNT RANGE $50,000 TO FACE AMOUNT RANGE $100,000 TO FACE AMOUNT RANGE $500,000 AND
ISSUE AGE $99,999 $499,999 OVER
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0-29 $20 in years 1 & 2 $40 in year 1 $25 in year 1
$8 in years 3 and later* $6 in years 2 and later* $6 in years 2 and later*
30+ $30 in years 1 & 2 $55 in year 1 $25 in year 1
$8 in years 3 and later* $6 in years 2 and later* $6 in years 2 and later*
</TABLE>
--------------
*We may increase this charge, but we guarantee that it will never exceed
$10 per month.
The monthly administrative charge will increase from $6 to $8 if you request a
Face Amount reduction that moves the policy into the lowest Face Amount range.
The charge will decrease from $8 to $6 if you request a Face Amount increase
after the second policy year that moves the policy out of the lowest Face Amount
range (the $20 or $30 charge will continue through the second policy year).
Cost Of Insurance Charge. The cost of insurance charge is calculated by
multiplying the net amount at risk at the beginning of the policy month by the
monthly cost of insurance rate applicable to the insured person at that time.
The net amount at risk is the difference between the current death benefit (not
including any term coverage on the insured person) and the amount in your Policy
Account. See ADDITIONAL BENEFITS MAY BE AVAILABLE in Part 2 of this prospectus
for a description of term insurance riders. We may earn a profit from this
charge.
22
<PAGE>
Your cost of insurance charge will vary from month to month with changes in the
net amount at risk. For example, if the current death benefit for the month is
increased because the death benefit is based on a percentage multiple of the
Policy Account, then the net amount at risk for the month will increase.
Assuming the percentage multiple is not in effect, increases or decreases to the
Policy Account will result in a corresponding decrease or increase to the net
amount at risk under Option A policies, but no change to the net amount at risk
under Option B policies. Increases or decreases to the Policy Account can result
from making premium payments, investment experience or the deduction of charges.
The monthly cost of insurance rate applicable to your policy will be based on
our current monthly cost of insurance rates. The current monthly cost of
insurance rates may be changed from time to time. However, the current rates
will never be more than the guaranteed maximum rates set forth in your policy.
The guaranteed rates are based on the Commissioner's 1980 Standard Ordinary Male
and Female Smoker and Non-Smoker Mortality Tables. The current and guaranteed
monthly cost of insurance rates are determined based on the sex, age, rating
class and tobacco-user status of the insured person. In addition, the current
rates also vary depending on the duration of the policy (i.e., the length of
time since a policy has been issued) and the Face Amount. Current cost of
insurance rates are generally highest for Face Amounts less than $100,000 and
generally lowest for Face Amounts of $200,000 and above.
Beginning in the tenth policy year, current monthly cost of insurance charges
are reduced by an amount equal to a percentage of your unloaned Policy Account
value on the date such charges are assessed. This means that the larger your
unloaned Policy Account value, the greater your potential reduction in current
cost of insurance charges. This percentage begins at an annual rate of .05%,
grading up to an annual rate of .65% in policy years 25 and later. This cost of
insurance charge reduction applies on a current basis and is not guaranteed. We
may in the future increase, decrease, change the duration of, or eliminate the
amount of the current cost of insurance charge reduction without advance notice
to you. Because Incentive Life Plus was offered for the first time in 1995, no
reduction of cost of insurance charges in the tenth policy year has yet been
attained.
Lower current cost of insurance rates apply at most ages for insured persons who
qualify as non-tobacco users. To qualify, an insured person must meet additional
requirements that relate to tobacco use. In addition, the insured person must be
age twenty or over. Insured persons who are under twenty years of age may ask us
to review their current tobacco habits when they reach the policy anniversary
nearest their twentieth birthday.
There will be no distinctions based on sex in the cost of insurance rates for
Incentive Life Plus policies sold in Montana. Cost of insurance rates applicable
to a policy issued in Montana will not be greater than the comparable male rates
set forth or illustrated in this prospectus. Similarly, illustrated policy
values in Part 4 would be no less favorable for comparable policies issued in
this state. The guaranteed cost of insurance rates for Incentive Life Plus
policies in this state are based on the Commissioner's 1980 Standard Ordinary SB
Smoker and NB Non-Smoker Mortality Table.
Congress and the legislatures of various states have from time to time
considered legislation that would require insurance rates to be the same for
males and females of the same age, rating class and tobacco-user status. In
addition, employers and employee organizations should consider, in consultation
with counsel, the impact of Title VII of the Civil Rights Act of 1964 on the
purchase of Incentive Life Plus in connection with an employment-related
insurance or benefit plan. In a 1983 decision, the United States Supreme Court
held that, under Title VII, optional annuity benefits under a deferred
compensation plan could not vary on the basis of sex.
Death Benefit Guarantee Charge. One cent per $1,000 of Face Amount (including
any amount of yearly renewable term insurance) is deducted monthly to compensate
us for the risk we assume by guaranteeing the death benefit under the death
benefit guarantee provision. This charge is deducted regardless of whether
specified premiums are paid, but it will not be deducted after the death benefit
guarantee provision terminates. This charge will not be deducted in states where
the death benefit guarantee provision is not available.
Charges For Additional Benefits. The charges for any additional benefits you
choose will be deducted monthly. Your policy contains tables showing the
guaranteed maximum charges for all of these benefits.
Transaction Charges. In addition to the monthly deductions from your Policy
Account described above, we charge fees for certain policy transactions: see
PARTIAL WITHDRAWALS, CHANGING THE FACE AMOUNT, SUBSTITUTION OF INSURED PERSON,
LIVING BENEFIT OPTION and TRANSFERS OF POLICY ACCOUNT VALUE in Part 2 of this
prospectus. 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 4 of this prospectus.
Mortality And Expense Risk Charge For New York Policies. For New York policies,
this charge will be deducted monthly from the Policy Account at an annual
current rate of .60% of the unloaned Policy Account value on the date this
charge is assessed. The maximum rate is .90%. See CHARGE AGAINST THE SEPARATE
ACCOUNT below for more information about this charge.
How Policy Account Charges Are Allocated. Generally, deductions from your Policy
Account for monthly charges are made from the Funds and the unloaned portion of
our Guaranteed Interest Account in accordance with the deduction allocation
percentages specified in your application unless you instruct us in writing to
do otherwise. See PREMIUM AND MONTHLY CHARGE ALLOCATIONS in Part 2 of this
prospectus. If a deduction cannot be made in accordance with these percentages,
it will be made based on the proportions that your unloaned amounts in the
Guaranteed Interest Account and your amounts in the Funds bear to the total
unloaned value of your Policy Account.
23
<PAGE>
Changes. Any changes in the cost of insurance rates, charges for additional
benefits, Premium Sales Charge, mortality and expense risk charge or
administrative charges will be by class of insured person and will be based on
changes in future expectations about such factors as investment earnings,
mortality, the length of time policies will remain in effect, expenses and
taxes. We reserve the right to make a charge in the future for taxes or reserves
set aside for taxes, which would reduce the investment experience of the Funds.
See TAX EFFECTS in Part 2 of this prospectus.
CHARGE AGAINST THE SEPARATE ACCOUNT. This charge is reflected in the unit values
for the Funds of the Separate Account. See HOW WE DETERMINE THE UNIT VALUE in
Part 2 of this prospectus.
A daily charge for assuming MORTALITY AND EXPENSE RISKS will be made. The annual
current rate is .60%. The annual guaranteed rate is .90%. We are committed to
fulfilling our obligations under the policy and providing service to you over
the lifetime of your policy. Despite the uncertainty of future events, we
guarantee that monthly administrative and cost of insurance deductions from your
Policy Account will never be greater than the maximum amounts shown in your
policy. In making this guarantee, we assume the mortality risk that insured
persons will live for shorter periods than we estimated. When this happens, we
have to pay a greater amount of death benefit than we expected to pay in
relation to the cost of insurance charges we received. We also assume the
expense risk that the cost of issuing and administering policies will be greater
than we expected. If the amount collected from this charge exceeds losses from
the risks assumed, it will be to our profit. For New York policies, this charge
will be deducted from your Policy Account rather than as a charge against the
Separate Account.
CHARGES OF THE TRUSTS. The Funds purchase Class IB shares of the HRT or EQAT at
net asset value. That price reflects investment management fees, indirect
expenses, such as brokerage commissions, 12b-1 distribution fee charges and
certain other operating expenses. The Trusts do not impose a sales charge. See
DEDUCTIONS AND CHARGES in Part 2 of this prospectus and HRT'S INVESTMENT
ADVISER, EQAT'S MANAGER and EQAT'S INVESTMENT ADVISERS in Part 1 of this
prospectus.
SURRENDER CHARGES. There will be a difference between the amount in your Policy
Account and the Cash Surrender Value of your policy for at least the first
fifteen policy years. This difference is the result of the Premium Surrender
Charge (which is a contingent deferred sales load) and an Administrative
Surrender Charge. See also PREMIUM SALES CHARGE in Part 2 of this prospectus.
These charges are contingent because you pay them only if you surrender your
policy, reduce its Face Amount or it terminates. They are deferred because we do
not deduct them from your premiums. Because these Surrender Charges are
contingent and deferred, the amount we might collect in a policy year is not
related to the actual sales expenses for that year. A table of maximum Surrender
Charges (maximum Premium Surrender Charge plus the maximum Administrative
Surrender Charge) appears on the Policy Information Page.
Assuming you have not previously changed the Face Amount, the pro rata Surrender
Charges for a partial surrender will be determined by dividing the amount of the
Face Amount decrease by the initial Face Amount and multiplying that fraction by
the Surrender Charges. Face Amount reductions will be applied against prior Face
Amount increases, if any, in the reverse order in which such increases occurred,
and then to the original Face Amount.
Premium Surrender Charge. To determine the Premium Surrender Charge, "target"
premiums are used. Target premiums are not based on the "planned" premium you
determine, but are actuarially determined based on the age, sex and tobacco-user
status of the insured person and the Face Amount. Target premiums are different
from sales load target premiums that are used to determine the Premium Sales
Charge.
The maximum Premium Surrender Charge for the initial Face Amount of your policy
(the "base policy") will equal 66% of one target premium. This maximum will not
vary based on the amount of premiums you pay or when you pay them. After the
first nine policy years, this maximum Premium Surrender Charge on the base
policy begins to decrease by 11% per year on a monthly basis for policy years
ten through fifteen. After fifteen years, the Premium Surrender Charge
attributable to the base policy expires.
Subject to the maximum, the Premium Surrender Charge is calculated based on your
actual premium payments. The Premium Surrender Charge percentage depends upon
the Face Amount and the policy year in which the premium payment is made as
follows:
-------------------------------------------------------------------------------
POLICY YEAR OF FACE AMOUNT RANGE FACE AMOUNT RANGE FACE AMOUNT RANGE
PREMIUM PAYMENT $50,000 TO $99,999 $100,000 TO $499,999 $500,000 AND OVER
-------------------------------------------------------------------------------
YEAR 1 (UP TO ONE
SEC GUIDELINE 24% 26% 27%
ANNUAL PREMIUM)
-------------------------------------------------------------------------------
YEAR 1 (OVER ONE
SEC GUIDELINE 3% 5% 6%
ANNUAL PREMIUM)
-------------------------------------------------------------------------------
YEAR 2
THROUGH 15 3% 5% 6%
(ALL PREMIUMS)
-------------------------------------------------------------------------------
24
<PAGE>
The SEC Guideline Annual Premium is the level annual amount that would be
payable in each policy year under certain assumptions, as defined by the SEC at
the date of this prospectus. These assumptions include cost of insurance charges
based on the 1980 Commissioner's Standard Ordinary Mortality Tables, net
investment earnings at an annual rate of 5%, and the fees and charges associated
with the policy.
Attempting to structure the timing and amount of premium payments to reduce the
potential surrender charge below the maximum is not recommended. Paying small
amounts of premium in the policy's first fifteen years to reduce the potential
surrender charge could increase the risk that your policy will terminate without
value.
If you increase the Face Amount above the previous highest Face Amount (computed
without regard to changes in Face Amount resulting from changing the death
benefit option), we will establish an additional Premium Surrender Charge
corresponding to the increased amount. An additional target premium attributable
to the increase will be established and the additional Premium Surrender Charge
will be subject to the same maximum percentage of 66%. This maximum will start
to decline in the tenth year after the increase in the same manner as the
Premium Surrender Charge on the base policy.
A portion of each premium payment made after a Face Amount increase will be
deemed to be attributable to such increase, even if you do not increase the
amount or frequency of your premium payments. The allocation of premiums between
the base policy and Face Amount increases is actuarially determined in
accordance with SEC regulations as in effect at the date of this prospectus.
Moreover, if the increase moves the policy into a higher Face Amount range, the
Premium Surrender Charge percentage applied to future premiums -- even those
premiums allocated to the base policy -- will be the higher percentage for that
Face Amount range. Face Amount decreases do not change the Premium Surrender
Charge percentage.
Administrative Surrender Charge. The Administrative Surrender Charge per $1,000
of Face Amount in the first three policy years (subject to a $3,000 maximum) is:
----------------------------------------------
ISSUE AGE: 0-34 35-44 45-49 50-54 55+
$2 $3 $4 $5 $6
----------------------------------------------
After the first three policy years, the Administrative Surrender Charge grades
down on a monthly basis to zero at the end of the eighth policy year.
A Face Amount increase above the previous highest Face Amount will result in a
new layer of Administrative Surrender Charges applicable to the increase.
PURPOSE OF POLICY CHARGES. The charges under the policies are designed to cover,
in the aggregate, our direct and indirect costs of selling, administering and
providing benefits under the policies. They are also designed, in the aggregate,
to compensate us for the risks of loss we assume pursuant to the policies.
If, as expected, the charges that we collect from the policies exceed our total
costs in connection with the policies, we will earn a profit. Otherwise, we will
incur a loss. The current and maximum rates of certain of our charges have been
set with reference to estimates of the amount of specific types of expenses or
risks that we will incur. In most cases, this prospectus identifies such
expenses or risks in the name of the charge; e.g., the monthly administrative
charge, cost of insurance charge, and mortality and expense risk charge.
However, the fact that any charge bears the name of a particular expense or risk
does not mean that the amount we collect from that charge will never be more
than the amount of such expense or risk, or that we may not also be compensated
for such expense or risk out of any other charges we are permitted to deduct by
the terms of the policies.
ADDITIONAL INFORMATION ABOUT INCENTIVE LIFE PLUS
YOUR POLICY CAN TERMINATE. Your insurance coverage under Incentive Life Plus
continues as long as the Net Cash Surrender Value of the policy is enough to pay
the monthly deductions. The Net Cash Surrender Value equals the Cash Surrender
Value minus any loan and accrued loan interest. If the Net Cash Surrender Value
at the beginning of any policy month is less than the deductions for that month,
your policy will go into default unless the operation of either the death
benefit guarantee provision or the 3-Year no lapse guarantee provision is in
effect. See GUARANTEEING THE DEATH BENEFIT in Part 2 of this prospectus.
If your policy goes into default, we will notify you, and any assignees on our
records, in writing, that a 61-day grace period has begun and indicate the
payment that is needed to avoid policy termination at the end of the grace
period. The required payment will not be more than an amount which would
increase the Net Cash Surrender Value to cover total monthly deductions for
three months (without regard to any investment performance in the Policy
Account). The required payment and any residual Policy Account value will be
used to cover the overdue deductions. However, if your Policy Account has
unfavorable investment experience, the required payment may not be sufficient to
cover the overdue deductions on the date we receive the payment. In this case, a
new 61-day grace period will begin. While a policy is in a grace period, you may
not transfer Policy Account value or make other policy changes.
25
<PAGE>
If we do not receive payment within the 61 days, your policy will terminate
without value. We will withdraw any amount left in your Policy Account and apply
this amount to the overdue deductions, any applicable Surrender Charges and any
unpaid loan and accrued loan interest. We will inform you, and any assignee, at
last known addresses that your policy has ended without value. See TAX EFFECTS
in Part 2 of this prospectus for the potential tax consequences of the
termination of a policy.
YOU MAY RESTORE A POLICY AFTER IT TERMINATES. Subject to certain state
variations, you may restore a policy within six months after it terminates if
you provide evidence that the insured person (and any other person insured under
a rider) is still insurable, and you make the premium payment that we require to
restore the policy. The required premium will not be more than an amount
sufficient to cover (i) total monthly deductions for 3 months, calculated from
the effective date of restoration; (ii) the monthly administrative charges from
the date of default to the effective date of restoration; (iii) any excess of
the applicable Surrender Charge on the date of restoration over the Surrender
Charge that was deducted on the date of default; and (iv) the charge for taxes,
the Premium Sales Charge, and any increase in Surrender Charge associated with
this payment. We will determine the amount of this required premium as if no
interest or investment performance were credited to, or charged against, your
Policy Account. The policy will be restored as of the beginning of the policy
month which coincides with or follows the date we approve your application. Your
restored policy will not have any loan balance even if there was a loan
outstanding under the terminated policy.
From the required payment we will deduct the charge for applicable taxes and the
Premium Sales Charge. On the effective date of restoration, the Policy Account
will be equal to the balance of the required payment plus a Surrender Charge
credit. This credit will be equal to the Surrender Charges that were deducted on
the date of default, but not greater than the applicable Surrender Charges as of
the effective date of restoration. We will start to make monthly deductions as
of the effective date of restoration. On that date, the monthly administrative
charges from the beginning of the grace period to the effective date of
restoration will be deducted from the Policy Account. See TAX EFFECTS in Part 2
of this prospectus for the potential tax consequences of restoring a terminated
policy. Some states may vary the time period and conditions for policy
restoration.
POLICY PERIODS, ANNIVERSARIES, DATES AND AGES. When an application for an
Incentive Life Plus policy is completed and submitted to us, we decide whether
or not to issue the policy. This decision is made based on the information in
the application and our standards for issuing insurance and classifying risks.
If we decide not to issue a policy, any premium paid will be refunded.
The Issue Date, shown on the Policy Information Page, is the date your policy is
actually issued, but if we have advanced the Register Date, the Issue Date will
be the same as the Register Date. Generally, contestability is measured from the
Issue Date, as is the suicide exclusion.
The Register Date, also shown on the Policy Information Page, is used to measure
policy years and policy months. Charges and deductions are first made as of the
Register Date, even when we have permitted an early Register Date as set forth
below. For information on such charges and deductions, see DEDUCTIONS FROM YOUR
POLICY ACCOUNT in Part 2 of this prospectus. As to when coverage under the
policy begins, see FLEXIBLE PREMIUMS in Part 2 of this prospectus.
Generally, we determine the Register Date based upon when we receive your full
minimum initial premium. In most cases:
o If you submit the full minimum initial premium to your Equitable agent at the
time you sign the application, and we issue the policy as it was applied for,
then the Register Date will be the later of (a) the date Part I of the policy
application was signed or, (b) the date Part II of the policy application was
signed by a medical professional.
o If we do not receive your full minimum initial premium at our Administrative
Office before the Issue Date or, if the policy is not issued as applied for,
the Register Date will be the same as the Issue Date.
An early Register Date may be permitted for employer-sponsored cases in order to
accommodate a common Register Date for all employees. An early Register Date may
also be permitted to provide a younger age at issue. We may also permit
policyowners to delay a Register Date (up to three months) in employer-sponsored
cases. Additionally, policies that would otherwise receive a Register Date of
the 29th, 30th or 31st of any month will receive a Register Date of the 28th of
that month.
The investment start date is the date that your initial net premium begins to
vary with the investment performance of the Funds or accrue interest in the
Guaranteed Interest Account. Generally, the investment start date will be the
same as the Register Date if the full minimum initial premium is received at our
Administrative Office before the Register Date. Otherwise, the investment start
date will be the date the full minimum initial premium is received at our
Administrative Office. Thus, to the extent that your first premium is received
before the Register Date, there will be a period during which the initial
premium will not be experiencing investment performance. The investment start
date for policies with early Register Dates will be the date the full minimum
initial premium is received at our Administrative Office. Any subsequent premium
payment received after the investment start date will begin to experience
investment performance as of the date such payment is received at our
Administrative Office. Remember, the amount of your initial net premium
allocated to the Funds may be temporarily allocated to the Alliance Money Market
Fund prior to allocation in accordance with your instructions. See FLEXIBLE
PREMIUMS in Part 2 of this prospectus.
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Age. Generally, when we refer to the age of the insured person, we mean his or
her age on the birthday nearest to the beginning of the particular policy year.
TAX EFFECTS
This discussion is based on our understanding of the current Federal income tax
laws as currently interpreted on Incentive Life Plus policies owned by U.S.
resident individuals. The tax effects on corporations and other business
entities, non-U.S. residents or non-U.S. citizens, may be different. This
discussion is general in nature, and should not be considered tax advice, for
which you should consult your legal or tax adviser.
POLICY PROCEEDS. An Incentive Life Plus policy will be treated as "life
insurance" for Federal income tax purposes if it meets the definitional
requirement of the Internal Revenue Code of 1986, as amended (the Code) and as
long as the portfolios of the Trusts satisfy the diversification requirements
under the Code. We believe that Incentive Life Plus will meet these
requirements, and that:
o the death benefit received by the beneficiary under your Incentive Life
Plus policy will not be subject to Federal income tax; and
o as long as your policy remains in force, increases in the Policy Account
value as a result of interest or investment experience will not be subject
to Federal income tax unless and until there is a distribution from your
policy, such as a surrender, loan or a partial withdrawal.
SPECIAL TAX RULES MAY APPLY, HOWEVER, IF YOU TRANSFER YOUR OWNERSHIP OF THE
POLICY. CERTAIN TRANSFERS FOR VALUE MAY SUBJECT THE TRANSFEROR TO INCOME TAX AND
RESULT IN THE TRANSFEREE BECOMING SUBJECT TO INCOME TAX ON DEATH PROCEEDS TO THE
EXTENT SUCH PROCEEDS EXCEED THE TRANSFEREE'S INVESTMENT IN THE POLICY. A GIFT OR
BEQUEST OF A POLICY SUBJECT TO A LOAN MAY BE VIEWED AS A PART SALE, PART GIFT
TRANSACTION AND CAN ALSO TRIGGER INCOME TAX CONSEQUENCES. CONSULT YOUR TAX
ADVISER BEFORE ANY TRANSFER OF YOUR POLICY.
The Federal income tax consequences of a distribution from your policy will
depend among other things on whether your policy is determined to be a "modified
endowment." The character of any income recognized under your policy will be
ordinary income as opposed to capital gain.
A MODIFIED ENDOWMENT IS a life insurance policy which fails to meet a
"seven-pay" test. In general, a policy will fail the seven-pay test if the
cumulative amount of premiums paid under the policy at any time during the first
seven policy years exceeds a calculated premium level. The calculated seven-pay
premium level is based on a hypothetical policy issued on the same insured
person and for the same initial death benefit which, under specified conditions
(which include the absence of expense, administrative and surrender charges),
would be fully paid for after seven level annual payments. Your policy will be
treated as a modified endowment unless the cumulative premiums paid under your
policy, at all times during the first seven policy years, are less than or equal
to the cumulative seven-pay premiums which would have been paid under the
hypothetical policy on or before such times.
Whenever there is a "material change" under a policy, it will generally be
treated as a new contract for purposes of determining whether the policy is a
modified endowment, and subjected to a new seven-pay period and a new seven-pay
limit. The new seven-pay limit would be determined taking into account, under a
downward adjustment formula, the Policy Account value of the policy at the time
of such change. A materially changed policy would be considered a modified
endowment if it failed to satisfy the new seven-pay limit. A material change
would occur if there was a substitution of the insured person, and could also
occur as a result of a change in death benefit option, the selection of
additional benefits, an increase in Face Amount and certain other changes.
If the benefits are reduced during the first seven policy years after entering
into the policy (or within seven years after a material change), for example, by
requesting a decrease in Face Amount or in some cases, by making a partial
withdrawal or terminating additional benefits under a rider, the calculated
seven-pay premium level will be redetermined based on the reduced level of
benefits and applied retroactively for purposes of the seven-pay test. If the
premiums previously paid are greater than the recalculated seven-pay premium
level limit, the policy will become a modified endowment. Generally, a life
insurance policy which is received in exchange for a modified endowment will
also be considered a modified endowment.
Whether or not your policy is a modified endowment, changes made to a life
insurance policy, for example, a decrease in benefits or the termination of or
restoration of a terminated policy, may have other effects on your policy,
including impacting the maximum amount of premiums that can be paid under the
policy, as well as the maximum amount of Policy Account value that may be
maintained under the policy. In some cases, this may cause us to take action in
order to assure your policy continues to qualify as life insurance, including
distribution of amounts that may be includable as income. Such changes can also
affect the tax treatment of prior distributions made during the same taxable
year or in anticipation of a reduction in benefits (generally within two years
before a reduction in benefits). See POLICY CHANGES in Part 2 of this
prospectus.
IF YOUR INCENTIVE LIFE PLUS POLICY IS NOT A MODIFIED ENDOWMENT, as long as it
remains in force, a loan under your policy will be treated as indebtedness and
no part of the loan will be subject to current Federal income tax. Interest on
the loan will generally not be tax deductible. After the first 15 policy years,
the proceeds from a partial withdrawal will generally 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
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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 of any
gain in your policy (to the extent your Policy Account value exceeds your Basis
in your policy). The portion subject to tax will depend upon a complex formula
depending in part 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. For example, a partial withdrawal
from a heavily funded policy or a withdrawal from a policy where the benefits
have been or within the next two years will be substantially reduced can cause
all or a portion of the distribution to be taxable to the extent of gain in your
policy.
If at any time your policy is surrendered, the excess, if any, of your Cash
Surrender Value (which includes the amount of policy loan and accrued loan
interest) over your Basis will be subject to Federal income tax. IN ADDITION, IF
A POLICY TERMINATES WHILE THERE IS A POLICY LOAN, THE CANCELLATION OF SUCH LOAN
AND ACCRUED LOAN INTEREST WILL BE TREATED AS A DISTRIBUTION AND COULD BE SUBJECT
TO TAX UNDER THE ABOVE RULES. On the Final Policy Date, the excess of the amount
of any benefit paid, not taking into account any reduction for any loan and
accrued loan interest, over your Basis in the policy, will be subject to Federal
income tax.
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 generally apply to the taxable portion of a distribution
from a modified endowment. The penalty tax will not, however, apply to
distributions (i) to taxpayers 59 1/2 years of age or older, (ii) in the case of
a disability (as defined in the Code) or (iii) received as part of a series of
substantially equal periodic annuity payments for the life (or life expectancy)
of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer
and his beneficiary. If your policy is surrendered, the excess, if any, of your
Cash Surrender Value over your Basis will be subject to Federal income tax and,
unless one of the above exceptions applies, the 10% penalty tax. If your policy
terminates while there is a policy loan, the cancellation of such loan and
accrued loan interest will be treated as a distribution to the extent not
previously treated as such and could be subject to tax, including the penalty
tax, as described under the above rules. In addition, upon the Final Policy Date
the excess of the amount of any benefit paid, not taking into account any
reduction for any loan and accrued loan interest, over your Basis in the policy,
will be subject to Federal income tax and, unless an exception applies, a 10%
penalty tax.
If your policy becomes a modified endowment, distributions that occur during the
policy year it becomes a modified endowment and any subsequent policy year will
be taxed as described in the two preceding paragraphs. In addition,
distributions from a policy within two years before it becomes a modified
endowment will be subject to tax in this manner. THIS MEANS THAT A DISTRIBUTION
MADE FROM A POLICY THAT IS NOT A MODIFIED ENDOWMENT COULD LATER BECOME TAXABLE
AS A DISTRIBUTION FROM A MODIFIED ENDOWMENT. The Secretary of the Treasury has
been authorized to prescribe rules which would treat similarly other
distributions made in anticipation of a policy becoming a modified endowment.
POLICY TERMINATIONS. A policy which has terminated without value may have the
tax consequences described above even though you may be able to reinstate your
policy. For tax purposes, some reinstatements may be treated as the purchase of
a new insurance contract.
LIVING BENEFITS. Amounts received under a life insurance contract on the life of
individuals who are terminally ill, as defined by the tax law, are generally
excludable from gross income as amounts paid by reason of the death of the
insured. We believe that the living benefit which may be payable under your
policy meets the law's definition of terminally ill and can qualify for this
exclusion. This exclusion does not apply, however, to amounts paid to someone
other than the insured if the payee has an insurable interest in the insured's
life because the insured is a director, officer or employee of the payee or by
reason of the insured being financially interested in any trade or business
carried on by the payee.
DIVERSIFICATION. Under Section 817(h) of the Code, the Secretary of the Treasury
has the authority to set standards for diversification of the investments
underlying variable life insurance policies. The Treasury Department has issued
final regulations regarding the diversification requirements. Failure by us to
meet these requirements would disqualify your policy as a variable life
insurance policy under Section 7702 of the Code. If this were to occur, you
would be subject to Federal income tax on the income under the policy for the
period of the disqualification and subsequent periods. The Separate Account,
through the Trusts, intends to comply with these requirements.
In connection with the issuance of the then temporary diversification
regulations, the Treasury Department stated that it anticipated the issuance of
regulations or rulings prescribing the circumstances in which the ability of a
policyowner to direct his investment to particular funds of a separate account
may cause the policyowner, rather than the insurance company, to be treated as
the owner of the assets in the account. If you were considered the owner of the
assets of the Separate Account, income and gains from the account would be
included
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in your gross income for Federal income tax purposes. Under current law we
believe that Equitable, and not the owner of the policy, would be considered the
owner of the assets of the Separate Account.
POLICY CHANGES. To receive the tax treatment discussed above, your policy must
initially qualify and continue to qualify as life insurance under Sections 7702
and 817(h) of the Code. We have reserved in the policy the right to decline to
accept all or part of any premium payments, decline to change death benefit
options, make face amount changes or decline to make partial withdrawals that
based upon our interpretation of current tax rules would cause your policy to
fail to qualify. We may also make changes in the policy or its riders or require
additional premium payments or make distributions from the policy to the extent
we deem necessary to qualify your policy as life insurance for tax purposes. Any
such change will apply uniformly to all policies that are affected. You will be
given written notice of such changes.
TAX CHANGES. The United States Congress has in the past considered, is currently
considering, and may in the future consider, legislation that, if enacted, could
change the tax treatment of life insurance policies. In addition, the Treasury
Department may amend existing regulations, issue regulations on the
qualification of life insurance and modified endowment contracts, or adopt new
interpretations of existing laws. State tax laws or, if you are not a United
States resident, foreign tax laws, may also affect the tax consequences to you,
the insured person or your beneficiary. These laws may change from time to time
without notice and, as a result, the tax consequences described above may be
altered. There is no way of predicting whether, when or in what form any such
change would be adopted. Any such change could have retroactive effect. We
suggest you consult your legal or tax adviser.
ESTATE AND GENERATION SKIPPING TAXES. If the insured person is the policyowner,
the death benefit under Incentive Life Plus will generally be includable in the
policyowner's estate for purposes of Federal estate tax. If the policyowner is
not the insured person, under certain conditions only the Cash Surrender Value
of the policy would be so includable upon the death of the policyowner. If the
policyowner is not the insured and the insured dies with someone other than the
owner as beneficiary, the policyowner will be considered to have made a gift
transfer to the beneficiary of such proceeds. Federal estate tax is integrated
with Federal gift tax under a unified rate schedule. In general, estates less
than $625,000 for decedents dying during 1998 (scheduled to increase in
subsequent years to $1 million by the year 2005) will not incur a Federal estate
tax liability. In addition, an unlimited marital deduction may be available for
Federal estate tax purposes.
As a general rule, if a "transfer" is made to a person two or more generations
younger than the policyowner, a generation skipping tax may be payable at rates
similar to the maximum estate tax rate in effect at the time. The generation
skipping tax provisions generally apply to "transfers" which would be subject to
the gift and estate tax rules. Individuals are generally allowed an aggregate
generation skipping tax exemption of $1 million. Because these rules are
complex, you should consult with your tax adviser for specific information,
especially where benefits are passing to younger generations.
The particular situation of each policyowner, insured or beneficiary will
determine how ownership or receipt of policy proceeds will be treated for
purposes of Federal estate and generation skipping taxes as well as state and
local estate, inheritance and other taxes.
PENSION AND PROFIT-SHARING PLANS. If Incentive Life Plus policies are purchased
by a fund which forms part of a pension or profit-sharing plan qualified under
Sections 401(a) or 403 of the Code for the benefit of participants covered under
the plan, the Federal income tax treatment of such policies will be somewhat
different from that described above.
If purchased as part of a pension or profit-sharing plan, the current cost of
insurance for the net amount at risk is treated as a "current fringe benefit"
and is required to be included annually in the plan participant's gross income.
This cost (generally referred to as the "P.S. 58" cost) is reported to the
participant annually. If the plan participant dies while covered by the plan and
the policy proceeds are paid to the participant's beneficiary, then the excess
of the death benefit over the Policy Account value will not be subject to
Federal income tax. However, the Policy Account value will generally be taxable
to the extent it exceeds the sum of $5,000 plus the participant's cost basis in
the policy. The participant's cost basis will generally include the costs of
insurance previously reported as income to the participant. Special rules may
apply if the participant had borrowed from his Policy Account or was an
owner-employee under the plan.
There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased by
a tax-qualified plan. You should consult your legal adviser.
TRADE OR BUSINESS ENTITY OWNS OR IS DIRECTLY OR INDIRECTLY A BENEFICIARY OF THE
POLICY. Where a policy is owned by other than a natural person, the owner's
ability to deduct interest on business borrowing unrelated to the policy can be
impacted as a result of its ownership of cash value life insurance. No deduction
will be allowed for a portion of a taxpayer's otherwise deductible interest
expense unless the policy covers only one individual, and such individual is, at
the time first covered by the policy, a 20 percent owner of the trade or
business entity that owns the policy, or an officer, director, or employee of
such trade or business. Although this limitation generally does not apply to
policies held by natural persons, if a trade or business (other than one carried
on as a sole proprietorship) is directly or indirectly the beneficiary under a
policy (e.g., pursuant to a split-dollar agreement), the policy shall be treated
as held by such trade or business. The effect will be that a portion of the
trade or business entity's deduction for its interest expenses will be
disallowed unless the above exception for a 20 percent owner, employee, officer
or director applies.
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The portion of the entity's interest deduction that is disallowed will generally
be a pro rata amount which bears the same ratio to such interest expense as the
taxpayer's average unborrowed cash value bears to the sum of the taxpayer's
average unborrowed cash value and average adjusted bases of all other assets.
These rules disallowing interest expenses for trade or business entities
generally apply to contracts issued after June 8, 1997 in taxable years ending
after such date. However, for purposes of the preceding sentence, any material
increase in the death benefit or other material change in a contract shall be
treated as a new contract. Any corporate or business use of life insurance
should be carefully reviewed by your tax adviser with attention to these rules
as well as any other rules and possible tax law changes that could occur with
respect to business-owned life insurance.
OTHER EMPLOYEE BENEFIT PROGRAMS. Complex rules may apply when a policy is held
by an employer or a trust, or acquired by an employee, in connection with the
provision of employee benefits. These policyowners also must consider whether
the policy was applied for by or issued to a person having an insurable interest
under applicable state law, as the lack of insurable interest may, among other
things, affect the qualification of the policy as life insurance for Federal
income tax purposes and the right of the beneficiary to death benefits.
Employers and employer-created trusts may be subject to reporting, disclosure
and fiduciary obligations under the Employee Retirement Income Security Act of
1974 (ERISA). You should consult your legal adviser.
OUR TAXES. Under the life insurance company tax provisions of the Code, variable
life insurance is treated in a manner consistent with fixed life insurance. The
operations of the Separate Account are reported in our Federal income tax return
but we currently pay no income tax on investment income and capital gains
reflected in variable life insurance policy reserves. Therefore, no charge is
currently being made to any Fund for taxes. We reserve the right to make a
charge in the future for taxes incurred, for example, a charge to the Separate
Account for income taxes incurred by us that are allocable to the policy.
We may have to pay state, local or other taxes in addition to applicable taxes
based on premiums. At present, these taxes are not substantial. If they
increase, charges may be made for such taxes when they are attributable to the
Separate Account or allocable to the policy.
WHEN WE WITHHOLD INCOME TAXES. Generally, unless you provide us with a written
election to the contrary before we make the distribution, we are required to
withhold Federal income tax from any portion of the money you receive if the
withdrawal of money from your Policy Account or the surrender or the maturity of
your policy is a taxable transaction. If you do not wish us to withhold tax from
the payment, or if enough is not withheld, you may have to pay later. You may
also have to pay penalties under the tax rules if your withholding and estimated
tax payments are insufficient. States may also require us to withhold tax on
payments to you. In the case of non-U.S. residents and/or non-U.S. citizens,
special withholding rules will apply. In some cases, where generation skipping
taxes may apply, we may also be required to withhold for such taxes unless we
are provided satisfactory written notification that no such taxes are due.
PART 3: ADDITIONAL INFORMATION
YOUR VOTING PRIVILEGES
TRUST VOTING PRIVILEGES. As explained in Part 1, we invest the assets in the
Funds in Class IB shares of the corresponding portfolios of the HRT or the EQAT.
Equitable is the legal owner of the shares of each Trust and will attend, and
has the right to vote at, any meeting of the HRT's or EQAT's shareholders. Among
other things, we may vote on any matters described in either Trust's prospectus
or requiring a vote by shareholders under the 1940 Act.
Even though we own the shares, to the extent required by the 1940 Act, you will
have the opportunity to tell us how to vote the number of shares that can be
attributed to your policy. We will vote those shares at meetings of HRT or EQAT
shareholders according to your instructions. If we do not receive instructions
in time from all policyowners, we will vote shares in a portfolio for which no
instructions have been received in the same proportion as we vote shares for
which we have received instructions in that portfolio. We will vote any HRT or
EQAT shares that we are entitled to vote directly due to amounts we have
accumulated in the Funds in the same proportions that all policyowners vote,
including those who participate in other separate accounts. If the Federal
securities laws or regulations or interpretations of them change so that we are
permitted to vote shares of the HRT or EQAT in our own right or to restrict
policyowner voting, we may do so.
HOW WE DETERMINE YOUR VOTING SHARES. You may participate in voting only on
matters concerning the HRT or EQAT portfolios corresponding to the Funds to
which your Policy Account is allocated. The number of HRT or EQAT shares in each
Fund that are attributable to your policy is determined by dividing the amount
in your Policy Account allocated to that Fund by the net asset value of one
share of the corresponding portfolio as of the record date set by either HRT's
or EQAT's Board for its respective shareholders meeting. The record date for
this purpose must be at least 10 and no more than 90 days before the particular
shareholder meeting. Fractional shares are counted.
If you are entitled to give us voting instructions, we will send you proxy
material and a form for providing voting instructions. In certain cases, we may
disregard instructions relating to changes in a portfolio's adviser or its
investment policies. We will advise you if we do and detail the reasons in the
next semiannual report to policyowners.
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SEPARATE ACCOUNT VOTING RIGHTS. Under the 1940 Act, certain actions (such as
some of those described under OUR RIGHT TO CHANGE HOW WE OPERATE below) may
require policyowner approval. In that case, you will be entitled to one vote for
every $100 of value you have in the Funds. We will cast votes attributable to
amounts we have in the Funds in the same proportions as votes cast by
policyowners.
OUR RIGHT TO CHANGE HOW WE OPERATE
In addition to changing or adding investment companies, we have the right to
modify how we or the Separate Account operate. We intend to comply with
applicable law in making any changes and, if necessary, we will seek policyowner
approval. We have the right to:
o add Funds to, or remove Funds from, the Separate Account, combine two or
more Funds within the Separate Account, or withdraw assets relating to
Incentive Life Plus from one Fund and put them into another;
o register or end the registration of the Separate Account under the 1940
Act;
o operate the Separate Account under the direction of a committee or
discharge such a committee at any time (the committee may be composed
entirely of persons who are "interested persons" of Equitable under the
1940 Act);
o restrict or eliminate any voting rights of policyowners or other people who
have voting rights that affect the Separate Account;
o operate the Separate Account or one or more of the Funds in any other form
the law allows, including a form that allows us to make direct investments.
Our Separate Account may be charged an advisory fee if its investments are
made directly rather than through an investment company. We may make any
legal investments we wish. In choosing these investments, we will rely on
our own or outside counsel for advice. In addition, we may disapprove any
change in investment advisers or in investment policy unless a law or
regulation provides differently.
If any changes are made that result in a material change in the underlying
investments of a Fund, you will be notified as required by law. We may, for
example, cause the Fund to invest in a mutual fund other than, or in addition
to, the HRT or EQAT. If you then wish to transfer the amount you have in that
Fund to another Fund of the Separate Account or to the Guaranteed Interest
Account, you may do so, without charge, by contacting our Administrative Office.
At the same time, you may also change how your net premiums and deductions are
allocated.
OUR REPORTS TO POLICYOWNERS
Shortly after the end of each policy year you will receive a report that
includes information about your policy's current death benefit, Policy Account
value, Cash Surrender Value and policy loan. Notices will be sent to you to
confirm premium payments (except premiums paid through an automated
arrangement), transfers and certain other policy transactions.
LIMITS ON OUR RIGHT TO CHALLENGE THE POLICY
We can challenge the validity of your insurance policy based on material
misstatements in your application and any application for change. However, there
are some limits on how and when we can challenge the policy.
o We cannot challenge the policy after it has been in effect, during the
insured person's lifetime, for two years from the date the policy was
issued or restored after termination. (Some states may require that we
measure this time in some other way.)
o We cannot challenge any policy change that requires evidence of
insurability (such as an increase in Face Amount or a substitution of
insured person) after the change has been in effect for two years during
the insured person's lifetime.
o We cannot challenge an additional benefit rider that provides benefits in
the event that the insured person becomes totally disabled, after two years
from the later of the Issue Date or the date as of which the additional
benefit rider became effective. We can require proof of continuing
disability while such a rider is in effect as specified in the rider.
If the insured person dies within the time that we may challenge the validity of
the policy, we may delay payment until we decide whether to challenge the
policy. If the insured person's age or sex is misstated on any application, the
death benefit and any additional benefits provided will be those which would be
purchased by the most recent deduction for the cost of insurance and the cost of
any additional benefits at the insured person's correct age and sex.
If the insured person commits suicide within two years after the date on which
the policy was issued, the death benefit will be limited to the total of all
premiums that have been paid to the time of death minus any outstanding policy
loan, accrued loan interest and any partial withdrawals of Net Cash Surrender
Value. If the insured person commits suicide within two years after the
effective date of an increase in Face Amount that you requested, we will pay the
death benefit based on the Face Amount which was in effect before the increase,
plus the monthly cost of insurance deductions for the increase (including the
transaction charge for the Face Amount increase). A new two-year suicide and
contestability period will begin on the date of substitution following a
substitution of insured. Some states require that we measure this time by some
other date.
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YOUR PAYMENT OPTIONS
Policy benefits or other payments, such as the Net Cash Surrender Value, may be
paid immediately in one sum or you may choose another form of payment for all or
part of the money. Payments under these options are not affected by the
investment experience of any Fund. Instead, interest accrues pursuant to the
options chosen.
You will make a choice of payment option (or any later changes) and your choice
will take effect in the same way as it would if you were changing a beneficiary.
(See YOUR BENEFICIARY below.) If you do not arrange for a specific form of
payment before the insured person dies, the beneficiary will be paid through the
Equitable Access Account.(TM) The Equitable Access Account is not available to
corporate or other non-natural beneficiaries. See WHEN WE PAY POLICY PROCEEDS
below. The beneficiary will then have a choice of payment options. However, if
you do make an arrangement with us for how the money will be paid, the
beneficiary cannot change the choice after the insured person dies. Different
payment options may result in different tax consequences.
The beneficiary or any other person who is entitled to receive payment may name
a successor to receive any amount that we would otherwise pay to that person's
estate if that person died. The person who is entitled to receive payment may
change the successor at any time.
We must approve any arrangements that involve more than one payment option, or a
payee who is not a natural person (for example, a corporation), or a payee who
is a fiduciary. Also, the details of all arrangements will be subject to our
rules at the time the arrangements are selected and take effect. This includes
rules on the minimum amount we will pay under an option, minimum amounts for
installment payments, withdrawal or commutation rights (your rights to receive
payments over time, for which we may offer a lump sum payment), the naming of
people who are entitled to receive payment and their successors, and the ways of
proving age and survival.
YOUR BENEFICIARY
You name your beneficiary when you apply for the policy. The beneficiary is
entitled to the insurance benefits of the policy. You may change the beneficiary
during the insured person's lifetime by writing to our Administrative Office. If
no beneficiary is living when the insured person dies, we will pay the death
benefit in equal shares to the insured person's surviving children. If there are
no surviving children, we will pay the death benefit to the insured person's
estate.
ASSIGNING YOUR POLICY
You may assign (transfer) your rights in the policy to someone else as
collateral for a loan or for some other reason, if we agree. A copy of the
assignment must be forwarded to our Administrative Office. We are not
responsible for any payment we make or any action taken before we receive notice
of the assignment or for the validity of the assignment. An absolute assignment
is a change of ownership. BECAUSE THERE MAY BE TAX CONSEQUENCES, INCLUDING THE
LOSS OF INCOME TAX-FREE TREATMENT FOR ANY DEATH BENEFIT PAYABLE TO THE
BENEFICIARY, YOU SHOULD CONSULT YOUR TAX ADVISER PRIOR TO MAKING AN ASSIGNMENT.
WHEN WE PAY POLICY PROCEEDS
We will pay any death benefits, maturity benefit, Net Cash Surrender Value or
loan proceeds within seven days after we receive the last required form or
request (and other documents that may be required for payment of death benefits)
at our Administrative Office. Death benefits are determined as of the date of
death of the insured person and will not be affected by subsequent changes in
the unit values of the Funds. Death benefits will generally be paid through the
Equitable Access Account, an interest bearing checking account. A beneficiary
will have immediate access to the proceeds by writing a check on the account. We
pay interest from the date of death to the date the Equitable Access Account is
closed. If an Equitable agent helps the beneficiary of a policy to prepare the
documents that are required for payment of the death benefit, we will send the
Equitable Access Account checkbook or check to the agent within seven days after
we receive the required documents. Our agents will take reasonable steps to
arrange for prompt delivery to the beneficiary.
We may, however, delay payment if we contest the policy. We may also delay
payment if we cannot determine the amount of the payment because the New York
Stock Exchange is closed, because trading in securities has been restricted by
the SEC, or because the SEC has declared that an emergency exists. In addition,
if necessary to protect our policyowners, we may delay payment where permitted
under applicable law.
We may defer payment of any Net Cash Surrender Value or loan amount (except a
loan to pay a premium to us) from the Guaranteed Interest Account for up to six
months after we receive your request. We will pay interest of at least 3% a year
from the date we receive your request if we delay more than 30 days in paying
you such amounts from the Guaranteed Interest Account.
DIVIDENDS
No dividends are paid on the policy described in this prospectus.
REGULATION
We are regulated and supervised by the New York State Insurance Department. In
addition, we are subject to the insurance laws and regulations in every
jurisdiction where we sell policies.
32
<PAGE>
The Incentive Life Plus policy (Plan No. 94-300) has been filed with and
approved by insurance officials in 50 states, the District of Columbia, Puerto
Rico and the Virgin Islands. We submit annual reports on our operations and
finances to insurance officials in all the jurisdictions where we sell policies.
The officials are responsible for reviewing our reports to be sure that we are
financially sound.
SPECIAL CIRCUMSTANCES
Equitable may vary the charges and other terms of Incentive Life Plus where
special circumstances result in sales or administrative expenses or mortality
risks that are different than those normally associated with Incentive Life Plus
policies. These variations will be made only in accordance with uniform rules
that we establish.
DISTRIBUTION
Equitable Distributors, Inc. (EDI) is a principal underwriter of HRT and EQAT, a
principal underwriter of the Separate Account and is also a distributor of
certain of our variable life insurance policies and variable annuity contracts.
EDI's principal business address is 1290 Avenue of the Americas, New York, NY
10104. EDI 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 1996 and 1997, EDI was paid a fee of $1,204,370 and
$20,088,049, respectively, for its services under a Distribution Agreement with
Equitable and its separate accounts.
Incentive Life Plus policies are sold through agencies (both affiliated and
unaffiliated with Equitable) licensed by state insurance officials, and their
affiliated broker-dealers who are registered under the 1934 Act and are members
of the NASD. Such agencies and their affiliated broker-dealers have entered into
selling agreements with EDI. Agents who sell our policies are licensed by state
insurance officials to sell our variable life policies, are appointed as agents
of Equitable, and are Registered Representatives of their agencies' affiliated
broker-dealer. When EDI has acted as distributor, sales commissions will be paid
by Equitable to the agency which sells you this policy. We pay commissions from
our own resources, including the Premium Sales Charge deducted from your premium
and any Premium Surrender Charge we might collect. Generally, during the first
policy year, the agency will receive a commission equal to a maximum of 50% of
the premiums paid up to a certain amount and 3% of the premiums paid in excess
of that amount. For policy years two through ten, the agency receives a
commission up to a maximum of 3% of the premiums paid up to a certain amount and
3% of the premiums paid in excess of that amount. Following a requested Face
Amount increase, commissions on a portion of the premium will be calculated
based on the same rates described above. Use of a term rider on the insured
person in place of an equal amount of coverage under the base policy generally
reduces commissions. Commissions paid to an agency based upon refunded premiums
will be recovered.
LEGAL PROCEEDINGS
We are not involved in any legal proceedings that would be considered material
with respect to a policyowner's interest in the Separate Account.
ACCOUNTING AND ACTUARIAL EXPERTS
The financial statements of Separate Account FP and Equitable included in this
prospectus have been audited for the years ended December 31, 1997, 1996 and
1995 by Price Waterhouse LLP, as stated in their reports. The financial
statements of Separate Account FP and Equitable have been so included in
reliance on the reports of Price Waterhouse LLP, independent accountants, given
on the authority of such firm as experts in accounting and auditing.
The financial statements of Equitable contained in this prospectus should be
considered only as bearing upon the ability of Equitable to meet its obligations
under the Incentive Life Plus policies. They should not be considered as bearing
upon the investment experience of the funds of the Separate Account. The
financial statements of Separate Account FP include periods when Separate
Account FP was part of Equitable Variable, a wholly owned subsidiary of
Equitable. The assets of Separate Account FP were assumed by Equitable on
January 1, 1997 when Equitable Variable was merged into Equitable.
Actuarial matters in this prospectus have been examined by Barbara Fraser,
F.S.A., M.A.A.A., who is a Vice President and Actuary of Equitable. Her opinion
on actuarial matters is filed as an exhibit to the Registration Statement we
filed with the SEC.
ADDITIONAL INFORMATION
We have filed a Registration Statement relating to the Separate Account and the
variable life insurance policy described in this prospectus with the SEC. The
Registration Statement, which is required by the Securities Act of 1933,
includes additional information that is not required in this prospectus under
the rules and regulations of the SEC. If you would like the additional
information, you may obtain it from the SEC's main office in Washington, D.C.
You will have to pay a fee for the material.
YEAR 2000 PROGRESS
Equitable relies upon various computer systems in order to administer your
policy and operate the investment portfolios. Some of these systems belong to
service providers who are not affiliated with Equitable.
In 1995, Equitable began addressing the question of whether its computer systems
would recognize the year 2000 before, on or after January 1, 2000, and Equitable
believes it has identified those of its systems critical to business operations
that are not Year 2000 compliant. By year end 1998, Equitable expects that the
work of modifying or replacing non-compliant systems will substantially be
completed and expects a comprehensive test of its Year 2000 compliance will be
performed in the first half of 1999. Equitable is in the
33
<PAGE>
process of seeking assurances from third party service providers that they are
acting to address the Year 2000 issue with the goal of avoiding any material
adverse effect on services provided to policy holders and on operations of the
investment portfolios. Any significant unresolved difficulty related to the Year
2000 compliance initiatives could have a material adverse effect on the ability
to administer your policy and operate the investment portfolios. Assuming the
timely completion of computer modifications by Equitable and third party service
providers, there should be no material adverse effect on our ability to perform
these functions.
MANAGEMENT
Here is a list of our directors and, to the extent they are responsible for
variable life insurance operations, our principal officers and a brief statement
of their business experience for the past five years. Unless otherwise noted,
their address is 1290 Avenue of the Americas, New York, New York 10104.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Francoise Colloc'h Director of Equitable since July 1992. Senior Executive Vice President, Human Resources
AXA-UAP and Communications of AXA-UAP ("AXA-UAP"), and various positions with AXA-UAP affiliated
23, Avenue Matignon companies. Director of the Holding Company.
75008 Paris, France
- ------------------------------------------------------------------------------------------------------------------------------------
Henri de Castries Director of Equitable since September 1993. Director and Chairman of the Board of
AXA-UAP the Holding Company since April 1998. Prior thereto, Vice Chairman of the Board of the
23, Avenue Matignon Holding Company since February 1996. Senior Executive Vice President, Financial Services and
75008 Paris, France Life Insurance Activities of AXA-UAP since 1996. Also Director or Officer of various
subsidiaries and affiliates of the AXA-UAP Group (formerly known as the AXA Group). Director
of other Equitable affiliates. Previously held other officerships with the AXA Group.
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph L. Dionne Director of Equitable since May 1982. Chairman and Chief Executive of The McGraw-Hill
The McGraw-Hill Companies Companies. Director of the Holding Company.
1221 Avenue of the Americas
New York, NY 10020
- ------------------------------------------------------------------------------------------------------------------------------------
Denis Duverne Director of Equitable since February 1998. Senior Vice President of AXA-UAP. Director since
AXA-UAP February 1996, Alliance. Director since February 1997, Donaldson Lufkin & Jenrette ("DLJ").
23, Avenue Matignon
75008 Paris, France
- ------------------------------------------------------------------------------------------------------------------------------------
William T. Esrey Director of Equitable since July 1986. Chairman and Chief Executive Officer of Sprint
Sprint Corporation 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 of Rhone-Poulenc
Rhone-Poulenc S.A. S.A. Member of the Supervisory Board of AXA-UAP since January 1997. Director of the Holding
25, Quai Paul Doumer Company.
92408 Courbevoie Cedex
France
- ------------------------------------------------------------------------------------------------------------------------------------
Norman C. Francis Director of Equitable since March 1989. President of Xavier University of Louisiana.
Xavier University of Louisiana
7325 Palmetto Street
New Orleans, LA 70125
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECTORS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Donald J. Greene Director of Equitable since July 1991. Partner, LeBoeuf, Lamb, Greene & MacRae.
LeBouef, Lamb, Greene & MacRae Director of the Holding Company.
125 West 55th Street
New York, NY 10019-4513
- ------------------------------------------------------------------------------------------------------------------------------------
John T. Hartley Director of Equitable since August 1987. Currently a Director and retired Chairman
Harris Corporation and Chief Executive Officer of Harris Corporation (retired July 1995);
1025 NASA Boulevard previously held other officerships with Harris Corporation. Director of the Holding
Melbourne, FL 32919 Company.
- ------------------------------------------------------------------------------------------------------------------------------------
John H.F. Haskell, Jr. Director of Equitable since July 1992. Managing Director of SBC Warburg Dillon Read,
SBC Warburg Dillon Read, Inc. Inc. and member of its Board of Directors. Director of the Holding Company.
535 Madison Avenue
New York, NY 10028
- ------------------------------------------------------------------------------------------------------------------------------------
Mary R. (Nina) Henderson Director of Equitable since December 1996. President of Bestfoods Grocery
Bestfoods Grocery (formerly CPC Specialty Markets Group) of BESTFOODS (formerly CPC International,
BESTFOODS Inc.) since 1993. Prior thereto, President of CPC Specialty Products and Best Foods
International Plaza Exports. Director of the Holding Company.
700 Sylvan Avenue
Englewood Cliffs, NJ 07632-9976
- ------------------------------------------------------------------------------------------------------------------------------------
W. Edwin Jarmain Director of Equitable since July 1992. President of Jarmain Group Inc.; 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
Suite 2525 other 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
184-400 Ocean Road of JWT Group, Inc. and J. Walter Thompson Company.
John's Island
Vero Beach, FL 32963
- ------------------------------------------------------------------------------------------------------------------------------------
George T. Lowy Director of Equitable since July 1992. Partner, Cravath, Swaine & Moore.
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
- ------------------------------------------------------------------------------------------------------------------------------------
Didier Pineau-Valencienne Director of Equitable since February 1996. Chairman and Chief Executive Officer of
Schneider S.A. Schneider S.A. 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
P.O. Box 397 Officer of American Cyanamid Company (retired April 1993); previously held other
Newton, NJ 07860 officerships with American Cyanamid. Director of the Holding Company.
- ------------------------------------------------------------------------------------------------------------------------------------
Dave H. Williams Director of Equitable since March 1991. Chairman and Chief Executive Officer
Alliance Capital Management of Alliance and Chairman or Director of numerous subsidiaries and affiliated
Corporation companies of Alliance. Director of the Holding Company.
1345 Avenue of the Americas
New York, NY 10105
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Michael Hegarty Director of Equitable since January 1998. President since January 1998 and Chief
Operating Officer since February 1998, Equitable. Vice Chairman since April 1998,
Senior Executive Vice President (January 1998 to April 1998), and Director and
Chief Operating Officer (both since January 1998), the Holding Company. Vice Chairman
(from 1996 to 1997), Chase Manhattan Corporation. Vice Chairman (from 1995 to 1996)
and Senior Executive Vice President (from 1991 to 1995), Chemical Bank.
Executive Vice President, Chief Operating Officer and Director since March
1998, Equitable Investment Corporation ("EIC"), ACMC, Inc. ("ACMC") and Equitable
Capital Management Corporation ("ECMC").
- ------------------------------------------------------------------------------------------------------------------------------------
Edward D. Miller Director of Equitable since August 1997. Chairman of the Board since January 1998,
Chief Executive Officer since August 1997, President (August 1997 to January 1998),
Equitable. Director, President and Chief Executive Officer, all since August 1997,
the Holding Company. Senior Vice Chairman, Chase Manhattan Corporation (March 1996
to April 1997). President (January 1994 to March 1996) and Vice Chairman (December
1991 to January 1994), Chemical Bank. Director, Alliance (since August 1997), DLJ
(since November 1997), ECMC (since March 1998) and ACMC (since March 1998).
Director, Chairman, President and Chief Executive Officer since March 1998, EIC.
- ------------------------------------------------------------------------------------------------------------------------------------
Stanley B. Tulin Director of Equitable since February 1998. Vice Chairman of the Board since February
1998 and Chief Financial Officer since April 1996, Equitable. Executive Vice
President since May 1996 and Chief Financial Officer since May 1997, the Holding
Company. Vice President since March 1997, EQAT. Director since July 1997,
Alliance. Director, Executive Vice President and Chief Financial Officer since June
1997, EIC. Director, Chairman, President and Chief Executive Officer since July
1997, ACMC. Prior thereto, Chairman, Insurance Consulting and Actuarial Practice,
Coopers & Lybrand, L.L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------
Leon B. Billis Executive Vice President and Chief Information Officer (since February 1998),
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 Chief Financial Officer
since March 1997, EQAT. Chairman, Frontier Trust Company ("Frontier"). Executive
Vice President since November 1996 and Director, EQ Financial Consultants, Inc.
("EQF"). Director until May 1997, Equitable Distributors, Inc. ("EDI") and Director
and Officer of various Equitable affiliates. Previously held other officerships
with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Kevin R. Byrne Senior Vice President and Treasurer, Equitable and the Holding Company. Treasurer,
EquiSource and Frontier. Vice President and Treasurer, Equitable Casualty Insurance
Company ("Casualty") and EQAT (since March 1997). Previously held other officerships
with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Judy A. Faucett Senior Vice President and Actuary, Equitable, since September 1996. Partner and Senior
Actuarial Consultant, Coopers & Lybrand L.L.P. (January 1989 to August 1996).
- ------------------------------------------------------------------------------------------------------------------------------------
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, the Holding
Company, since September 1994. Vice President/Auditor, National Westminster Bank
(November 1984 to June 1993).
- ------------------------------------------------------------------------------------------------------------------------------------
Mark A. Hug Senior Vice President since April 1997, Equitable. Prior thereto, Vice President,
Aetna.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Robert E. Garber Executive Vice President and General Counsel, Equitable and the Holding Company.
Previously held other officerships with Equitable and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Jerome S. Golden Executive Vice President since November 1997, Equitable. Prior thereto, President,
Income Management Group (May 1994 to November 1997), Equitable. Chairman and Chief
Executive Officer (February 1995 to December 1997), EDI. Owner (November 1993 to May
1994), JG Resources.
- ------------------------------------------------------------------------------------------------------------------------------------
Donald R. Kaplan Vice President and Chief Compliance Officer, Equitable. Previously held other
officerships with Equitable.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael S. Martin Senior Vice President, and Chief Marketing Officer since January 1997, Equitable.
Prior thereto, Senior Vice President. Chairman and Chief Executive Officer, EQF.
Vice President, EQAT (since March 1997) and HRT (until March 1998). 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.
- ------------------------------------------------------------------------------------------------------------------------------------
Douglas Menkes Senior Vice President and Corporate Actuary since June 1997, Equitable. Prior thereto,
Consulting Actuary, Milliman & Robertson, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Peter D. Noris Executive Vice President and Chief Investment Officer, Equitable. Executive Vice
President since May 1995 and Chief Investment Officer since July 1995, the Holding
Company. Trustee, HRT, and Chairman, President and Trustee since March 1997, EQAT.
Director, Alliance, since July 1995. Executive Vice President, EQF, since November
1996. Prior to May 1995, Vice President/Manager, Insurance Companies Investment
Strategies Group, Salomon Brothers, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Anthony C. Pasquale Senior Vice President, Equitable. Director, Chairman and Chief Operating Officer,
Casualty, since September 1997. Previously held other officerships with Equitable
and its affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Pauline Sherman Vice President, Secretary and Associate General Counsel, Equitable and the Holding
Company, both since September 1995. Previously held other officerships
with Equitable.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard V. Silver Senior Vice President since February 1995 and Deputy General Counsel since June 1996,
Equitable. Director, EQF. Previously held other officerships with Equitable and its
affiliates.
- ------------------------------------------------------------------------------------------------------------------------------------
Jose S. Suquet Senior Executive Vice President since August 1994, Chief Distribution Officer since
December 1997 and Chief Agency Officer (August 1994 to December 1997), Equitable.
Prior thereto, Agency Manager. Executive Vice President since May 1996, the Holding
Company. Vice President since March 1998, HRT.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
PART 4: ILLUSTRATIONS OF POLICY BENEFITS
To help clarify how the key financial elements of the policy work, a series of
tables has been prepared. The tables show how death benefits, Policy Account and
Cash Surrender Values ("policy benefits") under a hypothetical Incentive Life
Plus policy could vary over time if the Funds of our Separate Account had
CONSTANT hypothetical gross annual investment returns of 0%, 6% or 12% over the
years covered by each table. Actual investment results may be more or less than
those shown. The tables are for a 40-year-old preferred risk male non-tobacco
user. Planned premium payments of $4,000 for an initial Face Amount of $300,000
are assumed to be paid at the beginning of each policy year. The illustration
assumes no policy loan has been taken. The differences between the Policy
Account and the Cash Surrender Values in the first fifteen years are the
Surrender Charges. See SURRENDER CHARGES in Part 2 of this prospectus.
The tables illustrate both current and guaranteed charges. The current charges
include reductions in cost of insurance charges beginning in the tenth policy
year, which are not guaranteed, and daily charges against the Separate Account
Funds of .60% per annum for mortality and expense risks (.90% for the guaranteed
table). The tables also assume 0.56% per annum for investment management (the
average of the advisory fees payable with respect to each HRT and EQAT portfolio
based on average net assets for 1997, and for portfolios which commenced
operations on December 31, 1997, estimated average net assets for 1998) and
0.32% per annum for other Trust expenses. The assumption for other Trust
expenses equals the weighted average of the other expenses (including 12b-1
fees) of the HRT and EQAT portfolios based on average net assets for 1997 (and
for portfolios which commenced operations on December 31, 1997, estimated
average net assets for 1998). The effect of these adjustments is that on a 0%
gross rate of return the net rate of return would be -1.48%, on 6% it would be
4.44%, and on 12% it would be 10.35%. Remember, however, that investment
management fees and other Trust expenses vary by portfolio. See HRT'S MANAGER
INVESTMENT ADVISER, EQAT'S MANAGER and EQAT'S INVESTMENT ADVISERS in Part 1 of
this prospectus. The tables also assume a charge for taxes of 2% of premiums.
There are tables for both death benefit Option A and death benefit Option B.
The second column of each table shows the effect of an amount equal to the
premiums invested to earn interest, without regard to 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 (without regard to 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 (without regard to taxes) at which an amount
equal to the illustrated premiums could have been invested outside the Policy to
arrive at the death benefit of the Policy. The internal rate of return is
compounded annually, and the premiums are assumed to be paid at the beginning of
each policy year.
INDIVIDUAL ILLUSTRATIONS. On request, we will furnish you with a comparable
illustration based on your policy's factors. Upon request after issuance, we
will also provide a comparable illustration reflecting your actual Policy
Account value. If you request illustrations more than once in any policy year,
we may charge for the illustration.
38
<PAGE>
INCENTIVE LIFE PLUS
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<CAPTION>
PLANNED PREMIUM $4,000
MALE AGE 40
PREFERRED RISK NON-TOBACCO USER
ASSUMING CURRENT CHARGES
- --------------------------------------------------------------------------------------------------------------------
DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE
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 $ 4,200 $300,000 $300,000 $300,000 $ 2,366 $ 2,546 $ 2,726 $ 464 $ 644 $ 824
2 8,610 300,000 300,000 300,000 5,237 5,761 6,309 3,135 3,659 4,207
3 13,241 300,000 300,000 300,000 8,022 9,077 10,220 5,720 6,775 7,918
4 18,103 300,000 300,000 300,000 10,714 12,487 14,483 8,392 10,165 12,161
5 23,208 300,000 300,000 300,000 13,316 16,000 19,141 10,974 13,658 16,799
6 28,568 300,000 300,000 300,000 15,819 19,610 24,226 13,457 17,248 21,864
7 34,196 300,000 300,000 300,000 18,221 23,319 29,780 15,851 20,949 27,411
8 40,106 300,000 300,000 300,000 20,521 27,130 35,855 18,331 24,940 33,665
9 46,312 300,000 300,000 300,000 22,742 31,073 42,533 20,552 28,883 40,343
10 52,827 300,000 300,000 300,000 25,021 35,302 50,043 23,196 33,447 48,218
15 90,630 300,000 300,000 300,000 35,237 58,965 101,049 35,237 58,965 101,049
20 138,877 300,000 300,000 300,000 43,139 87,515 185,982 43,139 87,515 185,982
25 (age 65) 200,454 300,000 300,000 406,681 48,964 124,067 333,345 48,964 124,067 333,345
</TABLE>
INITIAL FACE AMOUNT $300,000
DEATH BENEFIT OPTION A
- --------------------------------------------------------------------------
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
--------------------------- --------- --------------------
1 - 88.40% - 83.91% - 79.41% 7,400.00% 7,400.00% 7,400.00%
2 - 48.33 - 42.07 - 35.91 717.47 717.47 717.47
3 - 32.72 - 25.98 - 19.40 283.61 283.61 283.61
4 - 24.21 - 17.34 - 10.68 162.42 162.42 162.42
5 - 19.38 - 12.46 - 5.76 109.30 109.30 109.30
6 - 16.34 - 9.37 - 2.66 80.35 80.35 80.35
7 - 14.27 - 7.26 - 0.53 62.43 62.43 62.43
8 - 12.56 - 5.57 1.13 50.35 50.35 50.35
9 - 11.48 - 4.44 2.27 41.74 41.74 41.74
10 - 10.21 - 3.26 3.37 35.31 35.31 35.31
15 - 7.00 - 0.22 6.28 18.45 18.45 18.45
20 - 6.34 0.85 7.49 11.41 11.41 11.41
25 (age 65) - 6.07 1.62 8.35 7.67 7.67 9.61
- ----------
(1) Assumes net interest of 5% compounded annually.
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS
POLICY WOULD BE $3,533.96.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN.
39
<PAGE>
INCENTIVE LIFE PLUS
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<CAPTION>
PLANNED PREMIUM $4,000
MALE AGE 40
PREFERRED RISK NON-TOBACCO USER
ASSUMING GUARANTEED CHARGES
- -------------------------------------------------------------------------------------------------------------------
DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN ANNUAL INVESTMENT RETURN OF
POLICY ACCUMULATED --------------------------- --------------------------- ---------------------------
YEAR PREMIUMS(1) 0% 6% 12% 0% 6% 12% 0% 6% 12%
---- ----------- -------- -------- --------- --------- -------- -------- ---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 4,200 $300,000 $300,000 $300,000 $ 2,331 $ 2,509 $ 2,687 $ 429 $ 607 $ 785
2 8,610 300,000 300,000 300,000 5,108 5,625 6,164 3,006 3,523 4,062
3 13,241 300,000 300,000 300,000 7,790 8,824 9,944 5,489 6,522 7,642
4 18,103 300,000 300,000 300,000 10,372 12,102 14,050 8,050 9,780 11,728
5 23,208 300,000 300,000 300,000 12,856 15,464 18,517 10,514 13,122 16,175
6 28,568 300,000 300,000 300,000 15,233 18,903 23,374 12,871 16,541 21,012
7 34,196 300,000 300,000 300,000 17,499 22,418 28,657 15,130 20,049 26,287
8 40,106 300,000 300,000 300,000 19,654 26,011 34,408 17,464 23,821 32,218
9 46,312 300,000 300,000 300,000 21,692 29,680 40,675 19,502 27,490 38,485
10 52,827 300,000 300,000 300,000 23,608 33,421 47,504 21,783 31,596 45,679
15 90,630 300,000 300,000 300,000 30,969 52,952 92,163 30,969 52,952 92,163
20 138,877 300,000 300,000 300,000 33,170 72,761 162,208 33,170 72,761 162,208
25 (age 65) 200,454 300,000 300,000 337,764 27,240 90,746 276,856 27,240 90,746 276,856
</TABLE>
INITIAL FACE AMOUNT $300,000
DEATH BENEFIT OPTION A
- ---------------------------------------------------------------------------
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
---- --------------------------- --------- --------------------
1 - 89.29% - 84.84% - 80.37% 7,400.00% 7,400.00% 7,400.00%
2 - 49.93 - 43.66 - 37.50 717.47 717.47 717.47
3 - 34.30 - 27.53 - 20.92 283.61 283.61 283.61
4 - 25.65 - 18.75 - 12.05 162.42 162.42 162.42
5 - 20.71 - 13.73 - 6.99 109.30 109.30 109.30
6 - 17.59 - 10.55 - 3.79 80.35 80.35 80.35
7 - 15.45 - 8.36 - 1.58 62.43 62.43 62.43
8 - 13.67 - 6.60 0.15 50.35 50.35 50.35
9 - 12.59 - 5.45 1.33 41.74 41.74 41.74
10 - 11.43 - 4.34 2.40 35.31 35.31 35.31
15 - 8.83 - 1.58 5.20 18.45 18.45 18.45
20 - 9.41 - 0.91 6.33 11.41 11.41 11.41
25 (age 65) - 12.39 - 0.76 7.15 7.67 7.67 8.43
- ----------
(1) Assumes net interest of 5% compounded annually.
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS
POLICY WOULD BE $3,533.96.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN.
40
<PAGE>
INCENTIVE LIFE PLUS
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<CAPTION>
PLANNED PREMIUM $4,000
MALE AGE 40
PREFERRED RISK NON-TOBACCO USER
ASSUMING CURRENT CHARGES
- ------------------------------------------------------------------------------------------------------------------
DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE
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 $ 4,200 $302,359 $302,538 $302,718 $ 2,359 $ 2,538 $ 2,718 $ 457 $ 636 $ 816
2 8,610 305,217 305,739 306,284 5,217 5,739 6,284 3,115 3,637 4,182
3 13,241 307,981 309,030 310,166 7,981 9,030 10,166 5,679 6,728 7,864
4 18,103 310,642 312,402 314,382 10,642 12,402 14,382 8,320 10,080 12,060
5 23,208 313,205 315,862 318,972 13,205 15,862 18,972 10,863 13,520 16,630
6 28,568 315,658 319,402 323,960 15,658 19,402 23,960 13,296 17,040 21,598
7 34,196 317,997 323,019 329,382 17,997 23,019 29,382 15,627 20,649 27,013
8 40,106 320,222 327,714 335,280 20,222 26,714 35,280 18,032 24,524 33,091
9 46,312 322,353 330,511 341,726 22,353 30,511 41,726 20,164 28,321 39,536
10 52,827 324,529 334,562 348,937 24,529 34,562 48,937 22,704 33,737 47,112
15 90,630 334,001 356,699 396,874 34,001 56,699 99,874 34,001 56,699 96,874
20 138,877 340,666 381,946 473,212 40,666 81,946 173,212 40,666 81,946 173,212
25 (age 65) 200,454 344,581 411,821 599,626 44,581 111,821 299,626 44,581 111,821 299,626
</TABLE>
INITIAL FACE AMOUNT $300,000
DEATH BENEFIT OPTION B
- ---------------------------------------------------------------------------
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
---- --------------------------- --------- --------------------
1 $ - 88.57% - 84.09% - 79.59% 7,458.98% 7,463.46% 7,467.96%
2 - 48.58 - 42.33 - 36.18 724.95 725.70 726.48
3 - 33.00 - 26.26 - 19.69 287.35 287.84 288.36
4 - 24.50 - 17.65 - 10.99 165.06 165.49 165.98
5 - 19.70 - 12.78 - 6.09 111.45 111.87 112.36
6 - 16.68 - 9.71 - 3.01 82.22 82.65 83.18
7 - 14.63 - 7.62 - 0.90 64.11 64.56 65.13
8 - 12.94 - 5.95 0.74 51.91 52.39 53.01
9 - 11.88 - 4.84 1.87 43.19 43.70 44.38
10 - 10.63 - 3.68 2.95 36.70 37.23 37.98
15 - 7.51 - 0.71 5.78 19.62 20.34 21.50
20 - 7.01 0.23 6.89 12.43 13.34 15.03
25 (age 65) - 6.98 0.85 7.66 8.56 9.69 12.02
- ----------
(1) Assumes net interest of 5% compounded annually.
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS
POLICY WOULD BE $3,533.96.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN.
41
<PAGE>
INCENTIVE LIFE PLUS
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
<TABLE>
<CAPTION>
PLANNED PREMIUM $4,000
MALE AGE 40
PREFERRED RISK NON-TOBACCO USER
ASSUMING GUARANTEED CHARGES
- ------------------------------------------------------------------------------------------------------------------
DEATH BENEFIT POLICY ACCOUNT CASH SURRENDER VALUE
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 $ 4,200 $302,324 $302,501 $302,680 $ 2,324 $ 2,501 $ 2,680 $ 422 $ 599 $ 778
2 8,610 305,087 305,602 306,139 5,087 5,602 6,139 2,985 3,500 4,037
3 13,241 307,748 308,776 309,889 7,748 8,776 9,889 5,446 6,474 7,587
4 18,103 310,300 312,016 313,947 10,300 12,016 13,947 7,978 9,694 11,625
5 23,208 312,744 315,325 318,346 12,744 15,325 18,346 10,402 12,983 16,004
6 28,568 315,070 318,693 323,106 15,070 18,693 23,106 12,708 16,331 20,744
7 34,196 317,274 322,118 328,257 17,274 22,118 28,257 14,905 19,748 25,887
8 40,106 319,354 325,594 333,832 19,354 25,594 33,832 17,164 23,404 31,642
9 46,312 321,304 329,119 339,868 21,304 29,119 39,868 19,114 26,929 37,678
10 52,827 323,116 332,681 346,397 23,116 32,681 46,397 21,291 30,857 44,572
15 90,630 329,668 350,562 387,759 29,668 50,562 87,759 29,668 50,562 87,759
20 138,877 330,383 366,389 447,475 30,383 66,389 147,475 30,383 66,389 147,475
25 (age 65) 200,454 322,213 375,642 532,128 22,213 75,642 232,128 22,213 75,642 232,128
</TABLE>
INITIAL FACE AMOUNT $300,000
DEATH BENEFIT OPTION B
- ----------------------------------------------------------------------------
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUES ON DEATH BENEFIT
END OF ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
POLICY ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
--------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
---- --------------------------- --------- --------------------
1 - 89.46% - 85.02% - 80.56% 7,458.09% 7,462.53% 7,466.99%
2 - 50.18 - 43.93 - 37.78 724.77 725.50 726.27
3 - 34.60 - 27.83 - 21.23 287.24 287.72 288.23
4 - 25.97 - 19.07 - 12.38 164.98 165.40 165.87
5 - 21.05 - 14.07 - 7.34 111.38 111.79 112.27
6 - 17.94 - 10.91 - 4.15 82.15 82.57 83.08
7 - 15.83 - 8.74 - 1.96 64.04 64.48 65.03
8 - 14.07 - 7.00 - 0.25 51.84 52.30 52.90
9 - 13.01 - 5.87 0.91 43.13 43.61 44.27
10 - 11.88 - 4.78 1.96 36.62 37.13 37.85
15 - 9.46 - 2.17 4.62 19.48 20.15 21.24
20 - 10.50 - 1.81 5.52 12.19 13.01 14.59
25 (age 65) - 15.04 - 2.22 5.99 8.13 9.11 11.29
- -----------
(1) Assumes net interest of 5% compounded annually.
THE VALUES WILL DIFFER IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE DEATH BENEFIT GUARANTEE / THREE-YEAR NO LAPSE GUARANTEE PREMIUM FOR THIS
POLICY WOULD BE $3,533.96.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RESULTS ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN.
42
<PAGE>
APPENDIX A
COMMUNICATING PERFORMANCE DATA
In reports or other communications to policyowners or in advertising material,
we may describe general economic and market conditions affecting the Separate
Account and the Trusts and may compare the performance or ranking of the
Separate Account Funds and the Trusts' portfolios with (1) that of other
insurance company separate accounts or mutual funds included in the rankings
prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or similar
investment services that monitor the performance of insurance company separate
accounts or mutual funds, (2) other appropriate indices of investment securities
and averages for peer universes of funds, or (3) data developed by us derived
from such indices or averages. Advertisements or other communications furnished
to present or prospective policyowners may also include evaluations of a
Separate Account Fund or Trust portfolio by financial publications that are
nationally recognized such as Barron's, Morningstar's Variable Annuities / Life,
Business Week, Forbes, Fortune, Institutional Investor, Money, Kiplinger's
Personal Finance, Financial Planning, Investment Adviser, Investment Management
Weekly, Money Management Letter, Investment Dealers Digest, National
Underwriter, Pension & Investments, USA Today, Investor's Daily, The New York
Times, The Wall Street Journal, the Los Angeles Times and the Chicago Tribune.
Performance data for peer universes of funds with similar investment objectives
are compiled by Lipper Analytical Services, Inc. (Lipper) in its Lipper Variable
Insurance Products Performance Analysis Service (Lipper Survey) and Morningstar,
Inc. in the Morningstar Variable Annuity / Life Report (Morningstar Report).
The Lipper Survey records performance data as reported to it by over 800 funds
underlying variable annuity and life insurance products. The Lipper Survey
divides these actively managed funds into 25 categories by portfolio objectives.
The Lipper Survey contains two different universes, which differ in terms of the
types of fees reflected in performance data. The "Separate Account" universe
reports performance data net of investment management fees, direct operating
expenses and asset-based charges applicable under variable insurance and annuity
contracts. The "Mutual Fund" universe reports performance net only of investment
management fees and direct operating expenses, and therefore reflects
asset-based charges that relate only to the underlying mutual fund.
The Morningstar Report consists of 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 A-2 illustrates the average annual compound rates of return
over selected time periods between December 31, 1926 and December 31, 1997 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 plus performance of other Alliance
funds with investment policies and objectives similar to those of the Alliance
Small Cap Growth portfolio, see page B-1 of the HRT prospectus. For a
comparative illustration of performance results of certain public mutual funds
which are similar to EQAT portfolios and are managed by EQAT's Advisers, see
page A-1 of the EQAT prospectus.
A-1
<PAGE>
<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
12/31/97: STOCKS BONDS BONDS BONDS BILLS INDEX
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year............. 33.36% 15.85% 12.95% 8.38% 5.26% 1.92%
3 years............ 31.15 14.76 13.36 8.93 5.35 2.59
5 years............ 20.24 10.51 9.22 6.40 4.57 2.64
10 years............ 18.05 11.32 10.85 8.33 5.44 3.43
20 years............ 16.65 10.39 10.29 9.51 7.29 4.90
30 years............ 12.12 8.63 8.86 8.52 6.77 5.34
40 years............ 12.30 6.71 7.09 7.10 5.85 4.44
50 years............ 13.12 5.70 6.07 6.04 4.99 3.94
60 years............ 12.53 5.31 5.54 5.44 4.18 4.11
Since 1926.......... 10.99 5.19 5.71 5.25 3.77 3.17
Inflation Adjusted
Since 1926.......... 7.58 1.96 2.46 2.02 0.58
</TABLE>
- ----------
Source: Ibbotson, Roger G. and Rex A. Sinquefield, STOCKS, BONDS, BILLS, AND
INFLATION (SBBI), 1982, updated in STOCKS, BONDS, BILLS, AND INFLATION 1998
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 - 1997, 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 -
1997; for the period 1926 - 1945, the Standard and Poor's monthly High-Grade
Corporate Composite yield data were used, assuming a 4 percent coupon and a
twenty-year maturity.
Intermediate-Term Government Bonds -- Measured by a one-bond portfolio
constructed each year containing a bond with approximately a five-year maturity.
U.S. Treasury Bills -- Measured by rolling over each month a one-bill portfolio
containing, at the beginning of each month, the bill having the shortest
maturity not less than one month.
Inflation -- Measured by the Consumer Price Index for all Urban Consumers
(CPI-U), not seasonally adjusted.
A-2
- --------------------------------------------------------------------------------
